Licensing Occupations: Ensuring Quality or Restricting Competition?

The licensing of occupations is often seen as stealth regulation that operates under the public policy radar screen. Unlike other labor market institutions, such as laws regulating unions or the minimum wage, the regulation of occupations has received little attention from the press, academics, or policymakers.

However, this lack of attention is not because occupational licensing is diminishing in the labor market. Since the 1950s, licensing coverage has grown from about 5 percent of the workforce to more than 20 percent, while unions have declined from about a third of the workforce to less than 13 percent, and to less than 8 percent in the private sector. In addition, approximately 50 occupations are licensed in all states, and about 800 occupations are similarly regulated in at least one state.

This pathbreaking book reveals the impacts of occupational licensing on the economies of the United States and several EU countries. Kleiner provides a thorough and up-to-date examination of the costs and benefits of occupational licensing (OL). He offers an explanation for the growth of OL, defines the winners and losers in terms of earnings and the quality of services provided by licensees, compares the differing labor market and price impacts of OL in the United States and Europe, provides evidence on the overall net impacts of OL for society, and offers policy alternatives to OL.

Morris Kleiner is a professor at the Humphrey Institute of Public Affairs and the Industrial Relations Center at the University of Minnesota-Twin Cities, a research associate in Labor Studies at the National Bureau of Economic Research, and a visiting scholar in economic research at the Federal Reserve Bank of Minneapolis.