New Closed Shop: Inequality, Diversity, and the Rise of Occupational Licensure

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This series of papers examines the effects of barriers to job entry. Traditionally, scholars believed that occupational licenses, such as medical licensing for doctors, reduced the number of people who could get into the occupation. This limit on the supply of workers was believed to result in increased wages for the workers that made it in. However, it turns out that the opposite is true! Using more than 15 million observations over 30 years of the Current Population Survey, I find that the licensing process actually increases access, particularly for underrepresented groups (women and racial minorities).

Even more interesting, occupational entry barriers change the face of an occupation – who gets a job and what they do at work. We might expect serious occupational entry standards, like a bar exam for paralegals or a school requirement for massage therapists, would make it more difficult to enter the occupation, but it actually facilitates entry. Informal barriers, which tend to encourage discrimination and homogeneity, are replaced with formal procedures, which have a greater potential to be color-blind and can be standardized, measured, and publicized. The new “free market” of labor, following the decline of unions, has given was to a new institutional form of closure that has a startling effect on who gets which jobs.

For a user-friendly summary of my licensure research, enjoy my video, “ Licensing: In a Nutshell”. This work has been funded in significant part by grants from the National Science Foundation and the United States Department of Labor.


media: EconTalk Podcast with Russ Roberts

Economists often oppose the expansion of licensing in America in recent years because it makes it harder for people with low skills to get access to opportunity. Sociologist Beth Redbird of Northwestern University talks with EconTalk host Russ Roberts about a different perspective. Redbird finds that licensing expands opportunity for women and minorities and […]

note: Occupational Licenses and Military Veterans

Recently, it has come to the attention of lawmakers, researchers, and the media that transitions from military to civilian employment may be hindered by licensing laws.  Since 2008, numerous states have passed laws intended to help resolve the issue.  Here they are:   CO H 1162 2008 Military Spouse Interim […]

news: The Positive Side of Licensing Barbers

Imposing requirements on certain kinds of work could actually be a better deal for consumers. by Justin Fox Bloomberg View <<<Read It >>> Occupational licensing, Milton Friedman declared in his 1962 classic “Capitalism and Freedom,” is an affront to freedom and a check on economic dynamism — a modern, Western […]

About the Data

The Northwestern Licensing Database Licensing data is derived from an extensive coding of occupational legislation and regulations, enacted federally and across all 50 states from 1970 to 2017, and across all occupations classified by the Bureau of Labor Statistics Standard Occupational Classification system (SOC). During this time period, thousands of […]

paper: The New Closed Shop? The Economic and Structural Effects of Occupational Licensing

  During the past few decades, licensure, a state-enforced mechanism for regulating occupational entry, quickly became the most prevalent form of occupational closure. Broad consensus among researchers is that licensure creates wage premiums through creation of economic monopolies. This article demonstrates that, contrary to established wisdom, licensure does not limit […]

chapter: Rent, Rent-Seeking, and Social Inequality

The compensation paid out to workers reflects: (a) the value of their contribution to the firm or organization; and (b) a possible premium because of restrictions on competition. The latter restrictions, which may take the form of corruption or monopolies that preclude labor from freely flowing throughout the economy, allow […]

news: So You Think You Can Be a Hair Braider?

Jestina Clayton grew up in a village in Sierra Leone where every girl learns traditional African hair-braiding. Then, when she was 22, she moved to Centerville, Utah, a place where no one learns traditional African hair-braiding. So Clayton was pleasantly surprised to find a niche in the market among a […]