Analyzing the Labor Market Outcomes of Occupational Licensing

Recent assessments of occupational licensing have shown varying effects of the institution on labor market outcomes. This study revisits the relationship between occupational licensing and labor market outcomes by analyzing a new topical module to the Survey of Income and Program Participation (SIPP). Relative to previously available data, the topical module offers more detailed information on occupational licensing from government, with a larger sample size and access to a richer set of person-level characteristics. We exploit this larger and more detailed dataset to examine the labor market outcomes of occupational licensing and how workers obtain these licenses from government. More specifically, we analyze whether there is evidence of a licensing wage premium, and how this premium varies with aspects of the regulatory regime such as the requirements to obtain a license or certification and the level of government oversight. After controlling for observable heterogeneity, including occupational status, those with a license earn higher pay, are more likely to be employed, and have a higher probability of retirement and pension plan offers. * SEHSD Working Paper Number 2014-27. This paper was prepared for the BLS-Census Workshop on Empirical Research using BLS-Census data, Washington, DC, May 19, 2014. We thank Sharon Boivin for her efforts to include questions on certification and licensing on national databases. This paper benefitted from discussions with Stephanie Ewert, Hwikwon Ham, Hubert Janicki, and Jeremy Skog. We also thank seminar participants at the Upjohn Institute for Employment Research for their helpful comments. This paper is released to inform interested parties of ongoing research and to encourage discussion of work in progress. The views expressed here are those of the authors and do not necessarily reflect the views or policies of the Census Bureau, the Bureau of Labor Statistics nor any other agency of the U.S. Department of Labor. **Social, Economic, & Housing Statistics Division, U.S. Census Bureau, 4600 Silver Hill Road, Washington, DC 20233. Email: mark.a.klee@census.gov