Licensing Occupations: Ensuring Quality or Restricting Competition?

Consistent with general growth in wage inequality over the period, the greatest wage growth occurred in licensed occupations with the highest levels of income. Wage growth in the U.S. economy was 47.1 percent, and hourly earnings growth was 45.1 percent in nominal values from 1990 to 2000… There are substantial bonuses and profit sharing from being involved in private practices in some occupations (e.g., lawyers, physicians, and dentists), and tips and private business revenues are a substantial part of the economic returns for cosmetologists. Growth in hourly wages was 92.6 percent for dentists and more than 70 percent for physicians. It is interesting to observe that the supply of dentists remained constant over the decade, but that the number of doctors increased. Unlike the decline in the number of doctors and their wage growth relative to dentists during the 1930s, the hourly earnings of dentists, when profit sharing, dividends, and other income from their practice are taken into account, were higher than they were or physicians by 2000. The relatively lower-wage occupations…like cosmetologists and teachers, saw the smallest wage growth (between 35.6 and 39.3 percent) during the 1990s. However, when hourly earnings are included, which include other business income, cosmetologists’ earnings growth was slightly higher than those of accountants. Regulated occupations followed national patterns of growing inequality of earnings by having the highest-wage occupations in 1990 showing the largest wage growth, but lower-wage occupations had smaller wage growth than national averages.

Morris M. Kleiner

W. E. Upjohn Institute for Employment Research

2006

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