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January 2014

Life, limbs, and licensing: occupational regulation, wages, and workplace safety of electricians, 1992–2007

Licensing of electricians, as well as of the broader construction occupational group to which electricians belong, grew significantly at the state level from 1992 to 2007.

Analysts of government policies in the labor market have long held that licensing laws which restrict the supply of labor cause an increase in wages, but there has been little analysis of the influence of regulation on the conditions of work. This article examines the influence of occupational licensing on the wages and workplace safety of electricians, one of the most regulated occupations directly involved in the construction industry.

Occupational licensing is among the fastest growing institutions in the U.S. economy. In the 1950s, about 4.5 percent of the workforce was licensed by state governments. By 2008 approximately 29 percent of the U.S. workforce was licensed by any level of government, and more than 800 occupations were licensed by at least one state in the 1990s.1 The latter statistic compared with about 12.4 percent of the workforce who said they were union members in the Current Population Survey (CPS) for the same year.2

Occupational regulation in the United States generally takes three forms. The least restrictive form is registration, in which individuals file their names, addresses, and qualifications with a government agency before practicing their occupation. The registration process may include posting a bond or filing a fee. In contrast, certification allows any person to perform the relevant tasks, but the government—or sometimes a private, nonprofit agency—administers an examination or another method to determine qualifications and certifies those who have achieved the level of skill and knowledge required for certification. The toughest form of regulation is licensure, often referred to as "the right to practice." Under licensure laws, working in an occupation for compensation without first meeting government standards is illegal. As examples of certification versus licensure, travel agents and car mechanics are generally certified but not licensed.

The focus of this article is the role of occupational licensing and other forms of government regulation for electricians, a heavily regulated occupation in the construction industry. Unlike previous work that examines the role of occupational licensing on wages, prices, and access to, and quality of, regulated services for consumers,3 the research presented here extends the analysis of regulation to the subject of the likelihood of occupational licensing reducing work-related deaths and serious job-related injuries.

The analysis presented finds that local licensing of electricians is associated with approximately a 12-percent wage premium beyond that afforded by state regulations and that certain aspects of occupational requirements of state licensing, such as age and education, as well as exam requirements, raise the wages of electricians by about 6 percent to 8 percent. These results are robust for several alternative specifications. Further, the findings suggest a modest tradeoff between wages and work-related injuries. However, no systematic influence of occupational licensing on the injury rates, severity of injuries, or death rates of electricians was found. The rest of the article documents the development of these results.

Notes

1 See Pamela L. Brinegar and Kara L. Schmitt, "State occupational and professional licensure," in The book of the states, 1992–1993 (Lexington, KY: Council of State Governments, 1992), pp. 567580; Morris M. Kleiner and Alan B. Krueger, "Analyzing the extent and influence of occupational licensing on the labor market," Journal of Labor Economics, April 2013, pp. S173S202, also available as paper read at the Princeton Data Improvement Initiative, Princeton, NJ, 2008, http://www.irs.princeton.edu/events/princeton-data-improvement-initiative.

2 Barry T. Hirsch and David A. Macpherson, Union membership and coverage database from the CPS, 2011, http://www.unionstats.com.

3 See Lawrence Shepard, "Licensing restrictions and the cost of dental care,"Journal of Law and Economics, vol. 21, no. 1, 1978. pp. 187201; Ronald S. Bond, John E. Kwoka, Jr., John J. Phelan, and Ira Taylor Whitten, Staff report on effects of restrictions on advertising and commercial practice in the professions: the case of optometry (Washington, DC: U.S. Bureau of Economics, September  1980); Carolyn Cox and Susan Foster, The costs and benefits of occupational regulation (Washington, DC: U.S. Bureau of Economics, October 1990); and Morris M. Kleiner and Richard M. Todd, "Mortgage broker regulations that matter: analyzing earnings, employment, and outcomes for consumers," in David Autor (ed.), Studies of labor market intermediation  (Chicago: University of Chicago Press, 2009).

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About the Author

Morris M. Kleiner
morris.kleiner@gmail.com

Morris M. Kleiner is Professor, Humphrey School of Public Affairs, University of Minnesota, Minneapolis, MN, and Research Associate, National Bureau of Economic Research, Cambridge, MA.

Kyoung Won Park
kwp@hanyang.ac.kr

Kyoung Won Park is an assistant professor in the College of Business and Economics, Hanyang University, Kyeonggi-do, Korea.