The Effects of Occupational Licensing and Racial Difference on Wages and Wage Distributions

This paper is trying to use multiple empirical methods to look at the kernel density distributions of wage between racial groups of Asian and White, and occupational licensing groups of licensed and unlicensed workers, as well as how racial and licensing factors interact with each other when affecting wage distributions. It finds that licensed workers enjoy a wage premium at the upper tail of the wage distribution, while unlicensed workers have higher wages at lower tail of the wage distribution. When putting racial factor into consideration, Asian workers tend to enjoy more unlicensed wage premium. White workers enjoy a wage premium at the middle wage distribution, while Asian workers enjoy a wage premium at the upper tail of the wage distribution. There seem to be no racial wage differential at the lower left tail of the wage distribution. When putting licensing factor into consideration, licensed workers tend to experience higher racial wage gap in the middle wage distribution compared with unlicensed workers. Using Blinder-Oaxaca decomposition, the paper finds that licensing takes up around 9% of the explained mean racial wage difference; the unexplained difference only takes up around 11% of the total racial wage difference. Both Asian and White group tend to benefit more at the upper right tail of the wage distribution if they have another group’s licensing rate. The returns to occupational licensing are higher for Asians when compared to the white, and the wage premium found here is relatively smaller compared with the literature.