Occupational Licensing and Occupational Mobility 
Existing research finds that because licensing regulations vary across states for the same occupation as well as across occupations within states, they hinder workers’ ability to change careers, relocate while remaining in the same profession, or both. However, it is not clear which aspects of licensing regulation impede such mobility. This paper uses state-level data on occupational licensing policy matched to 2015–2022 Current Population Survey data on workers to examine the extent to which the existence of licensing policy (the extensive margin) impedes the occupational mobility of US workers and the specific requirements of licensing (the intensive margin) that have the strongest effect.
Key Findings
- The existence of licensing regulation significantly reduces the probability of workers entering an occupation by 2.2 percentage points (or 24 percent), but it does not significantly affect the probability of workers switching out of an occupation.
- The impact of licensing on occupation entry is driven by regulations that govern fees and minimum thresholds for education and age, which can proxy for experience. This result holds when accounting for the possibility that licensing affects labor demand as well as labor supply.
Implications
Advocates of occupational licensing say that requiring workers to hold a license to perform their jobs reduces safety risks to consumers and improves the general quality of goods and services. Opponents argue that it creates a barrier to entry for workers that may be unnecessary because evidence about the benefits to consumers is mixed. The intensive-margin results may help to explain why the evidence is mixed. While workers’ education and experience typically reflect their skill level, their ability to pay a licensing fee may be less likely to ensure they are capable of maintaining or improving the safety and quality of the goods they produce or services they offer.
Abstract
This paper estimates the impact of occupational licensing at the extensive margin (existence) and intensive margin (qualifications) on the occupational mobility of US workers. Using 2015–2022 Current Population Survey data on worker occupational choices matched to licensing-policy data, I show that the existence of licensing regulation significantly reduces the probability that a worker enters an occupation. This reduced mobility is largely due to licensing fees and minimum thresholds for age and education. This finding may help explain the weak relationship between licensure and product market quality, as binding licensing qualifications likely have mixed links to worker skills.