Gender, Race, and Earnings: The Divergent Effect of Occupational Licensing on the Distribution of Earnings and on Access to the Economy

from the book Regulation and Economic Opportunity: Blueprints for Reform

Executive Summary

Regulations may not have the same effect on all classes of workers and people. In this chapter, regulatory economists Kathleen M. Sheehan and Diana W. Thomas discuss the research on occupational licensing’s effects on wages by gender and race. Licensing is an essential area for these studies because it may reduce or increase the wage gaps between genders and races. For example, by promoting transparency through worker associations the pay gap may be reduced between workers. Or licensing may increase the wage gap by making it more difficult for workers to move between locations or discouraging people from joining licensed fields. Key findings from the chapter include:

  • The effect of licensing on wage gaps between races and genders varies by the line of work but it is clear that the overall economic costs of licensing are large. There is no clear cut answer and policymakers should closely examine the evidence and be skeptical of new licensing proposals.
  • Occupational licensing can increase the employment of women and minorities and may reduce the wage gap between white men and other workers. For example, by creating pathways for workers to enter the field that are not subject to informal social barriers.
  • Voluntary certification programs in place of occupational licensing are likely to provide the same benefits as licensing but with much lower economic costs across the whole economy.
  • Licensure is likely an expensive way to help minorities and women because it hurts consumers and potential entrants to licensed professions.
CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.