Occupational Licensing: A Framework for Policymakers
If licensing places too many restrictions on this allocation of workers, it can reduce the overall efficiency of the labor market. When workers cannot enter jobs that make the best use of their skills, this hampers growth and may even lessen innovation. Licensing may also affect entrepreneurship. Licensed workers are more likely to be self-employed than other workers. Sixteen percent of licensed workers report being self employed, as compared to 13 percent of unlicensed workers. Just as important, entrepreneurs in new areas that overlap with a licensed occupation – such as someone who is creating a website to enable consumers to take legal action – may find themselves required to hold a license because a small part of their work overlaps with that of another licensed occupation. In this case, the web entrepreneur may be required to hold a law license…Estimates that account for differences in education, training, and experience find that licensing results in 10 percent to 15 percent higher wages for licensed workers relative to unlicensed workers.