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The Labor Market Consequences of Regulating Similar Occupations: the Licensing of Occupational and Physical Therapists

Abstract

This study examines the influence of occupational licensing on two significant occupations that provide similar health care services: occupational therapists and physical therapists. Since many of the tasks that these occupations overlap, individuals in both occupations can have legal jurisdiction over these tasks. We examine how these two occupations interact with one another in the labor market on wage determination and employment. Unlike previous analyses of occupational licensing, our study evaluates two professions that are female dominated both within the vocations, and among its leadership. Our results show that the ability of physical therapists to have direct access to patients is associated with a reduction in hourly earnings for occupational therapists, suggesting there is substitution for certain overlapping service tasks across the two occupations. The ability of these two occupations to be mainly substitutes for one another provides new evidence on how the growing numbers of regulated occupations that provide similar tasks influence one another.

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Notes

  1. 1.

    These data are from a LexisNexis search of statutes passed during the legislative session.

  2. 2.

    For example, allowing nurse practitioners to perform certain medical procedures is associated with a reduction of almost 10% of costs for well-child checkups which could result in a reduction of $600 million dollars ($10 × 60 million visits per year) (Kleiner et al. 2016).

  3. 3.

    See Kleiner (2015) for a review of the empirical literature on the wage determination effects of licensing.

  4. 4.

    The last state that licensed PT is Kansas in 2003. This is the only state that we may compare the average wage before and after the licensing law passage for PTs. Figure 6 show a comparison over time of PT wage in Kansas versus the national average PT wage.

  5. 5.

    This information is from the “Qualifications of an Occupational Therapist” published at The American Occupational Therapy Association website www.aota.org. But year by year change on the minimum education level for OTs are not available in our study.

  6. 6.

    See Appendix Table 8 for details regarding sample construction.

  7. 7.

    We also include OT direct access in state law into our preliminary analysis but find no effect of it on the wage and employment of any of the two occupations.

  8. 8.

    We use logged value of per capita personal income and percentage of senior aged population as state level covariates in estimating employment by state and year.

  9. 9.

    We estimated three alternative approaches. The first used a dummy variable for licensing. The second, used a partially continuous variable for duration. The third used a group of dummy variables that designated years since initial licensing. The results were similar, and are available from the authors.

  10. 10.

    Given the quality of the data for employment levels and changes in the OES at the state level, we prefer to use this source given its accuracy, sample size, and consistency relative to the ACS for these two occupations over time. We are aware that this does not allow us to obtain self-employed individuals, but they only are between 7 and 9% of the workers in these occupations.

References

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Acknowledgements

We thank Kevin Hollenbeck and the participants at seminars at the Annual Knee Center Occupational Licensing Conference, Association for Policy Analysis and Management annual meetings, and the Upjohn Institute for Employment Research for their comments and suggestions. We especially thank the library staff at the Upjohn Institute for Employment Research, the Federal Reserve Bank of Minneapolis library staff, and officials at the American Occupational Therapy Association and the American Physical Therapy Association for their assistance in collecting the statutory and administrative data.

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No funding was provided for the study.

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Correspondence to Morris M. Kleiner.

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Appendices

Appendix 1

Table 7 Jurisdictions regulating occupational therapists and physical therapists

Appendix 2

Table 8 Sample construction from the Census 1990, ACS 2000–2017

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Cai, J., Kleiner, M.M. The Labor Market Consequences of Regulating Similar Occupations: the Licensing of Occupational and Physical Therapists. J Labor Res 41, 352–381 (2020). https://doi.org/10.1007/s12122-020-09309-0

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Keywords

  • Occupational licensing
  • Wage and employment determination
  • Interaction of occupations

JEL Classification

  • J44
  • J31
  • J38
  • J88