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Facts about occupational licensing
We find that in 2006, 29 percent of the workforce was required to hold an occupational license from a government agency, which is a higher percentage than that found in studies that rely on state-level occupational licensing data.
That is from a new paper by Morris Kleiner and Alan Krueger. I am happy to see such respected economists turning their attention to a neglected issue. Here is a non-gated version of the paper.
There is, by the way, an interesting sentence buried near the end of the paper:
In contrast, union members perceive themselves as less competent than other workers.
Posted by Tyler Cowen on October 15, 2008 at 03:48 PM in Law | Permalink
Comments
I have noticed many people practicing economics without any credentials (or skills for that matter.)
Posted by: bastiat at Oct 15, 2008 4:44:54 PM
If I'm reading it correctly, the paper's perceived competence equation in Table 3 has a negative coefficient for union membership of -.006 with a standard error is .069. So, there's no relationship established by the data between perceived competence and union membership.
Posted by: JPinkerton at Oct 15, 2008 5:54:53 PM
Well, Bastiat, clearly the government needs to step in and ensure that only government-licensed and approved persons are allowed to say anything about economics. :-)
Posted by: David Wright at Oct 15, 2008 5:59:45 PM
Upon reading this
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_EGuB7kQmyo&refer=home
I hope Ben Bernanke's license is taken away. Or we should urge him to resign. He doesn't know what he's talking about but he's eager to get more power.
Posted by: E. Barandiaran at Oct 15, 2008 7:08:43 PM
"By 2000, the percent of the workforce in occupations licensed by states
was at least 20 percent, according to data gathered from the Department of Labor and the 2000
Census."
So a jump by 50% in 8 years. And this in an era where the number of college graduates is increasing, no?
But this...oh this is REALLY interesting:
"Both African-
Americans and Hispanics have a higher percentage of licenses than do Whites or Asians."
Makes you wonder what industries we are talking about here
Posted by: Robert Olson at Oct 15, 2008 7:53:03 PM
I got to wonder about this whole study. I have a number of certification's and license relating to the trades. I am consistently told that as a result of having these things I can write my own ticket. I have for my area and my age a good job. I am also a union member.
Looking at my own situation, I doubt that certifications have an effect on income in any way comparable to unions.
Don't get me wrong. I have no doubt that the underlying data is correct. I just think that they have causation and correlation mixed up.
For example, let us say that a similar study was done that was limited to the building and mechanical trades. I have no doubt that such a study would show that the value of having certifications was very strong. But if you stripped out the HVAC industry I would bet that the value of certifications would drop off sharply.
Now the people in the HVAC trades have way more certifications and such then people in the other trades. This is in large part due to government regulations. But the HVAC industry is also the fastest growing by far of all the building and mechanical trades. Companies want techs so bad they will drive up to a competitors job site and poach their techs. If you can do the work, people will kiss your butt to keep you happy.
This begs the question, is the effect of certifications on pay a real effect or is it just incidental to the fact that most of certifications have been issued in a field where real wage growth has been the strongest?
If you did away will all the certifications that HVAC techs are required to have by law I don't think you would lower real wage growth in the HVAC industry. The certifications that the law requires are so easy to get it is joke compare to how hard the work is. The real way the government is supporting our wages is by mandating increases in efficiency in HVAC equipment. Things that were simple even 10 years ago are now extremely complex in an effort to save energy/reduce pollution. I hope this exponential growth in complexity does not continue or soon I will not be smart enough to do the work.
By contrast, it has been easier to do the work in many other trade fields (carpentry in particular) and so they have not seen the same kind of wage growth even if they have similar amount of certifications as those of us in the HVAC fields have.
Union membership on the other hand, provides a boost to income regardless of field. For example, a union carpenter is going to make way more then non-union. A union plumber is going to make way more then a non-union plumber. Ironically, this effect is probably the smallest in the HVAC field.
Obviously, the study in question did not just cover the building trades so it might seem like my point is irrelevant. But as I look through the occupations that the study covers, I can't but help think that a similar effect is at work.
Take nursing for example. Their is a shortage of nurses and it seems to me that the complexity of what they are being asked to do is going up. Even if they were not required to be licensed, I would think/hope that their wages would still be rising.
Posted by: Ape Man at Oct 15, 2008 10:24:39 PM
Will someone please tell the American people if the US government gets into the health insurance business, it will crowd out all the private insurers and we will have one big government insurance company with thousands of patronage workers and bureaucrats. This behemoth will try to fix prices and drive out private health providers and suppliers and massive shortages will result. Is anyone listening? Some hospitals in the Soviet Union didn't have thread for stitches.
Ape Man, I think Friedman addressed licenses. Unions are bad, I agree. They destroyed mining, textiles, steel, autos and are in process of destroying public education while raping the taxpayers. Licenses are created by government for money and to provide rewards to politically connected individuals. I believe the French know about them...
Posted by: jorod at Oct 15, 2008 11:07:45 PM
government is already in healthcare
FDA, medical boards, Medicaid, Medicare, va hospitals, state insurance,
Do you think medical costs are were they are because of free market forces
Our healthcare system is heavily monopolized and nationalized by proxy
Posted by: Luis M at Oct 16, 2008 12:06:42 AM
What part of medical costs are private insurance costs?
Posted by: Taz at Oct 16, 2008 2:01:39 AM
Big Question for you Tyler. If the banks all got capital injections that require a 5% dividend return, why does anyone expect LIBOR (currently at 4.75%) to fall? The banks have to make 5.01% on the money, just to be able to return it to the government. Why isn't this troubling for anyone else? Why didn't we just take common stock if the crisis was that serious? Who the freak is running our banking system? Are Neel Kashkari and Paulson really this stupid?
Posted by: Sprizouse at Oct 16, 2008 5:16:55 AM
At the start of the paper, the authors briefly sketch two interpretations, Milton Friedman's and Carl Shapiro's.
I think that the lenses really needs to incorporate:
Gordon Tullock, "The Transitional Gains Trap," Bell Journal of Economics and Management Science, 1975.
Second generation licensees jump through all the hoops and arguably, on average, earn only normal returns, understood in terms of their individual-specific opportunity costs. So, contra the Friedman capsule they provide, no real group of winners beyond the first generation. And then liberalization would hurt the privilege holders, so a wholly sucky situation persists -- hence "trap."
Another major part of the storytelling, I think, though, should be returns and rents in terms of identity and selfhood, not merely pecuniary.
Posted by: Daniel Klein at Oct 16, 2008 6:49:46 AM
@ Robert Olson:
"But this...oh this is REALLY interesting:
"Both African-
Americans and Hispanics have a higher percentage of licenses than do Whites or Asians."
Makes you wonder what industries we are talking about here"
This makes a certain amount of sense. Several of the largest occupations requiring licensing are occupations that are particularly likely to appeal to groups with comparatively little access to higher education. Specifically I'm thinking of taxis, independent contractors, movers, [practical] nurses, and cosmetologists/barbers. Also security guards. I can think of some possible reasons that these occupations would be so regulated despite the fact that they are largely unskilled work (and thus appealing to people with limited access to higher education), but they're pretty speculative.
Posted by: Mark at Oct 16, 2008 1:14:04 PM
Apparently the "Joe the Plumber" from the debate is unlicensed, and owes a small back tax bill. One less budding entrepreneur...
Posted by: DK at Oct 16, 2008 4:51:55 PM
"Unions are bad, I agree."
This weird fiscal-conservative religion makes blanket statements like this -- easy to do when your conclusion are infallible dogma and data that disagrees must be wrong.
Posted by: Johnny Nemo at Oct 16, 2008 5:30:57 PM
