Occupational Licensing as a Barrier to Entry for Immigrants

By Tyler Boesch, Katherine Lim & Ryan Nunn. From the Federal Reserve Bank of Minneapolis.

"Abstract

Affecting about one-fifth of U.S. workers, occupational licensing is a core labor market institution. However, despite considerable policy focus on the uneven burden of licensure across groups, relatively little is known about the differential impacts of licensure policies by nativity and race/ethnicity. We explore demographic disparities in licensure rates, using variation in licensure within states and occupations to estimate its effects on employment. We find that licensure reduces foreign-born employment in a state-occupation pair by nearly 20 percent relative to native-born employment. Similar effects are evident for Asian, Black, and Latino workers overall, but the effects on Asian and Latino employment are driven largely by foreign-born workers. Wage premiums for immigrants are correspondingly larger than for native-born workers, consistent with the interpretation that licensure requirements constitute a disproportionate barrier to the labor supply of immigrants."