Occupational Licensing Doesn’t Raise Quality

February 1, 2023

Occupational licenses impose heavy costs on workers, consumers, the economy, and society at large. Proponents justify these costs by arguing that licensing weeds out workers likely to provide inferior service. But is this true? New IJ strategic research finds no evidence to support the claim that licensing raises quality—and even finds some evidence that licensing can reduce it. 

For six lower-income occupations drawn from License to Work, we compared Yelp ratings for businesses in neighboring states with licensing versus no licensing (or more burdensome licenses versus less burdensome ones). We focused on businesses near state borders to ensure the primary difference was the licensing regime. In all, we conducted nine comparisons, as some occupations had multiple state pairings. 

In seven of the nine comparisons, we found no statistically significant difference in quality. So, for example, interior designers in licensed Nevada were rated no better than those in unlicensed California, even though Nevada requires six years of education and experience. The same went for barbers, locksmiths, manicurists, and tree trimmers. 

In the two statistically significant comparisons, cosmetologist quality was higher in less burdensomely licensed New York than in more burdensomely licensed Connecticut and New Jersey. 

These results, which are consistent with a long line of research, might not surprise our readers, who understand how ordinary market incentives are usually enough to promote quality. But they may surprise policymakers used to licensing boosters’ talking points. That’s why IJ’s legislative and activism teams will be using these results, together with those from the third edition of License to Work, to persuade policymakers to rein in licensing’s reach and burdens, not just for the six occupations we studied but well beyond.

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