NBER Study Finds Occupational Licensing Laws Inhibit Labor Mobility

The paper, “Occupational Licensing and Labor Market Fluidity,” was published by the National Bureau of Economic Research. Here are some highlights from the authors’ summary of their findings:

We use public individual level survey data from the Current Population Survey and the Survey of Income and Program Participation as well as a newly constructed data set on licensing requirements—the Occupational Licensing Law Research Project (OLLRP)—to investigate the relationship between occupational licensing and labor market fluidity. The OLLRP contains a detailed range of occupational licensing requirements for all universally licensed occupations in every state from the 1980s to 2016. …

The data show that while the licensing rate (the fraction of the workforce that is licensed) has trended up steadily, the occupational mobility (or switching rate) has declined over the past two decades. This suggests that there may be a link between workers’ licensing status and occupational switching decisions. Using the Current Population Survey to focus on occupation??level data, we find that occupations with higher licensing shares are experiencing relatively lower churn rates. The negative correlation between the share of workers who are licensed and the occupational churn rate suggests that licensing may have a negative effect on individuals’ labor market transition decisions. …

[We] find that licensing can account for at least 7.7 percent of the total decline in occupational mobility over the past two decades. These results suggest that in addition to static general equilibrium welfare effects, licensing also has significant lifetime welfare effects for workers through impacting their dynamic occupational career choices.

Jon Guze / Director of Legal Studies

Jon Guze is the Director of Legal Studies at the John Locke Foundation. Before joining the John Locke Foundation, Jon practiced law in Durham, North Carolina for over twent...

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