Income inequality in professional and vocational occupations

This project will contribute more knowledge on the consequences of occupational regulation for income inequality within and between occupations.

This project investigates the link between occupational closure and income inequality in Norway. Occupational closure denotes strategies aimed at producing social and legal entry barriers to occupations that will raise the rewards of their members and to generate larger incomes than the ones available in the absence of closure. This project seeks to understand whether and to what extent wage levels are affected by occupational closure, and how this relates to wage inequality relating to ethnicity, immigrant status and social class background.

Approximately 20 percent of Norwegian employees perform an occupation where they need an
approval from the responsible authority in order to practice. There are 80 law regulated occupations, which places Norway at the median in Europe. With regard to voluntary certification, there is an increasing number of occupations offering certificates and these are typically found within the same major occupational groups as licensed occupations. We have also gathered statistics on the share of union members per occupation and the linkage between an occupation and the educational type of its incumbents. Occupations with a high degree of credential-based closure will tend to recruit from a narrow base of candidates, perhaps only from one or two educational fields. These four, licensure, certification, union density and credentialization, are the measures of occupational closure used for analyses.

Does occupational closure result in higher wages? The results are mixed. Undoubtedly, licensed occupations and occupations with strong union density have higher wages, and the finding is robust at all levels of the occupational hierarchy. The wage premium is collected among academics, technicians, craftsmen and machine operators alike. Certification and credentialization does not result in higher wages. These findings are mainly in line with the international research on this topic. When it comes to ethnic and immigrant earning differentials, the results show that the mean wage level for immigrants and the majority is more similar in licensed and unionized occupations, while neither certification nor credentialization equalizes earnings among these subgroups of the population.

We also investigate how trade unions and professional associations are negotiating closure processes. We will seek to understand how these associations and unions navigate and manage professional interest, which strategies are pursued, how these are justified, including analyzing the sources of closure, and what the ultimate aim is. In relation to this project, we have investigated how attitudes towards the wage distribution and preferences for collective wage formation vary with education, income position and peak union association. The results show that peak union association can explain some of the variation in the union members’ attitudes and preferences.

The results from this project are particularly interesting for authorities responsible for labor market regulation, unions and employer and employee peak associations and for everyone interested in gaining a broader understanding for how occupational wage inequalities arise and develop.