Occupational Licensing
Over the past several decades, the share of U.S. workers holding an occupational license has grown sharply. When designed and implemented carefully, licensing can offer important health and safety protections to consumers, as well as benefits to workers. However, the current licensing regime in the United States also creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as State certification, may offer a better balance between consumer protections and flexibility for workers.
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- More than one-quarter of U.S. workers now require a license to do their jobs, with most of these workers licensed by the States. The share of workers licensed at the State level has risen five-fold since the 1950s.
- About two-thirds of this change stems from an increase in the number of professions that require a license, with the remaining growth coming from changing composition of the workforce.
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- Research shows that by imposing additional requirements on people seeking to enter licensed professions, licensing can reduce total employment in the licensed professions.
- Estimates find that unlicensed workers earn 10 to 15 percent lower wages than licensed workers with similar levels of education, training, and experience.
- Licensing laws also lead to higher prices for goods and services, with research showing effects on prices of between 3 and 16 percent. Moreover, in a number of other studies, licensing did not increase the quality of goods and services, suggesting that consumers are sometimes paying higher prices without getting improved goods or services.
Licensing requirements vary substantially by State, creating barriers to workers moving across State lines and inefficiencies for businesses and the economy as a whole.
- Estimates suggest that over 1,100 occupations are regulated in at least one State, butfewer than 60 are regulated in all 50 States, showing substantial differences in whichoccupations States choose to regulate. For example, funeral attendants are licensed in nine States and florists are licensed in only one State.
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The costs of licensing fall disproportionately on certain populations.
- About 35 percent of military spouses in the labor force work in professions that require State licenses or certification, and they are ten times more likely to have moved across State lines in the last year than their civilian counterparts. These military spouses may have difficulty acquiring a new license each time they move or meeting different licenserequirements in their new State.
- Licensing requirements often make it difficult for immigrants to work in fields where they have valuable experience and training. This deprives the U.S. market of a large share of their skills, and makes it difficult for these workers to make their full contribution to the workforce.
- In half the States, applicants can be denied a license due to any kind of criminal conviction, regardless of whether it is relevant to the license sought or how long ago it occurred. It often takes six months to a year for some States to simply review an applicant’s criminal history and make an initial determination about whether she qualifies for a license.
