The Prevalence and Effects of Occupational Licensing

This study provides the first nation-wide analysis of the labor market implications of occupational licensing for the U.S. labor market, using data from a specially designed Gallup survey. We find that, in 2006, 29 percent of the workforce was required to hold an occupational license from a government agency, which is a higher percentage than that found in studies that rely on state-level occupational licensing data. Workers who have higher levels of education are more likely to work in jobs that require a license. Union workers and government employees are more likely to have a license requirement than are nonunion or private sector employees. Our multivariate estimates suggest that licensing has about the same quantitative impact on wages as do unions—that is about 15 percent, but unlike unions which reduce variance in wages, licensing does not significantly reduce wage dispersion for individuals in licensed jobs.