The Effect of Licensing on Dentists and Hygienists

States that require dental hygienists to be supervised by dentists suffer a 1 percent annual reduction in the output of dental services.

U.S. states require occupational licenses for everyone from surgeons to interior decorators. Licensing in effect creates a regulatory barrier to entry into licensed occupations, and thus results in higher income for those with licenses.

In Battles among Licensed Occupations: Analyzing Government Regulations on Labor Market Outcomes for Dentists and Hygienists (NBER Working Paper No. 16560), co-authors Morris Kleiner and Kyoung Won Park use state variations in dental hygienists' licensing, along with data from the 2001-2007 American Community Survey, to estimate the value created by limiting occupational competition through licensing.

Like dentists, dental hygienists clean teeth, apply sealants, take X-rays, and screen for dental problems. Because dentists are in the majority on the state licensing boards that license dental hygienists in most states, they can in theory create rules that limit the extent to which dental hygienists can compete with them. In fact, most states require dental hygienists to practice under the direct supervision of a dentist, but some allow dental hygienists to own their own practices, clean teeth, and apply sealants.

The authors find that in states that allow dental hygienists to have their own practices, hygienist employment is about 6 percent higher than in other states, and hygienist earnings are about 10 percent higher. At the same time, the growth rate of dentists' employment is lower, 1.5 percent per year versus 2 percent, in these states.

Assuming that less stringent regulation of dental hygienists has no effect on the quality of services they provide to patients, the authors calculate that reducing regulation would reallocate about $1.34 billion from dentists to dental hygienists and would reduce the output losses caused by restricting employment by $80 million. Overall, Kleiner and Park estimate, states that require dental hygienists to be supervised by dentists suffer a 1 percent annual reduction in the output of dental services.

--Linda Gorman