An Economic Analysis of Occupational Licensure

An Economic Analysis of Occupational Licensure

To examine the hypothesis that occupational licensure is primarily a restrictive device to protect those licensed from competition, analysis focused on the licensure of non-professional occupations in Rhode Island, Massachusetts, and Connecticut, covering 36 licenses issued by the three states for 12 occupations (e.g. electricians, barbers, opticians) and 3 sub-classes within those occupations. The study examined the composition of the licensing boards; their policies with respect to prices, advertising, and work constraints; constraints specifically incorporated in legislation; and the examination process. On ten of twelve licensure examinations for which adequate data were available, statistically significant positive correlations were found between failure rates and unemployment rates, supporting the hypothesis. Other findings were that licensing processes generated work restrictions, jurisdictional disputes among occupations, and restrictions on price competition; that licensure by reciprocity is rare and difficult to achieve; that licensure boards pay little attention to consumer complaints; that boards seldom revoke licenses; and that they are overwhelmingly composed of members of the licensed occupation with a vested interest in protecting those already licensed.

Elton Rayack

Education Resources Information Center

July 23, 1976

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