Peter Blair, Bobby Chung

In order to work legally, 29% of U.S. workers require an occupational license. We show that occupational licensing reduces the racial wage gap between white and black men by 43%, and the gender wage gap between women and white men by 36%-40%. For black men, a license is a positive indicator of non-felony status that aids in firm screening of workers, whereas women experience differentially higher returns to the human capital that is bundled with occupational licenses. The information and human capital content of licenses enable firms to rely less on race and gender as predictors of worker productivity.

JEL Codes  
D21: Firm Behavior: Theory
D84: Expectations; Speculations
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
J31: Wage Level and Structure; Wage Differentials
J41: Labor Contracts
J70: Labor Discrimination: General
K23: Regulated Industries and Administrative Law
K31: Labor Law
L51: Economics of Regulation
wage inequality
statistical discrimination
occupational licensing
optimal regulation