Occupational Licensing of Social Services and Nursing Home Quality: A Regression Discontinuity Approach

Abstract

Occupational licensing has grown dramatically in recent years, with over 25% of the U.S. workforce having attained a license as of 2008, up from 5% in 1950. The associated debate as to whether licensing improves quality or is simply rent-seeking behavior has correspondingly grown in intensity. Exploiting a staffing provision of the Omnibus Budget Reconciliation Act of 1987, we estimate the impact of increased licensure of social workers in skilled nursing facilities on quality. The key provision requires all skilled nursing facilities (SNFs) with 121 or more beds to provide at least one full-time equivalent qualified social worker. Using a regression discontinuity design, we find that this provision binds at that margin for a significant share of SNFs. Qualified social worker staffing increases by 8-10%. However, the overall increase in social services staffing is negligible because firms tend to meet this requirement in the lowest cost way – substituting from unlicensed, paraprofessional social services staff to qualified social workers, effectively increasing the licensure level of the marginal social services staff. We find no evidence that the upgrade in social services staffing improves overall SNF quality, quality of life, or provision of social services, as measured by the deficiency scores received by a facility during their annual recertification inspection.