Occupational licensing and job mobility in the United States

This paper studies the association between occupational licensing and job hire and job separation rates along with earnings of job stayers and job-to-job movers. In contrast to previous studies, it attempts to provide macro-level estimates by relying on a novel Job-to-Job Flows database from the U.S. Census Bureau, covering the near universe of job transitions. The empirical analysis exploits variation in licensing regulation across states and industries and constructs indicators for both the share of employment subject to licensing (the extensive margin) and the strictness of regulation (the intensive margin). Results show that more extensive and stricter licensing are both associated with lower job mobility. This holds for job-to-job mobility as well as for transitions in and out of nonemployment. The strictness indicator points to lower job-to-job mobility from entry restrictions and renewal requirements to licensing, while education and training requirements may increase job-to-job mobility. The analysis also finds a negative association between licensing restrictions for people with a criminal record and job hire from nonemployment. Further analysis shows that interstate job-to-job mobility tends to be lower towards states with more extensive and stricter licensing regulation. The results from the analysis of earnings are generally mixed and mostly insignificant. However, there is some evidence of lower earnings gains from job-to-job moves to states with more licensing within the same industry, which may reflect lower productivity growth because of weaker reallocation of labour resources and reduced competition.