Income Mobility, Automation, and Occupational Licensing

Technological change has long been tied with distributional concerns due to displacement against certain skills on labor markets. Short‐run dislocations could create scarring in the long run. For example, shifts against less skilled workers with children could limit their ability to improve the inter‐generational income mobility of their children. The existing literature rarely emphasizes the possibility that the ill effects of technological change are conditional on government regulations that limit the ability of workers to rapidly adjust—thus creating the scarring. We document the importance of these regulations by focusing on changes in licensing of low‐ and mid‐income occupations, exposure to industrial automation in the United States since the 1980s, and patterns of intergenerational income mobility. We find that a significant share of the prediction of falling income mobility attributed to automation is actually tied to changes in occupational licensing. Areas that experienced labor market deregulation and high exposure to automation suffered far less than areas that did not engage in deregulation.