Licensed Occupations And Income Inequality

One of the features of the Journal of Economic Perspectives is the Recommended Reading section.

Aaron Edlin and Rebecca Haw have an article in the Penn Law Review entitled “Cartels by another name: Should licensed occupations face anti-trust scrutiny?

When only about five percent of American workers were subject to licensing
requirements during the 1950s, the anticompetitive effect of these state sanctioned
cartels was relatively small. Now, however, nearly a third of
American workers need a state license to perform their job legally, and this
trend toward licensing is continuing. The service sector—the most likely to
be covered by licensing—has grown enormously, with its share of nonfarm
employment growing from roughly 40% in 1950 to over 60% in 2007. Some
recent additions to the list of professions requiring licenses include locksmiths,
beekeepers,  auctioneers,  interior designers,  fortune tellers,
tour guides, and shampooers.

If you’re pressed for time, just reading the introduction will prove valuable. Licensing costs consumers a lot, and it’s not really clear if they benefit from better quality services or lower error rates.

When income inequality talk is all the rage, could licensing be functioning as a proxy for things like union membership or collective agreements? What I’m getting at is the idea that where a decline in union membership can be offset to some extent by expansion of licensing programs.

It should be noted that those in the bottom quintile are least likely to benefit from licensed occupations privileges – licensing boards seem unlikely to offer payment plans so could have a non-trivial impact on social mobility.