Advertisement

The effect of occupational licensing deregulation on migrants in the German skilled crafts sector

Abstract

Occupational licensing on the national level reduces labor market prospects of individuals with a low likelihood of fulfilling the licensing requirements. Such regulation has the potential to adversely affect the labor market integration of foreign-born citizens and can be an obstacle to the free movement of labor toward its most productive uses. Before the backdrop of increased levels of migration into Germany, and the discussion about harmonizing labor standards in Europe, this paper empirically examines the effects of the deregulation of occupational licensing in the German crafts sector on the proportion of migrants working in this sector. The results suggest that the deregulation has increased the proportion of migrants among self-employed as well as employed craftsmen in the fully deregulated trades.

This is a preview of subscription content, log in to check access.

Access options

Buy single article

Instant unlimited access to the full article PDF.

US$ 39.95

Price includes VAT for USA

Subscribe to journal

Immediate online access to all issues from 2019. Subscription will auto renew annually.

US$ 99

This is the net price. Taxes to be calculated in checkout.

Fig. 1

Source: German microcensus, 2000–2010

Fig. 2

Source German microcensus data, 2000–2010

Fig. 3

Source: German microcensus data, 2000–2010

Fig. 4

Source: German microcensus data, 2000–2010

Notes

  1. 1.

    One member of parliament made the following statement concerning a trade which was intended to be deregulated: “Surgical device mechanics [Chirurgiemechaniker] play an important role in my local election district. Many of them vote for SPD [Social Democratic Party]” (Bulla 2012).

  2. 2.

    After the year 2011, migration was fully liberalized. Individuals who are born in any member state of the EU may freely relocate to any other member state and can be legally employed. After 2004, a person was permitted to engage in entrepreneurship in Germany if he or she is a citizen of a country within the European Union.

References

  1. BAMF. (2008). Schulische Bildung von Migranten in Deutschland. Integrationsreport, Teil 1. Bundesministerium für Migration und Flüchtlinge, working paper 13.

  2. Baycan-Levent, T., & Nijkamp, P. (2009). Characteristics of migrant entrepreneurship in Europe. Entrepreneurship and Regional Development, 21(4), 375–397.

  3. Bertrand, M., Duflo, E., & Mullainathan, S. (2004). How much should we trust difference-in-difference estimates? Quarterly Journal of Economics, 119(1), 249–275.

  4. Bian, Y. (1997). Bringing strong ties back in: Indirect ties, network bridges, and job searches in China. American Sociological Review, 62(3), 366–385.

  5. Bildungsbericht. (2016). H-Bildung und migration. In Bildung in Deutschland. Ein indikatorengestützter Bericht mit einer Analyse zu Bildung und Migration, Bertelsmann, Bielefeld. ISBN 978-3-7639-5742-2.

  6. Blundell, R., & Costa, D. M. (2009). Alternative approaches to evaluation in empirical microeconomics. Journal of Human Resources, 44(3), 565–640.

  7. Borjas, G. J. (2014). Immigration economics. Cambridge: Harvard University Press.

  8. Branstetter, L., Lima, F., Taylor, L. J., & Venancio, A. (2014). Do entry regulations deter entrepreneurship and job creation? Evidence from recent reforms in Portugal. The Economic Journal, 124(577), 805–832.

  9. Bulla, S. (2012). Ist das Berufszulassungsregime der Handwerksordnung noch verfassungsgemäß? Gewerbearchiv, 12, 470–476.

  10. Bundesagentur für Arbeit [BA]. (2016). Hintergrundinformation. Auswirkungen der Migration auf den deutschen Arbeitsmarkt. Nürnberg.

  11. Bundestag [German Parliament]. (2003a). Gesetz zur Änderung der Handwerksordnung und anderer handwerksrechtlicher Vorschriften. Bundestagsdrucksache, 15(1206), 4–46.

  12. Bundestag [German Parliament]. (2003b). Stellungnahme des Bundesrates zum Gesetz zur Änderung der Handwerksordnung und anderer handwerksrechtlicher Vorschriften. Bundestagsdrucksache 1.

  13. Bundestag [German Parliament]. (2011). Protokolle des Vermittlungsausschusses des Deutschen Bundestages und des Bundesrates für die 13. bis 15. Wahlperiode (1994 bis 2005): DVD-Edition der… mit Materialien zur Erschließung, C. H. Beck. ISBN 978-3406617997.

  14. Caliendo, M., & Künn, S. (2011). Start-up subsidies for the unemployed: Long-term evidence and effect heterogeneity. Journal of Public Economics, 95, 311–331.

  15. Constant, A., & Zimmermann, K. (2006). The making of entrepreneurs in Germany: Are native men and immigrants alike? Small Business Economics, 26, 279–300.

  16. Damelang, A., Haupt, A., & Abrahan, M. (2018). Economic consequences of occupational deregulation. Natural experiment in the German crafts. Acta Sociologica, 61(1), 34–49.

  17. Domin, J.-P., & Marciano, A. (2013). How much should professional markets be regulated? An introduction. The European Journal of Comparative Economics, 10(2), 153–157.

  18. Dorsey, S. (1983). Occupational licensing and minorities. Law and Human Behavior, 7(2), 171–181.

  19. European Commission. (2013). Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee on Evaluating National Regulations on Access to Professions, Brussels 2013, COM 2013/676 final 02 October 2013.

  20. Federal Assembly [Bundesrat]. (2003). Stenografischer Bericht, 795. Sitzung, Berlin, Friday Dec 19, 2003. Upper House of the German parliament.

  21. Federal Statistical Office. (2016). Produzierendes Gewerbe. Unternehmen, tätige Personen und Umsatz im Handwerk—Jahresergebnisse 2013. Fachserie 4, Reihe 7.2. Wiesbaden.

  22. Federman, M. N., Harrington, D. E., & Krynski, K. J. (2006). The impact of state licensing regulations on low-skilled immigrants: The case of Vietnamese Manicurists. American Economic Review, 96(2), 237–241.

  23. Feldman, H. (2009). The effects of hiring and firing regulation on unemployment and employment: Evidence based in survey data. Applied Economics, 41(19), 2389–2401.

  24. Feldmann, H. (2003). Labor market regulation and labor market performance: Evidence based on survey among senor business executives. Kyklos, 56(4), 509–540.

  25. Feuerhake, J. (2012). Handwerkszählung 2008. Wirtschaft und Statistik, 1, 51–62.

  26. Fredriksen, K., Runst, P., & Bizer, K. (forthcoming). Masterful meisters? Voluntary certification and quality in the German crafts sector. German Economic Review.

  27. Gomez, R., Gunderson, M., Huang, X., & Zhang, T. (2015). Do immigrants gain or lose by occupational licensing? Canadian Public Policy, 41(supplement 1), 80–97.

  28. Granovetter, M. (1973). The strength of weak ties. American Journal of Sociology, 78(6), 1360–1380.

  29. Hawthorne, L. (2015). The impact of skilled migration on Foreign Qualification Recognition reform in Australia. Canadian Public Policy, 41(1), 173–185.

  30. Kleiner, M. M. (2006). Licensing occupations. Ensuring quality or restricting competition?. Kalamazoo: W.E. Upjohn Institute for Employment Research.

  31. Kleiner, M. M. (2015). Border battles: The influence of occupational licensing on interstate migration. Employment Research Newsletter, 22(4), 4–6.

  32. Kleiner, M. M., Gay, R. S., & Greene, K. (1982). Barriers to labor migration: The case of occupational licensing. Industrial Relations, 21(3), 383–391.

  33. Kleiner, M. M., & Krueger, A. (2013). Analyzing the extent and influence of occupational licensing on the labor market. Journal of Labor Economics, 31(2/2), 173–202.

  34. Koch, A., & Nielen, S. (2016). Ökonomische Effekte der Liberalisierung der Handwerksordnung von 2004, WISO Diskurs, 5/2016.

  35. Kogan, I. (2010). Anew immigrants—Old disadvantage patterns? Labour market integration of recent immigrants into Germany. International Migration, 49(1), 91–117.

  36. Law, M. T., & Marks, M. S. (2009). Effects of occupational licensing laws on minorities: Evidence from the progressive era. Journal of Law and Economic, 52, 351–366.

  37. Lergetporer, P., Ruhose, J., & Simon, L. (2016). Labor market effects of entry barriers to self-employment: Evidence from deregulating the German crafts sector. Ifo working paper—Ifo Center for the Economics of Education, Ifo Institute.

  38. May-Strobl, E. (2005). Die Ich-AG als neue Form der Existenzgründung aus der Arbeitslosigkeit. IfM Bonn.

  39. McDonald, J. T., Warman, C., & Worswick, C. (2015). Immigrant selection systems and occupational outcomes of international medical graduates in Canada and the United States. Canadian Public Policy, 41(Suppl 1), 116–137.

  40. Minniti, M., & Wim, N. (2010). What do we know about the patterns and determinants of female entrepreneurship cross countries? The European Journal of Development Research, 22(3), 277–293.

  41. Mueller, K. (2006). Erste Auswirkungen der Novelierung der Handwerksordnung von 2004, Göttinger Handwerkswirtschaftliche Studien, 74. Duderstadt: Mecke-Druck.

  42. Mueller, K. (2014). Stabilität und Ausbildungsbereitschaft von Existenzgründern im Handwerk, Göttinger Handwerkswirtschaftliche Studien, 94. Duderstadt: Mecke-Druck.

  43. Mueller, K. (2015). Strukturentwicklung im Handwerk, Göttinger Handwerkswirtschaftliche Studien, 98. Duderstadt: Mecke-Druck.

  44. OECD. (2017). International migration outlook 2017. Paris: OECD.

  45. Ogus, A., & Zhang, Q. (2006). Licensing procedures in developing countries: Should they be part of the set-up process? International Journal of Public Administration, 29(12), 1091–1108.

  46. Pashigian, P. B. (1979). Occupational licensing and the interstate mobility of professionals. The Journal of Law and Economics, 22(1), 1–25.

  47. Philipsen, N. (2009). Regulation of liberal professions and competition policy: Developments in the EU and China. Journal of Competition Law & Economics, 6(2), 203–231.

  48. Rostam-Afschar, D. (2014). Entry regulation and entrepreneurship: A natural experiment in German craftsmanship. Empirical Economics, 47, 1067–1101.

  49. Runst, P., Thomä, J., Haverkamp, K., & Müller, K. (forthcoming). A replication of ‘Entry regulation and entrepreneurship: A natural experiment in German craftsmanship’. Empirical Economics.

  50. Shapiro, C. (1986). Investment, moral hazard, and occupational licensing. The Review of Economic Studies, 53(5), 843–862.

  51. Svorny, S. (2000). Licensing, market entry regulation. Encyclopedia of law and economics.

  52. Williams, W. E. (1982). The state against Blacks. New York, NY: New Press.

Download references

Author information

Correspondence to Petrik Runst.

Electronic supplementary material

Appendix: Classification of crafts trades

Appendix: Classification of crafts trades

The following procedure was used to identify individuals who are working in the crafts sector by using the microcensus occupation codes (KldB1992). In a first step, information was gathered on all training occupations and their classification codes (KldB 1992) Training occupations are different from occupations but are nevertheless associated with a particular crafts trade. This was achieved by consulting the official classifications of the ZDH and the Federal Institute for Vocational Education and Training and included present as well as predecessor occupations (Bundesinstitut für Berufsbildung, BiBB 2012).

In a second step, I used data provided online by BiBB concerning the information about how many apprentices within one occupational field are trained either within crafts companies or non-crafts (mainly industrial) companies. Subsequently, I computed a proportion of crafts apprentices within each occupational code. To exclude occupation codes with a high proportion of non-crafts workers, I used the information on the proportion on crafts trainees and dropped codes if this proportion was less than 60%. Lowering or increasing this cut-off point by up to 20% hardly affects the classification as most occupations contain either a very low or a high proportion of craftsmen. Observations were also removed if occupations could not be clearly marked as either an A or B occupation.

This method is not error-proof as it assumes that the proportion of crafts trainees strongly correlates with the proportion of crafts employees. However, this method removes occupation codes from the analysis that most probably contain very low proportions of crafts workers. For example, while the KldB code 141 (“Chemiebetriebswerker”, chemical plant employee) may seem a good proxy for the B-trade of “Wachszieher” (candle maker), according to my results less than 1% of individuals in the occupation of chemical plant employee are actually craftsmen. The classification scheme implies that most of the individuals in that occupation are industrial workers such as chemical production specialists, chemical technicians or pharmaceutical technicians.

In a last step, I scrutinized the occupation of building cleaners (KldB code: 934). The occupation comprises about 45% of all individuals in the deregulated B-trades in the microcensus dataset. Owing to its large size, it potentially biases any general conclusions about B-trades.

After a thorough inspection, it is doubtful if the occupational group of cleaners in the microcensus data perfectly matches the TCC trade of cleaners. For example, while official company registration data by the Federal Statistics office of Germany points to a sharp increase in market entry in that trade after 2004 (Mueller 2006), no such trend can be established in the microcensus data. The proportion of self-employed cleaners in the microcensus only increases from 1.6 (2004) to 2.3% (2011). Upon request, employees of the Research Data Centers of the German States confirmed our suspicion and suggested several other classification codes under which cleaners might be found, none of which can be identified as crafts trades based upon our classification scheme.

According to the documentation for an older occupation classification system (KldB1975), there are about seven activity profiles coded as 933 or 934 (cleaners). The classification scheme in the microcensus (KldB1992) merges these codes into one code (934). According to the crafts classification scheme recently developed by the Federal Employment Agency (BAA 2014), only three of these seven occupations belong to the crafts sector. I therefore do not include cleaners in the analysis. Doing so, however, increases the effects size as well as the statistical significance of our results, suggesting that the share of migrants rose more strongly amongst cleaners (see Table 12).

Table 12 Classification of crafts occupations by Runst et al. (KldB1992 titles)

Rights and permissions

Reprints and Permissions

About this article

Verify currency and authenticity via CrossMark

Cite this article

Runst, P. The effect of occupational licensing deregulation on migrants in the German skilled crafts sector. Eur J Law Econ 45, 555–589 (2018) doi:10.1007/s10657-018-9583-x

Download citation

Keywords

  • Occupational licensing
  • Migrants
  • Germany
  • Common market
  • Deregulation

JEL Classification

  • D45
  • K20
  • L51