Re-evaluating the labor market effects of occupational licensing: Longitudinal evidence across states

Christos A. Makridis () and Patrick A. McLaughlin ()
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Christos A. Makridis: Arizona State University
Patrick A. McLaughlin: The Hoover Institution at Stanford University

Palgrave Communications, 2025, vol. 12, issue 1, 1-9

Abstract: Abstract We present new data on regulatory restrictions across states and occupations between 2017 and 2022 to study the labor market effects of occupational licensing. First, we document three stylized facts: (a) regulatory restrictions across states and occupations have grown by nearly a factor of three since 2019, (b) increases in regulatory restrictions are concentrated in occupations with lower median hourly wages and higher within-occupation inequality, and (c) states that expanded regulatory restrictions tend to have lower GOP vote shares. Second, exploiting variation across occupations within the same state-year, we find that a 10% rise in regulatory restrictions leads to a 2% rise in hourly wages, but a 4% decline in employment. Both the employment and wage effects are concentrated in lower wage jobs, as well as among respondents with professional licenses, even after controlling for differences across industry.

Date: 2025
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DOI: 10.1057/s41599-025-04497-5

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