This is a brief of the study title The Ties that Bind: Occupational Licensing and Family Migration. Bae, Kihwan and Timmons, Edward, (March 05, 2024). Available at SSRN: https://ssrn.com/abstract=5166993 or http://dx.doi.org/10.2139/ssrn.5166993
We examine how the limited portability of occupational licenses across states affects interstate migrants' labor market outcomes. To address selection into migration, we focus on female workers with family ties. First, we show that interstate migration is uncorrelated with their licensing status. Next, we show that the limited portability of occupational licenses has a negative employment effect on female interstate migrants with family ties and reduces the likelihood that they continue the same occupation relative to their peers moving within a state. Our findings suggest occupational licensing barriers have negative implications for interstate migrants' labor market activity and career development.
Introduction
Occupational licensing is a prominent labor market institution in many countries. For example, the share of workers with an occupational license is above 20% in the United States and the European Union. As a government-issued credential, occupational licenses are expected to address market failure due to asymmetric information on service quality and protect consumers from unscrupulous providers. However, by requiring government permission to practice, occupational licensing creates barriers to entry and is likely to serve special interests rather than the public interest. In particular, state licensure prevents individuals with out-of-state licenses from providing a service, even though they are trained, credentialed, and experienced workers who are likely to raise little concern on service quality.
Under the existing system, occupational licenses are often not portable across states: an individual licensed in a state cannot practice in another state until obtaining another license, which often requires additional training, exams, or practice experience. This limitation in license portability may reduce interstate exchange of licensed services and geographic mobility of licensed individuals. In this vein, previous studies found that occupational licensing barriers reduce interstate migration of licensed practitioners. Also, for those who moved to a new state despite the barrier, because of family ties for example, a costly relicensing procedure may prevent or delay their practice in licensed occupations after migration. However, the existing literature has underexplored the effect of occupational licensing barriers on interstate migrants’ labor market outcomes.
We examine how the limited portability of occupational licenses affects labor market outcomes of interstate migrants among female workers with a male spouse – a clearly established family tie. The motivation of our focus on female migrants with family ties is to mitigate a potential bias arising from selection into migration. Since workers expecting occupational licensing barriers in a new state may not move across states, a study of self-selected migrants may find little effect of the same barrier on their post-migration labor market outcomes. Thus, we study the labor market outcomes of female workers with family ties whose migration is likely to be driven by their spouse’s job opportunity rather than their own career. To check the validity of this approach, we also examine an association between individual licensing status and interstate migration in the sample.
To identify the effect of limited license portability across states, we compare labor market outcomes between interstate and intrastate migrants with a low portability license, relative to those with a high portability license. The outcomes of primary interest are employment and the continuation of the same occupation after migration. Our difference-in-differences method uses two dimensional variations in the portability of occupational licenses. First, we use geographic variations in the portability of occupational licenses – individuals moving across states face occupational licensing barriers, while those moving within a state do not. Among intrastate migrants, our baseline analysis uses intrastate intercounty migrants as a control group. The comparison between interstate and intrastate intercounty migrants is expected to isolate the effect of the limited portability of occupational licenses across states by factoring out the effect of other labor market frictions associated with moving a long distance at least across counties, such as limited information on the job or business opportunities in a new place.
Next, we utilize variations in the portability of occupational licenses between two groups of licensed occupations for our analysis. Occupations that require state-specific licensing exams (“state-specific licensed occupations”) tend to provide a lower portability of occupational licenses than occupations that require national standard exams (“quasi-national licensed occupations”) (Johnson and Kleiner 2020). It is important to note that individuals in both licensed groups may have higher job and career stability than unlicensed workers, implying that they may have similar risk attitudes and face similar labor market frictions. In sum, we compare the labor market outcomes between interstate and intrastate intercounty migrants who were in state-specific licensed occupations, relative to those who were in quasi-national licensed occupations.
To implement the analysis, we use individual-level data from the Current Population Survey (CPS) Annual Socio-Economic Supplements (ASEC) 2003-2023. In each year, it provides migration status in the previous year. It also provides data on the labor market activity in the previous calendar year as well as that as of the survey. We use the previous calendar year’s occupation to approximate whether an individual worked in a state-specific or quasi-national licensed occupation before migration. Our analysis primarily focuses on the sample of female workers aged 25 to 64 who worked in a state-specific or quasi-national licensed occupation and moved across counties with a male spouse in the previous year.
From our analysis of interstate migration, we find that the propensity of interstate migration is uncorrelated with individual licensing status among female workers with family ties. We attribute this finding to the fact that tied migrants are unlikely to select out of interstate migration despite the limited portability of their occupational license across states. On the other hand, we find a strong negative association between individual licensing status and interstate migration among all other workers, who may have little to weak family ties for a location choice. This finding confirms that our focus on female workers with family ties is valid to address selection into migration based on licensing status.
From our analysis of migrants’ labor market outcomes, we find a negative employment effect of limited license portability across states. Among female workers with family ties, the employment rate is 10.2 percentage points lower among interstate migrants in state-specific licensed occupations than it is among intrastate intercounty migrants in the same occupations, relative to the same difference among migrants in quasi-national licensed occupations. Moreover, we find a negative effect of limited license portability on migrants continuing a career in the same occupation. Conditional on workers being employed, those who worked in state-specific licensed occupations are 11.5 percentage points more likely to change their occupation after interstate migration than those who worked in quasi-national licensed occupations, relative to the same difference among intrastate intercounty migrants.
Taken together, about 20% of female interstate migrants with family ties in state-specific licensed occupations neither have a job nor continue an occupation on average six months after migration. This large interruption to the career of female spouses, caused jointly by family migration and occupational licensing, may cause a loss of occupation-specific human capital and a downward shift of their earnings trajectory. Also, the male dominance in family migration and the prevalence of female-dominated licensed occupations may reinforce and further widen the spousal earnings gap, which has a negative implication on the overall gender earnings gap. Moreover, since migrants with out-of-state licenses are experienced practitioners with transferrable skills across U.S. states, occupational licensing barriers across states may reduce public welfare.
This paper makes several contributions to the literature and ongoing policy debates. First, the study adds to the literature on occupational licensing. It broadens a perspective on the implications of geographic barriers against occupational license portability. Previous studies from Holen (1965) to Johnson and Kleiner (2020) focused on the negative implications of occupational licensing barriers across states on interstate migration. Expanding on the existing literature, our study shows that licensing barriers have negative effects on interstate migrants’ employment and career in the same occupation. Moreover, our study uncovers that the two effects fall on different groups of workers: interstate mobility is restricted among workers who can circumvent the licensing barrier in a new state by selecting out of migration (e.g., males with a female spouse), while the labor market activity is constrained among workers who cannot avoid moving to the new state (e.g., females with a male spouse).
Next, the study contributes to the literature on family migration. Previous studies commonly found that individuals with a spouse are less likely to move a long distance than those without a spouse, and that if they move, male spouse’s earnings increase more than female spouse’s earnings (Mincer 1978, Taylor 2007, Burke and Miller 2018, Jayachandran et al. 2024). Our study reveals a mechanism behind the divergence in earnings after family migration in the context of state licensing in the United States: occupational licensing barriers across states restrict interstate migrants’ labor market activity among female spouses but not male spouses. In the same context, Johnson (2021) documented that couples are less likely to move across states if the male spouse faces licensing barriers, and that the female spouse facing the same barrier tends to exit from the labor force after interstate migration.
Lastly, the study suggests that policy reforms to improve the portability of occupational licenses may have the potential to reduce labor market frictions against migrants in licensed occupations. Our finding is crucial because previous studies on occupation-specific license portability programs for nurses or certified public accountants (CPA) do not find evidence that they effectively increased employment and migration in the United States (DePasquale and Stange 2016, Cascino, Tamayo, and Vetter 2021). However, our results are in line with positive employment and wage effects of a foreign occupational credential recognition program in Germany (Brücker et al. 2021, Anger, Bassetto, and Sandler 2024). Our study is also consistent with previous studies on the impact of license portability programs such as universal recognition of out-of-state licenses in the United States (Deyo and Plemmons 2022, Shakya, Plemmons, and Norris 2024, Bae and Timmons 2023).
Conclusion
Our study demonstrates that occupational licensing barriers across states have negative labor market effects on interstate migrants among female workers with family ties. We first provide empirical evidence that female workers with a male spouse tend not to select out of interstate migration based on occupational licensing barriers relevant to their own occupation. Next, we show that the employment and continuation of the same occupation after migration for this subset of workers is negatively affected by the limited portability of occupational licenses across states. Given that these female workers with family ties are experienced practitioners with an out-of-state license, the licensing barrier may cause a loss of social welfare. By contrast, we find little evidence on the negative labor market effect of the licensing barrier on male workers with a female spouse, who may select into migration based on their own job opportunity.
Our findings shed a new light on the economic implications of occupational license portability across geography, which is broader than their effect on geographic mobility. The occupational licensing barriers across states not only limit interstate mobility of workers but also restrict the labor market activity of interstate migrants. Our study also reveals a dichotomy between the two effects by family ties: the licensing barrier restricts the interstate mobility of male workers with a female spouse, but licensing instead limits the post-migration labor market activity of female workers with a male spouse. This finding implies if male workers motivate family migration, occupational licensing barriers may worsen the spousal earnings gap, which is a vicious circle to further male dominance in family migration.
It should be noted that our study’s scope is limited to a relatively short-term effect of occupational licensing barriers across states within a country, and several extensions seem possible to understand broader implications of occupational license portability. First, the longterm labor market effect of occupational licensing barriers across states may differ from our findings on average six months after migration. It is unclear how the effect evolves over time. A conjecture is that the negative employment effect may diminish as more workers obtain a license in a new state or adjust to another occupation over time, while the negative effect on continuing the same occupation may be sustained at least for some tied migrants. Second, the effect of occupational licensing barriers across countries may have a larger effect than what our study finds, and this may have implications for immigration policy. Since the licensing barrier is expected to be stronger between countries than it is between states within a country, we would anticipate larger negative effect on immigrants’ labor market activity and overall efficiency.
Third, there are growing research opportunities on the effectiveness of occupational license portability programs. Our study provides a practical guide on plausible effects of these programs: they may improve the post-move labor market activity of female workers with family ties, while they may increase geographic mobility of other workers.
The full paper was originally published in SSRN.
