Who profits from occupational licensing?

Sociologists have debated intensively how and why occupations matter for economic inequality. I argue that occupational licensing alters wage setting, depending on the characteristics of the licensing system. Licensing does not only restrict market entry as in the US. Some governments, like that of Germany, also regulate task prices and set occupation-specific wage floors for licensed occupations. I claim that the US system leads to a growing licensing wage advantage across the distribution, and that the German system leads to a falling one. Furthermore, I discuss that women may benefit especially from licensing, because for them it reduces typical disadvantage in the wage setting. I present unconditional and gender-specific quantile treatment effects based on CPS-MORG and BIBB/BAuA data from 2018. In the US, wage premiums are highest for employees in the upper middle and are small for those in the bottom and the top. For Germany, the wage premium is the largest for licensed employees at within the lower quarter and reduces significantly towards the top. In both countries, women profit significantly more from licensing. These results challenge claims about the role of licensing for inequality in the top, and suggest that licensing reduce penalties faced by disadvantaged groups.