How Does Occupational Licensing Impact Immigrants?

From a recent working paper out of the Center for Growth & Opportunity:

We use two sources of data—the Current Population Survey (CPS) and the Survey of Income and Program Participation (SIPP)—to explore the differences in occupational licensing between natives and immigrants. Each dataset provides unique advantages, allowing us to paint a clearer picture of how occupational licensing differs between natives and immigrants than would be possible by using either dataset alone.

Though the CPS and SIPP differ in some key ways, where comparable our results are quite similar between the two datasets. We find that immigrants are significantly less likely to have an occupational license than natives; this gap is larger for men than for women and is especially large for the highest education level. The wage premium from having a license may not differ between natives and immigrants when controlling for English language ability, suggesting that though immigrants are less likely to have a license, they seem to benefit at least as much as natives from having one. Licensed workers tend to work more hours per week than otherwise similar unlicensed workers, so the wage premium understates the earnings premium.

Using the CPS, we find that the native/immigrant licensing gap declines with years since migration, consistent with immigrants assimilating toward natives. We also find large differences in licensing rates by region of origin; in particular, women from the Caribbean, Southeast Asia, and Africa have a higher probability of having a license than otherwise similar natives.

Using the SIPP, we find that a lack of English language proficiency lowers the probability that an immigrant has a license, even when controlling for other individual characteristics such as education level. Utilizing the richer set of occupational licensing questions available in the SIPP, we find no evidence to suggest that license characteristics differ between natives and immigrants, and thus we find no evidence that natives and immigrants are acquiring different types of licenses.

Our results suggest that occupational licensing disproportionately affects immigrants, especially male immigrants, those lacking English proficiency, and the most educated group. Indeed, insofar as occupational licensing helps to protect incumbent (largely native) workers in an occupation from competition, it is unsurprising that immigrants are particularly impacted (pg. 18-19).

They also find, “Skill-based immigration would favor immigrants with high levels of education. Our results indicate that it is precisely this group that exhibits the largest licensing attainment gap with natives. Increasing the flow of immigrants from this education level may lead to substantial occupational mismatch for this group of immigrants if they face difficulty in acquiring licenses needed to work in their pre-migration occupations” (pg. 20).

Regressive regulations like this are low-hanging fruit that can easily be changed.

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