Analyzing the Extent and Influence of Occupational Licensing on the Labor Market


This study examines the extent and influence of occupational licensing in the U.S. using a
specially designed national labor force survey. Specifically, we provide new ways of measuring
occupational licensing and consider what types of regulatory requirements and what level of
government oversight contribute to wage gains and variability. Estimates from the survey
indicated that 35 percent of employees were either licensed or certified by the government, and
that 29 percent were fully licensed. Another 3 percent stated that all who worked in their job
would eventually be required to be certified or licensed, bringing the total that are or eventually
must be licensed or certified by government to 38 percent. We find that licensing is associated
with about 14 percent higher wages, but the effect of governmental certification on pay is much
smaller. Licensing by multiple political jurisdictions is associated with the highest wage gains
relative to only local licensing. Specific requirements by the government for a worker to enter an
occupation, such as education level and long internships, are positively associated with wages.
We find little association between licensing and the variance of wages, in contrast to unions.
Overall, our results show that occupational licensing is an important labor market phenomenon
that can be measured in labor force surveys.

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