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Occupational licenses may reduce income inequality

The Wall Street Journal highlights a study by Clemson University economists Peter Blair and Bobby Chung which purports to show that occupational licenses, which legally permit workers to do certain jobs like barbering or pest control, reduce income inequality between men and women and between whites and African Americans.

According to the report, occupations that require licensing see a decline in wage inequality between men and women between 36% and 40%, and a decrease between black men and white men of 43%.

Why it matters: Occupational licensing has been criticised by both Democrats and Republicans as unnecessary barriers erected by vested interests to keep new entrants out of the market, which reduce employment and raise prices. But Blair and Chung argue that they also enable workers who are discriminated against an opportunity to signal their competence to prospective employers.