More research on how occupational licensing hinders economic mobility

A new report from Archbridge Institute finds that occupational licensing is negatively correlated with economic mobility.

What does that mean in plain English? As the report authors ask, “is occupational licensing preventing individuals from earning more than their parents did?”

They find good reason to think it is. They conclude,

the findings of this paper shed light on a suggestive relationship between the growth of occupational licensing, the economic mobility of low-income Americans, and income inequality. More specifically, our analysis suggests that growth in occupational licensing of low- and moderate-income occupations may be limiting opportunities for upward economic mobility (a 1.7% to 6.7% reduction evaluated at the mean). Licensing shrinks the pool of potential laborers by creating barriers to entry and this reduction in mobility also seems to relate to increases in income inequality (3.9% to 15.4% evaluated at the mean) as measured by U.S. county-level Gini coefficients.

The problem seems worse for low- and moderate-income workers. The report urges policymakers to

take note of the potential distributional consequences of this growing phenomenon as they reconsider occupational licensing requirements for low- and moderate-income occupations. In addition to raising prices for consumers, occupational licensing may be creating barriers to opportunity that prevent the least fortunate Americans from achieving the American dream of prosperity.

The report offers a look at how occupational licensing for low- to moderate-income professions grew from 1993 to 2012. In North Carolina over that 20-year window, 33 low- to moderate-income professions fell under state licensing.

For more information

Readers interested in occupational licensing in North Carolina and how to reform it can find that information here, for example:

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

Reader Comments