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More Information. Accounting for just 5 percent of the employed population in the s, licensed workers now comprise nearly 25 percent of all employed Americans. Spurred by concerns for public safety, consumer protection or other policy goals, the growth in state licensing over time has created a patchwork of different requirements across states. This inconsistency makes it difficult for workers to move their skills across state lines and, because of varying fees for obtaining licenses, costly for them to work in a licensed profession.
Council of Economic Advisers and departments of Labor and Treasury. State policymakers play an important role in setting licensure policy and are at the heart of many efforts to strike the right balance needed to protect consumers and promote economic growth and employment opportunity.
Occupational licensing research offers important lessons about the effects, costs and benefits of licensing policies, as well as best practices and tools for designing a smart regulatory approach. Drawing from the vast body of occupa- tional licensing research, this report provides an overview of occupational licensing trends and policy issues, summarizes best practices and recommendations for licensing policies, and highlights state legislative and executive actions that aim to protect consumers, foster employment growth and remove barriers to work.
What is the current occupational licensing landscape in the United States? What are the educational and training barriers to labor market entry for worker populations targeted by the Occupational Licensing Research Consortium project? What are researchers and industry leaders identifying as policy barriers to interstate portability and reciprocity of occupational licensing and labor market entry for workers?
What are occupational licensing best practices and state policy recommendations? To answer these questions, we identified and reviewed a wide range of primary and secondary sources, including reports, literature reviews, articles, white papers and labor statistics published by federal and state agencies, think tanks, nonprofit organizations, academic experts, trade associations and digital media sources.
Legislative research tools and databases, such as LexisNexis State Net and Westlaw, and state agency and legislative webpages, provided many of the state legislative examples profiled in this report.
The complete bibliography is presented in Appendix A. The report focuses on licensure requirements that affect the types of occupations studied as part of the Occupational Licensing Research Consortium project.
The 34 occupations studied in this NCSL-led project, summarized in Appendix B , typically require an entry-level education i. An occupational license is a credential that government—most often states—requires a worker to hold in certain occupations. Aspiring workers must meet state-specific educational, training, testing and other requirements to practice in a licensed profession.
While some professions, such as physicians and attorneys, are universally licensed in states, a growing number of occupations are now licensed by states. These include jobs that are commonly licensed across all states—e. Licensing is just one form of occupational regulation, which also includes less restrictive methods, ranging from reliance on market forces to inspections, registration and voluntary certification—a continuum of approaches that are discussed later in this report.
State policymakers play a critical and longstanding role in occupational licensing policies, dating back to the late 19th century when the Supreme Court decision in Dent v. Shortly after, states began developing their own systems of occupational regulation and licensing. State policymakers play a central role in developing and shaping these systems by:. Removing employment barriers for unique populations, such as immigrants with work authorization, military families and people with criminal records, offers a powerful lever to achieve multiple policy goals.
These include employment growth, reduced recidivism for employed ex-offenders, enhanced geographic mobility, and economic stability and opportunity for individuals and their families. The share of American workers who hold an occupational license has grown five-fold over the last several decades, from around five percent of the employed population in the s to almost a quarter of all employed workers today Figure 1.
Of the 1, occupations that were licensed in at least one state in , a small number—less than 60—were licensed in every state, illustrating the considerable differences in licensure requirements from state to state. Share of U. According to the U. As shown in Figure 2, states vary considerably in the share of their workforce that holds a license, ranging from 12 percent in South Carolina to 33 percent in Iowa.
States also differ in which occupations they license. Every state licenses emergency medical technicians, bus and truck drivers, and cosmetologists, while three or fewer states license professions such as home entertainment installers, nursery workers, conveyer operators and florists.
The minimum requirements and costs to obtain and keep a license to work in the same occupation vary widely across states. So does the licensing process itself, with differences in the availability of distance or online learning for continuing education often required to obtain a license. Licensed cosmetologists in Iowa, Nebraska and South Dakota need 16 months of education, double what is required for their counterparts in New York and Massachusetts. Even among states with uniform, or near-uniform, licensing requirements, workforce mobility may be hindered by a lack of reciprocity in credentialing; for example, states often only recognize training from schools and other institutions outlined in statute or regulation.
When implemented appropriately, licensing can offer important health and safety benefits and consumer protections, and provide workers with clear professional development and training guidelines, as well as a career path. For decades, policymakers have adopted licensure policies to achieve a variety of goals.
Some professional associations argue that licensing protects consumers and promotes public health and safety.
However, it cautions policymakers about the potential consequences of deregulating the 1. Licensure offers the public an assurance that the individual has met certain educational, training or experience standards. The enhanced access to information and strong provider incentives to deliver high-quality services bolster claims by experts that alternate regulatory approaches could achieve the same goals as licensing. Harvard and Stanford researchers found that, while licensure is not directly associated with improved quality of goods or services, there is a relationship between licensing and increased consumer confidence that can lead to increased economic activity.
The growth of occupational licensing in the states, and the inconsistent requirements among them, has come at a steep price to workers, employers, consumers and government. Carpenter and Lee McGrath in a policy brief. The burdens to American workers vary by state and occupation. The state comparisons revealed several inconsistencies across states: Many occupations are licensed in a small number of states, the same occupations have significantly different training requirements across states, and licensure requirements do not always align with public health or safety concerns.
Researchers point out that cosmetologists require an average of training days, significantly higher than emergency medical technicians, who need an average of 33 training days. Research indicates that unnecessary licensing requirements reduce employment in licensed occupations and reduce wages for unlicensed workers relative to their licensed counterparts.
Occupational licensing requirements—including the need to pass exams, attend continuing education, and pay licensing and renewal fees—present significant barriers to entering a licensed occupation and can reduce total employment in that profession.
Occupational licensing can result in higher wages for licensed workers, which in turn increases consumer costs. Research indicates that licensing requirements increase the price of goods and services. Occupational licensing imposes costs in the form of fees and educational requirements on American workers, often because of arbitrary rationale and inconsistent rules across states.
The requirements drive away potential workers, especially those for whom the costs of obtaining licensure are too high. Researchers find little evidence that licensure improves the quality of services or protects consumers from harm. In fact, evidence suggests that the most onerous licensure laws may lead to lower-quality services and increased public safety risks.
Licensing reduces the supply of service providers while simultaneously increasing the average operating costs for professionals. The result of limited consumer choice and increased prices can be a provision of licensed services at a rate below true market equilibrium; in other words, consumers forego necessary services because prices are too high or no one is available for hire. This situation can pose a threat to public safety in certain occupations.
For example, the inability to legally hire an electrician for repairs may lead to electrocution or fire. Similarly, licensing that limits the supply and increases the cost of veterinarians may prevent animal owners from vaccinating against contagious diseases like rabies.
Licensing rules limit geographic mobility for licensed workers. Licensed work- ers are less likely than unlicensed workers with similar education to move to a new state, in part because they may be required to complete new training and educational requirements or pay fees. Labor market fluidity—or the ease and prevalence of relocating for a job—is vital to employment growth, particularly for the young and less educated.
Among men under 25 without a high school degree, a 1 percent fall in labor fluidity corresponds to a 1. Strict occupational licensing requirements limit the value of interstate relocation as a tool to combat unemployment.
The barriers described above are especially problematic for low-income individuals, people with criminal records, members of the military and their spouses, and immigrants with work authorization. The burdens facing specific worker populations are summarized below. Active-Duty Military, Veterans and Spouses. Licensing requirements make it difficult for the , service members who leave or retire from active duty, guard and reserve service each year, from entering occupations that they may be qualified to practice.
Licensing is a burden for the highly mobile population of military spouses, one-third of whom work in occupations that require licenses or certification. Compared to civilians, military spouses are 10 times more likely to have moved across states in the last year, making it difficult and costly for them to obtain a new license every time they move to a new state.
In some professions, improper practice can result in serious harm to the public. Occupational licensing can reduce the number of unqualified individuals working in that profession, increasing overall public safety and welfare.
However, because licensing laws are established independently by each state government, significant differences and disparities in licensing requirements often exist across states. In some cases, occupational licensing requirements are established directly by state legislatures in the statute authorizing the creation of the license.
Other states delegate the power to determine licensure requirements to state agencies or state-sponsored independent boards. Often, licensing requirements are set by a combination of statute and regulation, the latter being written by a state government agency or an independent licensing board usually comprised of industry representatives appointed by the governor.
Over the last 60 years, the number of jobs requiring an occupational license, or government approval to practice a profession, has grown from about 1-in to almost 1-in Licensing laws are implemented with the intention of protecting the health and safety of consumers by creating barriers to employment—through testing, training, and fees—in professions determined to be sufficiently dangerous.
Excessively onerous requirements, however, can create barriers to employment for individuals who may not actually pose a serious risk. Because of this, some states have recently moved to remove licensure requirements determined to be overly burdensome. Among certain populations—like immigrants with work authorization and people with criminal records—individuals who are otherwise well-equipped to safely practice a chosen profession can be limited by licensing requirements that prohibit these individuals from practicing based on their nontraditional education or language proficiency, and do not accurately reflect the actual risks of practicing that profession.
Furthermore, the wide variation in occupational licensing laws across states can impede the ability of workers to relocate across state lines.
This variation disproportionately impacts employment opportunities for individuals that move from the job market in one state to another—like long-term unemployed and otherwise dislocated workers seeking new opportunities, or members of the military and their families who are regularly moved to new places in their service to the country. These 48 were chosen based on the following criteria:. Limiting the scope of the database to only those professions that do not require more than a four-year college degree focuses this research on employment opportunities available to individuals without higher education, who face the highest unemployment rate in the nation.
These workers are more likely to encounter the undue barriers to work that policymakers may wish to address. Lastly, not only does basing the selection of occupations on projected growth potential extend the relevancy of this data in the constantly changing labor market, it also is meant to ensure that data is provided for sectors of the economy in which discussions of workforce development may already be a focus for policymakers.
Two occupations teachers and Prekindergarten teachers had licensure systems that could not be easily categorized by our database. To get more information on how licensure for these two occupations you can see our deep-dives linked below.
Differences in earnings between those with and without a certification or license varied substantially by occupation in Table 9 presents median weekly earnings by certification and licensing status and occupational group, as well as the percent difference in earnings between credentialed and noncredentialed workers. On the other end of the distribution, for workers in computer and mathematical occupations and in arts, design, entertainment, sports, and media occupations, the differences in earnings were not statistically significant.
Note: A person may have more than one certification or license. Statistical significance is at the percent confidence level. Differences in earnings between those with and without a certification or license at the intermediate occupational level may be the result of these differences in job roles and responsibilities, instead of the credential.
Looking at differences in earnings at the detailed occupational level partially addresses this shortcoming. The difference in earnings for those with and without a certification or license varied substantially within occupational groups.
Table 10 presents earnings data for those with and without one of these credentials for select detailed occupations. Not all occupations are presented, because many smaller occupations did not have a sufficient number of observations for reliable earnings estimates to be calculated. Estimates of full-time wage and salary workers for detailed occupations may not sum to totals because data are not presented for all occupations.
Data are not presented for occupations for which the base is less than 50, These percent differences in earnings for individual jobs were much smaller than the percent difference in earnings for legal occupations in the aggregate. Thus, the overall difference in earnings for legal occupations was partially driven by occupational and educational differences. Within legal occupations, more than 8 in 10 workers with a certification or license were lawyers—who tend to be more highly paid—while about half of noncredentialed workers were paralegals and legal assistants.
In addition, 87 percent of credentialed workers in legal occupations held an advanced degree, compared with 31 percent of noncredentialed workers. Within education, training, and library occupations, the percent difference in earnings between those with and without a certification or license was 41 percent for preschool and kindergarten teachers and 10 percent for elementary and middle school teachers.
Earnings differences were modestly positive for secondary school teachers 11 percent , special education teachers 18 percent , and other teachers and instructors 16 percent , which includes substitutes. Among postsecondary teachers and teacher assistants, by contrast, differences in median earnings for those with and without one of these credentials were not statistically significant.
However, it is important to note that among teachers, the difference in earnings may partly reflect whether the teacher is employed in a public or private school and whether the teacher is a member of a union or covered by a union contract. Research by Allegretto and Tojerow found that, when controlling for educational attainment and demographics, public school teachers were paid about 16 to 19 percent more, on average, than private school teachers during the period from to Because public school teachers are more likely to hold a certification or license than private school teachers, it is hard to determine to what degree each of these factors is influencing the difference in earnings between teachers with and without one of these credentials.
Among healthcare practitioners and technical occupations, some detailed occupations showed a substantial difference in earnings between full-time wage and salary workers with and without a credential. See table In general, the gap in earnings between workers with a required credential and a nonrequired credential was largest in occupations with a high prevalence of certification and licensing.
Workers without a required certification or license were disproportionately paralegals and legal assistants. A similar pattern was present among healthcare practitioners and technical occupations.
Very few workers in this occupational group held a credential that was not required, but those who did were typically technicians or technologists. On the other hand, practitioners, such as physicians, surgeons, dentists, and nurses, held credentials that were required for their job. These occupations have very different roles and responsibilities, which may be a factor in the earnings differences. In many occupations, holding an optional certification or license was not associated with a boost in earnings.
This analysis of CPS data provides insight into the effect that professional certifications and licenses have in the U. Over 43 million people, or People with a certification or license had lower unemployment rates and higher labor force participation rates.
Among the employed, the prevalence of these credentials increased with age and educational attainment. Among the race and ethnicity groups, Whites held these credentials at the highest rate and Hispanics held them at the lowest rate. Licenses were the more common credential, held by Licensed workers were most frequently employed in legal occupations, or in jobs related to healthcare or education.
Professional certifications, by contrast, were held by only 2. In addition, a large majority of workers with a certification or license said the credential was required for their job. Overall, earnings for workers with a credential were about one-third higher than earnings for those without one of these credentials. This percent difference in earnings increased with age, but decreased with educational attainment.
In addition, workers who said their credential was required for their job had significantly higher earnings than those with an optional credential. Although these new data from the CPS provide a useful snapshot of the prevalence of certification and licensing among U. Perhaps most importantly, because of the relatively small sample size in most states, the data are only available at the national level.
Since many occupational licensing laws are passed at the state level, the applicability of CPS data to certain research questions about licensing may be limited. Still, as a tool to study changes in occupational licensing and professional certification over time and at various stages of the business cycle, these new data from the CPS should prove useful to researchers and other data users.
A license or certification must also be issued to a person—licenses issued to businesses, such as liquor or vending licenses, are excluded. Educational certificates awarded by an educational institution, such as a college or university, are also excluded. These credentials are not time limited, and while such training may help in the performance of a specific job, it is not necessarily required or considered proof of qualification.
Finally, certificates of attendance at short-term training are not counted. This was because adding questions to the monthly CPS is costly, and BLS did not have funding to increase the length of the survey permanently. For each question added about certifications and licenses, another question had to be removed.
This question is also asked of the unemployed and refers to the job at which they last worked. An important caveat to this third question is that it does not exhaustively measure the relevance of a credential to a particular job.
While the question can provide information on whether a certification or license is required for a particular job, it cannot determine when a credential is not required but still helpful. Another important caveat is that the measure of the prevalence of certification and licensing is self- or proxy-reported in the CPS.
People identified as holding a currently active certification or license and working in a specific occupation may not necessarily work in a state where a license is required to work in that occupation. Thus, certification and licensing data from the CPS should not be construed as complete measures of the extent of occupational licensing regulation in the United States.
Even with the incorporation of results from the third question, readers should exercise caution when drawing conclusions. However, the Adult Training and Education Survey, conducted by the National Center for Education Statistics, found that a large majority of licensed workers—about 86 percent in —did not hold a professional certification. Conducting a national labor force survey in the summer of , Morris Kleiner and Alan Krueger found that 28 percent of the labor force 18 years and over were licensed by the federal, state, or local government.
In addition, data from the U. Estimates of certification and licensing status by sex, age, race, ethnicity, educational attainment, and occupation, as well as earnings differences, were also generally consistent between the data sources.
However, an important shortcoming to the new data is that because of sample size concerns, BLS does not have plans to publish CPS data on certifications and licenses at the state level. This may make analyzing the data more challenging, as many occupational licensing regulations are enacted at the state level. See Morris M. Kleiner and Alan B.
For an analysis of certification and licensing at the state level, see Morris M. Included in professional school degrees are M. Included in doctoral degrees are Ph. However, because the cell sizes were smaller for this occupation group, the difference between farming, fishing, and forestry occupations and the occupation groups listed above was not statistically significant. The CPS data represent earnings before taxes and other deductions, and include any overtime pay, commissions, or tips typically received.
In the case of multiple jobholders, only earnings received at their main job are included. Earnings reported on a basis other than weekly are converted to a weekly equivalent.
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