NCPA - National Center for Policy Analysis


February 27, 2009

In "The Prevalence and Effects of Occupational Licensing," authors Morris Kleiner and Alan Krueger use newly available data from a nationally representative sample of Americans surveyed by the Gallup Organization to analyze the influence of occupational licensing in the labor market. 

To determine if a worker is in a licensed position, their survey asked: "Does your job require a license by a federal, state, or local government agency?"

  • The authors find that 29 percent of the workforce was required to hold a license in 2006, which is a higher percentage than that found in other studies that rely only on state-level occupational licensing data or data restricted to single states.
  • Workers who have higher levels of education are more likely to work in jobs that require a license.
  • Union workers and government employees are more likely to have a license requirement than are nonunion or private sector employees.

The authors suggest that working in a licensed job is associated with about 15 percent higher wages, other things being equal -- about the same as estimates for the effect of unions.  However, unlike unions, which reduce the variance in wages, licensing does not significantly affect wage dispersion for individuals in licensed jobs.

If these results hold up to further scrutiny, then occupational licensing would turn out to be a more consequential phenomenon for determining income than labor unions, given the prevalence of licensing.

Source: Lester Picker, "The Prevalence and Effects of Occupation Licensing, NBER Digest, February 2009; based upon: Morris M. Kleiner and Alan B. Krueger, "The Prevalence and Effects of Occupation Licensing, National Bureau of Economic Research, Working Paper No. 14308, September 2008.

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