Licensing Laws Are Shutting Young People Out Of The Job Market

By Ben Casselman of 538. Excerpt:

"A week ago, however, the Bureau of Labor Statistics released a trove of new data on licenses — who has them, how much they earn and how they compare to other workers. The numbers are based on a new set of questions added to the monthly Current Population Survey in 2015, so there is no historical information available, but the new evidence is broadly consistent with what the White House and other economists have found: Close to a quarter of workers, 22.4 percent, have a government-issued license, and 25.5 percent have either a license or a privately issued certification. Unsurprisingly, licenses were concentrated in the medical field, where mistakes can cost lives, but even in nonmedical occupations, nearly one in five workers had a license in 2015.¹

Licensing rules are a particular problem for young workers trying to break into the job market, especially those without a college degree. The unemployment rate for adults ages 18 to 35 with neither a license nor a college degree was 9.9 percent in 2015; for those with a license (but still no degree), it was 5.2 percent.² Those who do manage to find full-time jobs earn 13 percent less than those with a license. Good jobs that don’t require a license are scarce, particularly for women: Nearly two-thirds of young women without a license or a degree earn less than $540 a week, roughly two-thirds of the median wage for full-time workers. (For women with a license, about half earn at least $540 a week, in part because women dominate many medical occupations.) Licensing rules don’t explain all or even most of that gap — there are likely other differences between people who have licenses and those who don’t — but they probably do play a role. The earnings gap shrinks, but doesn’t disappear, after controlling for education, occupation and other factors.

Young workers aren’t the only ones affected. Among older workers, the earnings disparities between those with licenses and those without aren’t as stark,³ likely because they have had more time to find their way into a career (and perhaps also because occupational licensing wasn’t as widespread when they entered the workforce). But when older workers lose jobs, licensing requirements can make it hard for them to get back to work, especially if they need to change careers. Workers over 45 consistently face longer spells of unemployment when they lose jobs compared with younger workers; unemployment lasts more than 40 percent longer for those without a license.⁴

One solution, of course, is for workers without licenses to get them. But state licensing programs are often long and expensive, which can deter low-income workers or those who aren’t yet sure what career they want to pursue. And licenses can be barriers in other ways as well, making it hard for people to move to other states, where their license may not be valid, or to pursue entrepreneurial ideas, which may not fit with licensing requirements.

Both Democrats and Republicans have spoken out against excessive licensing in recent years. But the problem is that the winners from licensing laws are clear, as Josh Zumbrun noted this week in The Wall Street Journal. Particularly for workers without a college degree, a license brings higher earnings and a reduced risk of unemployment. The losers, even though there are probably more of them, are harder to identify. Someone who avoids becoming a hairdresser because of the mandated training, for example, may not think of herself as being a victim of licensing, even if she is. As a result, supporters of licensing have a stronger incentive to defend their interests, making it hard to roll back the laws once they’re in place."