Most previous work on occupational licensing has been concerned with effects on consumers. Proponents of licensing contend that the public may benefit from regulations that assure minimum quality. However, many economists have argued that the competitive market will exclude incompetent practititoners and that licensing restrictions result in higher prices and a welfare loss for consumers. This paper considers another type of loss that may result from occupational licensing–the effects on workers who are excluded from an occupation by failing licensing examinations. Data on applicants for licenses in a nonprofessioanl occupation reveal that the less educated, blacks, apprentices, and other specific groups are more likely than others to fail written licensing examinations, even though they do not appear to be less able than workers who are admitted. These results suggest that occupational licensing can restrict the labor market opportunities of groups of wokers whose alternatives are already limited, and that licensing has distributional as well as price and output effects.
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