Occupational licensing and the transition from welfare to work

Article Abstract:

Occupational licensing laws erect barriers to entry into various labor markets, impeding the upward mobility of welfare recipients seeking to transition into employment. This paper, recognizing that labor market interventions have often been used precisely because of this effect, proceeds to examine various restrictions which directly affect low-skilled workers in the U.S. economy who now have stronger incentives to participate in labor markets in response to recent welfare policy reforms. Three distinct types of labor market restrictions are identified: (1) the licensing of professional, high-skilled occupations tends to crowd workers into lower-skilled occupations, lowering such wages and thus weakening work incentives among the welfare population; (2) quantity license restrictions (permits which set quotas limiting the overall number of suppliers in a market) suppress demand for low-skilled workers, and may substantially reduce work opportunities and, thus, incentives. Taxi license restrictions alone, for instance, may result in several hundreds of thousands of lost employment opportunities throughout the United States: and (3) quality license restrictions, where entrants face higher entry costs (typically through educational requirements above the requirements of the market), may paradoxically provide welfare recipients with enhanced opportunities for employment, particularly when coupled with job-training subsidies typically extended to welfare recipients. This we call a "de facto liberalization" of occupational licensure. While incumbent workers are certain to resist enhanced entry by welfare recipients into licensed occupations, vocational schools should aggressively support such entry, affording a possible realpolitik to the migration path envisioned. More interestingly, once entry has accelerated under de facto liberalization, occupational license rents will predictably decline, thus increasing the likelihood of explicit liberalization, and further opening labor markets to competitive entry. (Reprinted by permission of the publisher.)

Evaluation, Licensing agreements, Labor market, Occupations

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Outsourcing: a corporate competitiveness strategy, not a search for low wages

Article Abstract:

Popular use of outsourcing as a description of corporations' search for cheap labor reflects a belief about the motives and consequences of economic restructuring, not careful analysis. As I show, several factors are at work simultaneously that are likely to increase outsourcing: rapid technological change, increased risk and the search for flexibility, greater emphasis on core corporate competencies, and globalization. In this broader context, outsourcing is the result of a complex change in the cost boundaries facing firms as they choose between inside and outside production. The question of what happens to wages is one to which there is not a simple a priori answer. (Reprinted by permission of the publisher.)

Business Methods, Causes of, Business planning, Contract manufacturing, Outsourcing

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Welfare to work: building a better path to private employment opportunities

Article Abstract:

As welfare reform legislation takes effect, employers in both the private and public sectors hope to create jobs and offer employment to over two million former welfare recipients entering the labor market. We examine the economic environment facing these welfare-to-work efforts: the job market and the characteristics of the welfare population, current business approaches, and employment policy regulations which could be changed to ease the often difficult transition from welfare to work. (Reprinted by permission of the publisher.)

Economic aspects, Welfare reform

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