Occupational licensing and minorities

Abstract

The costs of occupational licensing fall disproportionately on minorities and the poor. Licensing seeks to eliminate the lower-quality, lower-price services that low-income consumers would be more likely to select. Perhaps more important, however, is the impact on workers who are denied entry into the occupation. Recent evidence confirms that licensing regulations esclude less-educated and minority workers more than proportionally. The consequences for these excluded workers include unemployment or lower earnings—either by moving to a less-favored occupation or practicing without a license. The outcomes ofnonprofessional trades regulated by licensing are similar to those predicted by segmented labor market theory. Those who fail to obtain the credential (license) are denied access to the trade even if they are no less productive.