The White House issued an executive order this week requiring state and local governments to issue occupational licenses to workers who have received a similar license in another jurisdiction — as long as they are in good standing. The goal of the new order is to increase economic and geographic mobility.
Kim Weeden, professor of sociology and director of Cornell University’s Center for the Study of Inequality, says some regulation is necessary to protect consumers, but occupational licensing creates inequality in the workforce.
“Occupational licensing increases inequality by limiting the supply of people who can legally practice an occupation and driving up wages in those occupations. Although some regulation is necessary to protect the public from incompetent or malfeasant practitioners, overly restrictive licensing laws can lead to workforce shortages, and drive up the cost of services for consumers.
“Research on occupational licensing shows that licensed occupations enjoy about a 10% wage premium relative to occupations that require similar levels of education and skill levels. Aside from some construction trades (e.g., plumbers) and service occupations (e.g., hairdressers), licensing is most common in the professions, so the benefits typically go to those at the top of the occupational structure.”