Occupational licensing is common and associated with diminished worker mobility.

(<< Fact 13: State subsidies have tripled since 1990.)

State policies, from land-use rules to business permitting to licensing restrictions, are economically consequential. However, such regulations are often subjected to less scrutiny and less-rigorous cost-benefit analysis than are federal regulations (Glaeser and Sunstein 2014). Because they are defined at the state level, inconsistencies across states can also have economic impacts, including diminished geographic mobility.

Occupational licensing is a prominent example of such policies. Intended to protect public health and safety, licensing nonetheless imposes substantial costs on some consumers and workers. By definition, licensing is a restriction on entry into certain occupations, which reduces competition in those occupations. In addition, licensing often constrains the ways in which work is structured, limiting innovation and economic growth (White House 2015).

Figure 14a gives a sense of how widespread licensure is, displaying the fraction of working-age employees who are licensed in various large occupational groups. More than a fifth of all employees hold licenses, but the fraction varies considerably across professions. Health-care practitioners and legal workers are the most likely to be licensed, with 73 and 61 percent of workers licensed, respectively, while only about 5 percent of workers in computer and mathematical occupations are licensed.

Figure 14b focuses on just one economic impact of state licensure: lower geographic mobility. Licensed workers—who generally must pay to be relicensed after an interstate move—are much less likely to move across state lines than are comparable workers without licenses, but only slightly less likely to move within their state. The discrepancy in interstate mobility rates is particularly pronounced when relicensure is more onerous for workers (Johnson and Kleiner 2017). Voluntary certification, which is often suggested as an alternative to mandatory licensure, is associated with somewhat higher interstate mobility (see figure 14b).

(Fact 15: Health-care licensure rules vary in ways that matter for competition and mobility. >>)