How Does Government Regulate Occupations in the UK and US? Issues and Policy Implications
We show that in both countries occupational licensing has a large impact on wage determination. The wage premium associated with licensing stands at approximately 18 per cent in the US and 13 per cent in the UK. For both countries, this is higher than the estimated effect of union membership. Interestingly, in the UK licensing has the opposite effect on income inequality compared to unionization. In particular, licensing raises the wages of high skilled and high paid individuals thus exacerbating the existing disparity in the distribution of earnings in the UK. Such a finding confirms previous US estimates, and it is therefore consistent within both contexts.
Amy Humphris, Morris M. Kleiner, and Maria Koumenta