Real economics in a satirical workplace
Hidetoshi Hasagawa, or Hide, is a warehouse worker in NBC hit comedy, The Office. Of course, fans may better know him as the number one heart surgeon in Japan. As Hide reveals, he left Japan to escape from the Yakuza after killing one of the Yakuza’s bosses. The warehouse foreman, Darryl Philbin, gave Hide a job working at Dunder Mifflin, something that Hide describes as saving his life.
The antics in The Office shouldn’t be taken too seriously, yet there’s an economic lesson in Hide’s life story. Maybe you’ve had an Uber driver who worked as a doctor or nurse before coming to the US. Like Hide, the driver has specialized training that’s not being put to work. The steady hand on a steering wheel gets you around town, but it could be performing heart surgeries or working in any other highly trained field.
Economists refer to cases like Hide as skill wastage or brain waste. It’s not unique to immigrants, but state laws that create barriers to who can work in professional trades make it all too common. Research shows that immigrants are 34 percent less likely to obtain a government license to work than natives. The Migration Policy Institute estimates that about 260,000 immigrants with health-related degrees are “sidelined” or in positions that only require a high school degree, in part because of occupational licensing laws. Some of that is because states don’t recognize credentials from other places and some of it is because licensing requirements are often difficult for people who speak English as a second language.
Keeping immigrants from using their skills is an economic loss that state policymakers should endeavor to change. We only stand to gain from reforming occupational licensing to let more immigrants into professional trades.
What is occupational licensing?
Occupational licensing is incredibly common, even though its technical nature makes people’s eyes glaze over. More than one out of five workers has to earn and maintain a license to work in their field, as shown in Figure 1 below. For a rough comparison, that’s more than the number of workers who are in a union, about one in ten, and ten times the proportion of workers paid the minimum wage.
Unfortunately, the driver’s license comparison can only go so far. One of the chief problems with occupational licensing is that licenses don’t work across state lines. The rules to get licenses vary from state to state. Some states don’t even license occupations that other states do and other states require multiple exams for a license that you can get with only one exam elsewhere. One common theme across states, however, is that licensing has higher costs for immigrants.
How does licensing affect immigrants?
Unlike licensed workers in neighboring states, it might not be true that foreign workers have generally the same training as their counterparts in the U.S. To return to Hide, how do we know if he’s ready to leave Dunder Mifflin to work in one of Scranton’s hospitals?
To figure out what we should do to recover the wasted skills of people like Hide and balance consumer protection, we need to start by making it easier for immigrants to obtain licenses. We know about one of the largest barriers, but there’s still a lot left to learn.
Existing research suggests that the central barrier to obtaining licenses for immigrants is language. Economists Hugh Cassidy and Tennecia Dacass studied the relationship between licensing and immigrants using surveys of workers. Cassidy and Dacass show that language proficiency and years since the worker migrated to the US make it more likely that the immigrant worker has a license. This makes sense because of the licensing process. To qualify for many licenses, workers have to take exams that are only available in English. That makes it more difficult for even skillful and qualified workers to pass the test.
Without Googling, what is this?
Yo prometo lealtad a la bandera de los Estados Unidos de América, y a la República que representa, una Nación, bajo Dios, indivisible, con libertad y justicia para todos.
You should be able to puzzle out and make a good guess about what that text is, even if you don’t speak Spanish. But here’s the same text in English:
I pledge allegiance to the Flag of the United States of America and to the Republic for which it stands, one nation, indivisible, with liberty and justice for all.
If English is your first language, you immediately recognize the second, but not the first. Even though it’s not too hard to piece together what the first is (largely because you’re already familiar with it in English), it’s a lot more difficult to recognize it than it is to recognize the Pledge of Allegiance in English. That friction that you felt reading the Spanish version is the same friction holding skilled immigrants back from working in many trades. You know it, you just don’t recognize it. Skilled immigrants know their trade, but they just don’t recognize the questions on exams.
To fix this, states should provide exams in many languages. And there’s good evidence suggesting that doing so will increase the number of immigrants working in licensed fields. A study examining English proficiency requirements found that when states required English proficiency, fewer Vietnamese immigrants worked as manicurists.
Other policy barriers that states should remove are citizenship requirements. These range from requirements that workers be citizens, as Massachusetts requires for funeral home directors, to laxer requirements that workers be permanent residents, as for funeral directors in New York.
A real issue with citizenship requirements comes up for people enrolled in the Deferred Action for Childhood Arrivals, DACA. The issue here is that although DACA grants work authorization, many state laws prevent those DACA recipients from working in licensed trades. Take the story of Rosa Serna, a DACA recipient in Arkansas who grew up wanting to be a nurse. It wasn’t until she was partway through her schooling that she learned Arkansas wouldn’t allow her to work as a nurse. Not only was this a crushing realization for Rosa, but Arkansas is in need of more healthcare workers just as much of the US does.
Recognizing that it doesn’t make sense to keep workers out of these valuable occupations, Arkansas and Nebraska have updated their rules and people like Rosa can now work in licensed trades. Other states, like South Carolina, are working on similar regulatory changes.
Going one step further than DACA, Nevada allows undocumented immigrants to obtain occupational licenses. New Jersey is considering similar changes. Setting aside the wider debates about illegal immigration, these are common-sense reforms. Citizenship is a poor metric for worker quality. Consumers won’t be any safer because licenses aren’t available to unauthorized immigrants. Licensing requirements that aren’t directly related to consumer protection only harm the US economy. They make it harder for consumers to find skilled workers to meet their needs, whether those are nurses, plumbers, or teachers. In short, citizenship requirements for specific industries are unlikely to serve consumer protection and should simply be done away with as irrelevant red tape.
Asking the right questions
There are a lot of unanswered questions about the connections between immigrants and licensing. For example, when the rubber hits the road, which languages should states start providing exams for licenses in? Should they start with Chinese, Spanish, or Portuguese? Should they base it on the proportion of people who speak a language in their state? These are real policy questions that are difficult to answer without more research.
Identifying where highly skilled workers’ training is going to waste is an important step in solving the problem. Who are the highly skilled workers that are working in warehouses instead of installing circuit breakers in homes or using their medical knowledge in hospitals? Policymakers should start asking where those immigrants are and how they can open up licensing to those who face a language barrier. From there, they can begin removing unnecessary licensing requirements that don’t serve consumers’ interests, such as citizenship requirements.
Policymakers should lead the way in considering how they can recognize credentials and experience from outside of the US. Even though there’s much to learn, we already know that licensing has immense costs and that those costs often fall on immigrants more harshly than others. States like Arkansas, Nebraska, and Nevada have already updated their licensing laws to remove barriers to immigrants working in licensed fields. More states should consider similar reforms that can unlock the potential of immigrants to put their skills to work.