Competition and Regulation in Professional Services – KLEINER – June 2024 OECD discussion

This presentation by Morris Kleiner (University of Minnesota), was made during the discussion “Competition and Regulation in Professions and Occupations” held at the Working Party No. 2 on Competition and Regulation on 10 June 2024. More papers and presentations on the topic can be found out at oe.cd/crps.

This presentation was uploaded with the author’s consent.

1. Determinants and Consequences of
Occupational Licensing
Morris M. Kleiner, Ph.D.
A Presentation to the OECD
June 10, 2024

2. Definitions of occupational regulation
•Occupational licensing is a pervasive feature of the labor market and
service markets around the world
•Types of Occupational Regulation:
Registration: Unlawful to perform certain tasks without registering with
the government, but no competency requirements.
Certification: Unlawful to use title modifiers such as ”licensed,
”certified,” or ”registered” without a credential
Licensing is a government credential legally required to perform
certain tasks for compensation
Attaches to an individual (not establishment/firm) and requires a demonstration of competency

3. Longer-Run Trends in Occupational Licensing Requirements in the U.S.
Composition of occupations covered by licensing statutes (source: Carrollo, Hicks, Karch, and Kleiner, 2022)
Management, financial, and legal
Engineering and scientific
Education, arts, and media
Healthcare and social services
Other services
Sales and office
Construction, production, and transportation
0
1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
10
20
30
50
40
60
70
80
90
100
Share

of

Regulated

Employment
June 2June 22, 2023
2, 2023

4. Policy Innovation and Diffusion in the US
Certain states are consistently early adopters of licensing legislation (Carrollo, Hicks, Karch, and Kleiner, 2022).
CA
CT
GA AL
ID
KY
LA
MA
CO MS
NE KS
NV MT
IA
NJ
NM MD
NY IL
NC MI
ME OH
FL OR
SD
TN
UT RI AR
VA OK
ND WA MN MO
PA AZ SC NH WV TX
WI IN
WY DE VT
0.05
0.00
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
Share of Regulated
Occupations
First adopter
In first 5 adopters
In first 10 adopters
Carollo, Hicks, Karch, and Kleiner
4 / 38

5. US Professional Association Organization and Policy Adoption
Cumulative probability of regulation increases 15pp within 5 years of organization (Carrollo, Hicks, Karch, and Kleiner, 2022).
.25
.2
.15
.1
.05
0
-.05
-.1
Cumulative

Impact

on

Probability

of

Regulation
-10 15-5 0 5 10
Years Relative to State Professional Association Organization
Carollo, Hicks, Karch, and Kleiner April 25, 2024
5 / 35

6. Consequences of Occupational Licensing
•Occupational licensing is a pervasive feature of the U.S.
labor market and service markets around the world.
•Licensing has been shown to raise wages of regulated workers
from 4 to 15% (Kleiner, 2015; Gittleman et.al. 2018, Koumenta
and Pagliero, 2018)
•Reduces employment in regulated occupations by up to 25-30
percent (Kleiner and Soltas, 2023)
•Prices are higher in more regulated occupations (Kleiner et. al.
2016)
•Licensing reduces labor market efficiency and equity (Johnson
and Kleiner, 2020, Dodini, 2023, Kleiner and Xu, 2024).

7. Case Studies of Occupational Licensing and Service Quality
Across Nations (Kleiner, Morris M. and Maria Koumenta, 2022)
Occupation (and country) Nature of regulatory reform Quality indicator Summary of findings
Ridesharing drivers (UK and
Ireland)
Explore variations in the stringency
of the regulatory regime between
the two jurisdictions
-Customer satisfaction ratings
-Hard breaking and hard
accelerations
-No effects
Driving instructors (UK) Increase in educational
requirements to practise
-Service availability indicators
-Indicators of student performance
-Price levels
-No effect on quality of instructors
-Negative effect on outcomes for
learners
-Higher prices
Pharmacists (Italy) Relaxation of quantitative and
structural restrictions
-Availability of pharmacies at the
municipal level
-Health indicators
Positive effect on pharmacy
availability and health indicators
Advocates and legal advisors
(Poland)
Relaxation of restrictions relating
to educational requirements to
practise
-Complaints and disciplinary
cases
-Employment creation
-Decrease in complaints and
disciplinary cases
-Positive effect on availability of
practitioners
Health service practitioners (US)Relaxation on restrictions on the
scope of practice
-Health outcomes (e.g. mental
health, child mortality, patient
mortality)
-Price levels
-Positive effect on health
outcomes
-No effect on prices
Makeup artists and shampooers
(US)
State variation in licensing
requirements
-Satisfaction ratings by consumers-No effect of licensing on service
quality

8. Bibliography
•Carollo, Nicholas A., Jason F. Hicks, Andrew Karch, and Morris M. Kleiner. "The Origins and Evolution of Occupational Licensing in the
United States." (2022).
•Dodini, Samuel. "The spillover effects of labor regulations on the structure of earnings and employment: Evidence from occupational licensing."
Journal of Public Economics 225 (2023): 104947.
•Gittleman, Maury, Mark A. Klee, and Morris M. Kleiner. "Analyzing the labor market outcomes of occupational licensing."Industrial Relations:
A Journal of Economy and Society57, no. 1 (2018): 57–100
•Johnson, Janna E., and Morris M. Kleiner. 2020. "Is Occupational Licensing a Barrier to Interstate Migration?" American Economic Journal:
Economic Policy, 12 (3): 347-73
•Kleiner, Morris M. and Maria Koumenta, eds. 2022. Grease or Grit?: International Case Studies of Occupational Licensing and Its Effects on
Efficiency and Quality. Kalamazoo, MI: W.E. Upjohn Institute for Employment Research. https://doi.org/10.17848/9780880996877
•Kleiner, Morris M., Allison Marier, Kyoung Won Park, and Coady Wing. 2016. “Relaxing occupational licensing requirements: Analyzing
wages and prices for a medical service.” Journal of Law and Economics (May): 1–42.
•Kleiner, Morris M. and Evan J Soltas, A Welfare Analysis of Occupational Licensing in U.S. States, Review of Economic Studies, Vol., 90, No.
5. October 2023. pp. 2481–2516.
•Kleiner, Morris M. and Ming Xu. “Occupational Licensing and Labor Market Fluidity”, Journal of Labor Economics, 2024.
https://www.journals.uchicago.edu/doi/10.1086/730120
•Koumenta, Maria, and Mario Pagliero. "Occupational regulation in the European Union: coverage and wage effects." British Journal of
Industrial Relations 57, no. 4 (2019): 818-849.