Not only do state occupational licensing laws force people to spend a lot of time and money earning a license instead of earning a living, they also impose real economic costs. This study takes advantage of a uniquely large dataset to offer the first state-level estimates of licensing’s economic costs for 36 states, as well as new national estimates. It also confirms earlier research demonstrating considerable growth in licensing since the 1950s.

Key findings include:

States vary widely in the share of workers licensed, from 14 percent in Georgia to 27 percent in Nevada. At the national level, nearly 20 percent of workers are now licensed, up from just 5 percent in the early 1950s.

Nationally, licensing costs the economy nearly 2 million jobs annually. In the states, licensing’s toll on jobs ranges from around 7,000 (Rhode Island) to nearly 196,000 (California).

By a conservative measure of lost economic value, licensing may cost the national economy $6 billion. However, a broader and likely more accurate measure suggests the true cost may reach $184 billion or more. At the state level, the broader measure finds losses ranging from $675 million (Rhode Island) to over $22 billion (California).

Licensing likely leads to these losses because it restricts competition, effectively giving licensed workers a monopoly. With fewer competitors, licensees can charge more for their services. Consumers and the wider economy pay the price.

The costs of licensing are substantial, and it seems likely, given ample prior research showing licensing rarely improves consumer outcomes, that they outweigh any purported benefits. Eliminating needless licensing burdens—and, if necessary, replacing them with less restrictive alternatives—would likely result in a win–win for workers and consumers.

Click here to watch a video about the high cost of occupational licensing.