IDEAS home Printed from https://ideas.repec.org/a/vrs/izajle/v11y2022i1p38n4.html
   My bibliography  Save this article

Beyond traditional academic degrees: The labor market returns to occupational credentials in the United States

Author

Listed:
  • Baird Matthew D.

    (RAND Corporation, 4570 Fifth Avenue Suite 600, Pittsburgh, PA 15213.)

  • Bozick Robert

    (Kinder Institute for Urban Research, Rice University, 6100 Main Street, Suite 305, Houston, TX 77005-1892)

  • Zaber Melanie A.

    (RAND Corporation, 4570 Fifth Avenue Suite 600, Pittsburgh, PA 15213.)

Abstract

Occupational credentials provide an additional—and, at times, alternative—path other than traditional academic degrees for individuals to increase productivity and demonstrate their abilities and qualifications to employers. In the United States, these credentials typically take the form of licenses and certifications. Although a critical part of the workforce landscape, the literature on the returns to credentials is inadequate, with prior research typically relying on Ordinary Least Squares (OLS) regressions which do not sufficiently control for selection. Using questions that identify credential receipt from the 2015 and 2016 United States’ Current Population Surveys, we construct an instrumental variable of local peer influence using the within-labor market credential rate of individuals sharing the same sociodemographic characteristics, while controlling for the same group's average wages and a suite of demographic and geographic controls. We use this instrument in a marginal treatment effects estimator, which allows for estimation of the average treatment effect and determines the direction of selection, and we estimate the effects of credentials on labor market outcomes. We find large, meaningful returns in the form of increased probability of individual employment, an effect which is concentrated primarily among women. The effect of having a credential on log wages is higher for those in the sub-baccalaureate labor market, suggesting the potential role of occupational credentials as an alternative path to marketable human capital and a signal of skills in the absence of a bachelor's degree.

Suggested Citation

  • Baird Matthew D. & Bozick Robert & Zaber Melanie A., 2022. "Beyond traditional academic degrees: The labor market returns to occupational credentials in the United States," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-38, January.
  • Handle: RePEc:vrs:izajle:v:11:y:2022:i:1:p:38:n:4
    DOI: 10.2478/izajole-2022-0004
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/izajole-2022-0004
    Download Restriction: no

    File URL: https://libkey.io/10.2478/izajole-2022-0004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jacob M. Markman & Eric A. Hanushek & John F. Kain & Steven G. Rivkin, 2003. "Does peer ability affect student achievement?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(5), pages 527-544.
    2. Morikawa, Masayuki, 2018. "Occupational licenses and labor market outcomes in Japan," Japan and the World Economy, Elsevier, vol. 48(C), pages 45-56.
    3. Morris M. Kleiner & Alan B. Krueger, 2010. "The Prevalence and Effects of Occupational Licensing," British Journal of Industrial Relations, London School of Economics, vol. 48(4), pages 676-687, December.
    4. Balestra, Simone & Backes-Gellner, Uschi, 2017. "Heterogeneous returns to education over the wage distribution: Who profits the most?," Labour Economics, Elsevier, vol. 44(C), pages 89-105.
    5. Christopher R. Bollinger & Barry T. Hirsch, 2013. "Is Earnings Nonresponse Ignorable?," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 407-416, May.
    6. Böckerman, Petri & Haapanen, Mika & Jepsen, Christopher, 2019. "Back to school: Labor-market returns to higher vocational schooling," Labour Economics, Elsevier, vol. 61(C).
    7. Cornelissen, Thomas & Dustmann, Christian & Raute, Anna & Schönberg, Uta, 2016. "From LATE to MTE: Alternative methods for the evaluation of policy interventions," Labour Economics, Elsevier, vol. 41(C), pages 47-60.
    8. Francine D. Blau & Lawrence M. Kahn, 2017. "The Gender Wage Gap: Extent, Trends, and Explanations," Journal of Economic Literature, American Economic Association, vol. 55(3), pages 789-865, September.
    9. Samuel J. Ingram, 2019. "Occupational Licensing and the Earnings Premium in the United States: Updated Evidence from the Current Population Survey," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 732-763, December.
    10. Maury Gittleman & Morris M. Kleiner, 2016. "Wage Effects of Unionization and Occupational Licensing Coverage in the United States," ILR Review, Cornell University, ILR School, vol. 69(1), pages 142-172, January.
    11. Erin Velez & Melissa Cominole & Alexander Bentz, 2019. "Debt burden after college: the effect of student loan debt on graduates’ employment, additional schooling, family formation, and home ownership," Education Economics, Taylor & Francis Journals, vol. 27(2), pages 186-206, March.
    12. Morris M. Kleiner & Alan B. Krueger, 2013. "Analyzing the Extent and Influence of Occupational Licensing on the Labor Market," Journal of Labor Economics, University of Chicago Press, vol. 31(S1), pages 173-202.
    13. Philip Oreopoulos, 2006. "Estimating Average and Local Average Treatment Effects of Education when Compulsory Schooling Laws Really Matter," American Economic Review, American Economic Association, vol. 96(1), pages 152-175, March.
    14. Elise Coudin & Sophie Maillard & Maxime Tô, 2018. "Family, Firms and the Gender Wage Gap in France," Working Papers 2018-09, Center for Research in Economics and Statistics.
    15. Lang, Kevin & Weinstein, Russell, 2013. "The wage effects of not-for-profit and for-profit certifications: Better data, somewhat different results," Labour Economics, Elsevier, vol. 24(C), pages 230-243.
    16. Sophie van Huellen & Duo Qin, 2019. "Compulsory Schooling and Returns to Education: A Re-Examination," Econometrics, MDPI, vol. 7(3), pages 1-20, September.
    17. Maury Gittleman & Mark A. Klee & Morris M. Kleiner, 2018. "Analyzing the Labor Market Outcomes of Occupational Licensing," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(1), pages 57-100, January.
    18. Petit, Pascale, 2007. "The effects of age and family constraints on gender hiring discrimination: A field experiment in the French financial sector," Labour Economics, Elsevier, vol. 14(3), pages 371-391, June.
    19. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 531-542.
    20. Peter Blair & Bobby Chung, 2017. "Job Market Signaling through Occupational Licensing," Working Papers 2017-50, Human Capital and Economic Opportunity Working Group.
    21. Marc T. Law & Mindy S. Marks, 2009. "Effects of Occupational Licensing Laws on Minorities: Evidence from the Progressive Era," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 351-366, May.
    22. Card, David, 2001. "Estimating the Return to Schooling: Progress on Some Persistent Econometric Problems," Econometrica, Econometric Society, vol. 69(5), pages 1127-1160, September.
    23. Stephen V. Cameron & James J. Heckman, 2001. "The Dynamics of Educational Attainment for Black, Hispanic, and White Males," Journal of Political Economy, University of Chicago Press, vol. 109(3), pages 455-499, June.
    24. Coate, Stephen & Loury, Glenn C, 1993. "Will Affirmative-Action Policies Eliminate Negative Stereotypes?," American Economic Review, American Economic Association, vol. 83(5), pages 1220-1240, December.
    25. Morris M. Kleiner & Evgeny Vorotnikov, 2017. "Analyzing occupational licensing among the states," Journal of Regulatory Economics, Springer, vol. 52(2), pages 132-158, October.
    26. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts of American Males," Journal of Political Economy, University of Chicago Press, vol. 106(2), pages 262-333, April.
    27. Thomas Diprete & Claudia Buchmann, 2006. "Gender-specific trends in the value of education and the emerging gender gap in college completion," Demography, Springer;Population Association of America (PAA), vol. 43(1), pages 1-24, February.
    28. Philip Oreopoulos & Uros Petronijevic, 2013. "Making College Worth It: A Review of Research on the Returns to Higher Education," NBER Working Papers 19053, National Bureau of Economic Research, Inc.
    29. Bollinger, Christopher R, 1998. "Measurement Error in the Current Population Survey: A Nonparametric Look," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 576-594, July.
    30. Doyle, William R. & Skinner, Benjamin T., 2016. "Estimating the education-earnings equation using geographic variation," Economics of Education Review, Elsevier, vol. 53(C), pages 254-267.
    31. Mohsen Javdani & Andrew McGee, 2019. "Moving Up or Falling Behind? Gender, Promotions, and Wages in Canada," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 58(2), pages 189-228, April.
    32. Stephen V. Cameron & James J. Heckman, 1998. "Life Cycle Schooling and Dynamic Selection Bias: Models and Evidence for Five Cohorts," NBER Working Papers 6385, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mengjie Lyu & Tingting Zhang & Hua Ye, 2023. "Labour market impacts of occupational licensing and delicensing: New evidence from China," British Journal of Industrial Relations, London School of Economics, vol. 61(4), pages 895-921, December.
    2. Kihwan Bae & Edward Timmons, 2023. "Now You Can Take It with You: Effects of Occupational Credential Recognition on Labor Market Outcomes," Working Papers 23-03, Department of Economics, West Virginia University.
    3. Koumenta, Maria & Pagliero, Mario & Rostam-Afschar, Davud, 2020. "Occupational licensing and the gender wage gap," Hohenheim Discussion Papers in Business, Economics and Social Sciences 13-2020, University of Hohenheim, Faculty of Business, Economics and Social Sciences.
    4. Tingting Zhang & Morley Gunderson, 2020. "Impact of Occupational Licensing on Wages and Wage Inequality: Canadian Evidence 1998–2018," Journal of Labor Research, Springer, vol. 41(4), pages 338-351, December.
    5. Omar Bamieh & Andrea Cintolesi & Mario Pagliero, 2024. "Estimating the returns to occupational licensing: evidence from regression discontinuities at the bar exam," Temi di discussione (Economic working papers) 1440, Bank of Italy, Economic Research and International Relations Area.
    6. Dustin Chambers & Colin O’Reilly, 2022. "The economic theory of regulation and inequality," Public Choice, Springer, vol. 193(1), pages 63-78, October.
    7. Morikawa, Masayuki, 2018. "Occupational licenses and labor market outcomes in Japan," Japan and the World Economy, Elsevier, vol. 48(C), pages 45-56.
    8. Alicia Plemmons, 2022. "Occupational licensing's effects on firm location and employment in the United States," British Journal of Industrial Relations, London School of Economics, vol. 60(4), pages 735-760, December.
    9. Mario Pagliero, 2019. "Occupational Licensing in the EU: Protecting Consumers or Limiting Competition?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(1), pages 137-153, August.
    10. Akabayashi, Hideo & Ruberg, Tim & Shikishima, Chizuru & Yamashita, Jun, 2023. "Education-oriented and care-oriented preschools: Implications on child development," Labour Economics, Elsevier, vol. 84(C).
    11. Biewen, Martin & (neé Tapalaga), Madalina Thiele, 2020. "Early tracking, academic vs. vocational training, and the value of ‘second-chance’ options," Labour Economics, Elsevier, vol. 66(C).
    12. Suyoun Han & Morris M. Kleiner, 2016. "Analyzing the Influence of Occupational Licensing Duration and Grandfathering on Labor Market Outcomes," NBER Working Papers 22810, National Bureau of Economic Research, Inc.
    13. Tingting Zhang, 2019. "Effects of Occupational Licensing and Unions on Labour Market Earnings in Canada," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 791-817, December.
    14. Samuel J. Ingram, 2019. "Occupational Licensing and the Earnings Premium in the United States: Updated Evidence from the Current Population Survey," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 732-763, December.
    15. Ilya Kukaev & Edward J. Timmons, 2023. "Certifiably employable?: The effects of occupational regulation on unemployment duration," Working Papers 23-02, Department of Economics, West Virginia University.
    16. Pizzola, Brandon & Tabarrok, Alexander, 2017. "Occupational licensing causes a wage premium: Evidence from a natural experiment in Colorado’s funeral services industry," International Review of Law and Economics, Elsevier, vol. 50(C), pages 50-59.
    17. Maria Koumenta & Mario Pagliero, 2019. "Occupational Regulation in the European Union: Coverage and Wage Effects," British Journal of Industrial Relations, London School of Economics, vol. 57(4), pages 818-849, December.
    18. Maury Gittleman & Mark A. Klee & Morris M. Kleiner, 2018. "Analyzing the Labor Market Outcomes of Occupational Licensing," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 57(1), pages 57-100, January.
    19. Juergen Jung & Vinish Shrestha, 2018. "The Affordable Care Act And College Enrollment Decisions," Economic Inquiry, Western Economic Association International, vol. 56(4), pages 1980-2009, October.
    20. Peter Blair & Bobby Chung, 2017. "Job Market Signaling through Occupational Licensing," Working Papers 2017-50, Human Capital and Economic Opportunity Working Group.

    More about this item

    Keywords

    human capital; credentials; certifications; licenses;
    All these keywords.

    JEL classification:

    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:izajle:v:11:y:2022:i:1:p:38:n:4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.