IDEAS home Printed from https://ideas.repec.org/a/spr/jlabre/v41y2020i4d10.1007_s12122-020-09310-7.html
   My bibliography  Save this article

Impact of Occupational Licensing on Wages and Wage Inequality: Canadian Evidence 1998–2018

Author

Listed:
  • Tingting Zhang

    (Merrimack College)

  • Morley Gunderson

    (University of Toronto)

Abstract

Based on Labour Force Survey data for Canada over the period 1998 to 2018, we find occupational licensing raised average real wages from 6.1% in 1998 to 13.8% by 2018, slightly less for propensity score matching estimates, suggesting the effect is somewhat lower after adjusting for unobservable factors that can affect pay. Unconditional quantile regressions indicate the licensing effects on wages are greater at the higher ends of the wage distribution, with those inequality enhancing effects becoming more pronounced over time. In contrast, the union wage premium declined steadily from 9.2% in 1998 to 5% in 2018, with a substantial premium at the bottom of the wage distribution but a steady decline at the top, becoming negative at higher parts of the wage distribution, with those equality enhancing effects becoming less pronounced over time. Overall, the estimates for Canada indicate that occupational licensing contributes to wage inequality, and the effect is increasing over time, while unions reduce overall wage inequality, but this equalizing effect is decreasing over time.

Suggested Citation

  • Tingting Zhang & Morley Gunderson, 2020. "Impact of Occupational Licensing on Wages and Wage Inequality: Canadian Evidence 1998–2018," Journal of Labor Research, Springer, vol. 41(4), pages 338-351, December.
  • Handle: RePEc:spr:jlabre:v:41:y:2020:i:4:d:10.1007_s12122-020-09310-7
    DOI: 10.1007/s12122-020-09310-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s12122-020-09310-7
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    File URL: https://libkey.io/10.1007/s12122-020-09310-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Morris M. Kleiner & Alan B. Krueger, 2010. "The Prevalence and Effects of Occupational Licensing," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 676-687, December.
    2. Nicole M. Fortin & Thomas Lemieux, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring.
    3. Maria Guadalupe, 2007. "Product Market Competition, Returns to Skill, and Wage Inequality," Journal of Labor Economics, University of Chicago Press, vol. 25(3), pages 439-474.
    4. Maury Gittleman & Mark A. Klee & Morris M. Kleiner, 2018. "Analyzing the Labor Market Outcomes of Occupational Licensing," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(1), pages 57-100, January.
    5. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
    6. David Card & Thomas Lemieux & W. Craig Riddell, 2020. "Unions and wage inequality: The roles of gender, skill and public sector employment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 140-173, February.
    7. Morris M. Kleiner & Alan B. Krueger, 2013. "Analyzing the Extent and Influence of Occupational Licensing on the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 31(S1), pages 173-202.
    8. Oded Galor & Omer Moav, 2000. "Ability-Biased Technological Transition, Wage Inequality, and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 469-497.
    9. Nicole M. Fortin & Thomas Lemieux, 2015. "Changes in wage inequality in Canada: An interprovincial perspective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(2), pages 682-713, May.
    10. Card, David & Freeman, Richard B. (ed.), 1993. "Small Differences That Matter," National Bureau of Economic Research Books, University of Chicago Press, number 9780226092836, Febrero.
    11. Bijan J. Borah & Anirban Basu, 2013. "Highlighting Differences Between Conditional And Unconditional Quantile Regression Approaches Through An Application To Assess Medication Adherence," Health Economics, John Wiley & Sons, Ltd., vol. 22(9), pages 1052-1070, September.
    12. Rafael Gomez & Morley Gunderson & Xiaoyu Huang & Tingting Zhang, 2015. "Do Immigrants Gain or Lose by Occupational Licensing?," Canadian Public Policy, University of Toronto Press, vol. 41(s1), pages 80-97, August.
    13. Erik Lindqvist & Roine Vestman, 2011. "The Labor Market Returns to Cognitive and Noncognitive Ability: Evidence from the Swedish Enlistment," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 101-128, January.
    14. Samuel J. Ingram, 2019. "Occupational Licensing and the Earnings Premium in the United States: Updated Evidence from the Current Population Survey," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 732-763, December.
    15. Morris M. Kleiner, 2006. "Licensing Occupations: Ensuring Quality or Restricting Competition?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number lo, july-dece.
    16. James Foster & Michael Wolfson, 2010. "Polarization and the decline of the middle class: Canada and the U.S," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(2), pages 247-273, June.
    17. David Card & John E. DiNardo, 2002. "Skill-Biased Technological Change and Rising Wage Inequality: Some Problems and Puzzles," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 733-783, October.
    18. Nicole Fortin & David A. Green & Thomas Lemieux & Kevin Milligan & W. Craig Riddell, 2012. "Canadian Inequality: Recent Developments and Policy Options," Canadian Public Policy, University of Toronto Press, vol. 38(2), pages 121-145, June.
    19. Sergio Firpo & Nicole M. Fortin & Thomas Lemieux, 2009. "Unconditional Quantile Regressions," Econometrica, Econometric Society, vol. 77(3), pages 953-973, May.
    20. Maury Gittleman & Morris M. Kleiner, 2016. "Wage Effects of Unionization and Occupational Licensing Coverage in the United States," ILR Review, Cornell University, ILR School, vol. 69(1), pages 142-172, January.
    21. Edward J. Timmons & Robert J. Thornton, 2019. "There and Back Again: The De‐Licensing and Re‐Licensing of Barbers in Alabama," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 764-790, December.
    22. Acemoglu, Daron & Autor, David, 2011. "Skills, Tasks and Technologies: Implications for Employment and Earnings," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 12, pages 1043-1171, Elsevier.
    23. Morley Gunderson & Harry Krashinsky, 2015. "Returns to Apprenticeship Based on the 2006 Canadian Census," ILR Review, Cornell University, ILR School, vol. 68(5), pages 1078-1101, October.
    24. Thomas Lemieux, 2008. "The changing nature of wage inequality," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(1), pages 21-48, January.
    25. David Card & Richard B. Freeman, 1993. "Introduction to "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States"," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 1-20, National Bureau of Economic Research, Inc.
    26. Morris M. Kleiner, 2000. "Occupational Licensing," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 189-202, Fall.
    27. Tingting Zhang, 2019. "Effects of Occupational Licensing and Unions on Labour Market Earnings in Canada," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 791-817, December.
    28. David Card & Richard B. Freeman, 1993. "Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States," NBER Books, National Bureau of Economic Research, Inc, number card93-1, January.
    29. Rafael Gomez & Danielle Lamb, 2019. "Unions and Non-Standard Work: Union Representation and Wage Premiums across Non-Standard Work Arrangements in Canada, 1997–2014," ILR Review, Cornell University, ILR School, vol. 72(4), pages 1009-1035, August.
    30. Maria Koumenta & Mario Pagliero, 2019. "Occupational Regulation in the European Union: Coverage and Wage Effects," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 818-849, December.
    31. David H. Autor & Lawrence F. Katz & Alan B. Krueger, 1998. "Computing Inequality: Have Computers Changed the Labor Market?," The Quarterly Journal of Economics, Oxford University Press, vol. 113(4), pages 1169-1213.
    32. Chi, Wei & Li, Bo, 2008. "Glass ceiling or sticky floor? Examining the gender earnings differential across the earnings distribution in urban China, 1987-2004," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 243-263, June.
    33. Michele Campolieti, 2018. "Matching and Inverse Propensity Weighting Estimates of the Union Wage Premium: Evidence from Canada, 1997–2014," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(1), pages 101-130, January.
    34. Morris M. Kleiner & Evgeny Vorotnikov, 2017. "Analyzing occupational licensing among the states," Journal of Regulatory Economics, Springer, vol. 52(2), pages 132-158, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fang, Tony & Hartley, John, 2022. "Evolution of Union Wages and Determinants," IZA Discussion Papers 15333, Institute of Labor Economics (IZA).
    2. Chung, Bobby W., 2022. "The costs and potential benefits of occupational licensing: A case of real estate license reform," Labour Economics, Elsevier, vol. 76(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lisa Simon, 2019. "Mikroökonometrische Analysen der Determinanten von Individuellem Arbeitsmarkterfolg," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 83.
    2. Mario Pagliero, 2019. "Occupational Licensing in the EU: Protecting Consumers or Limiting Competition?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 137-153, August.
    3. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2022. "Occupational Regulation, Institutions, and Migrants’ Labor Market Outcomes," Labour Economics, Elsevier, vol. 79(C).
    4. Dustin Chambers & Colin O’Reilly, 2022. "The economic theory of regulation and inequality," Public Choice, Springer, vol. 193(1), pages 63-78, October.
    5. Morikawa, Masayuki, 2018. "Occupational licenses and labor market outcomes in Japan," Japan and the World Economy, Elsevier, vol. 48(C), pages 45-56.
    6. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2020. "Occupational licensing and the gender wage gap," Hohenheim Discussion Papers in Business, Economics and Social Sciences 13-2020, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    7. Rosalia Castellano & Gaetano Musella & Gennaro Punzo, 2019. "Exploring changes in the employment structure and wage inequality in Western Europe using the unconditional quantile regression," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 249-304, May.
    8. Kerr, Andrew & Wittenberg, Martin, 2021. "Union wage premia and wage inequality in South Africa," Economic Modelling, Elsevier, vol. 97(C), pages 255-271.
    9. Battisti, Michele & Gatto, Massimo Del & Parmeter, Christopher F., 2022. "Skill-biased technical change and labor market inefficiency," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    10. John M. Barrios, 2022. "Occupational Licensing and Accountant Quality: Evidence from the 150‐Hour Rule," Journal of Accounting Research, Wiley Blackwell, vol. 60(1), pages 3-43, March.
    11. Pizzola, Brandon & Tabarrok, Alexander, 2017. "Occupational licensing causes a wage premium: Evidence from a natural experiment in Colorado’s funeral services industry," International Review of Law and Economics, Elsevier, vol. 50(C), pages 50-59.
    12. Alicia Plemmons, 2022. "Occupational licensing's effects on firm location and employment in the United States," British Journal of Industrial Relations, London School of Economics, vol. 60(4), pages 735-760, December.
    13. Morris M. Kleiner & Evgeny Vorotnikov, 2017. "Analyzing occupational licensing among the states," Journal of Regulatory Economics, Springer, vol. 52(2), pages 132-158, October.
    14. David A. Green & Benjamin M. Sand, 2015. "Has the Canadian labour market polarized?," Canadian Journal of Economics, Canadian Economics Association, vol. 48(2), pages 612-646, May.
    15. Markowitz, Sara & Adams, E. Kathleen & Lewitt, Mary Jane & Dunlop, Anne L., 2017. "Competitive effects of scope of practice restrictions: Public health or public harm?," Journal of Health Economics, Elsevier, vol. 55(C), pages 201-218.
    16. Massimiliano Tani, 2021. "Occupational Licensing and the Skills Mismatch of Highly Educated Migrants," British Journal of Industrial Relations, London School of Economics, vol. 59(3), pages 730-756, September.
    17. David Albouy & Alex Chernoff & Chandler Lutz & Casey Warman, 2019. "Local Labor Markets in Canada and the United States," Journal of Labor Economics, University of Chicago Press, vol. 37(S2), pages 533-594.
    18. Michael Chletsos & Stelios Roupakias, 2020. "Education and wage inequality before and during the fiscal crisis: A quantile regression analysis for Greece 2006–2016," Review of Development Economics, Wiley Blackwell, vol. 24(4), pages 1333-1364, November.
    19. David Card & Thomas Lemieux & W. Craig Riddell, 2020. "Unions and wage inequality: The roles of gender, skill and public sector employment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 140-173, February.
    20. Baird Matthew D. & Zaber Melanie A. & Bozick Robert, 2022. "Beyond traditional academic degrees: The labor market returns to occupational credentials in the United States," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-38, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jlabre:v:41:y:2020:i:4:d:10.1007_s12122-020-09310-7. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://www.springer.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.