Occupational licensing

Occupational licensing, also called occupational licensure, is a form of government regulation requiring a license to pursue a particular profession or vocation for compensation. Professions that can have a large negative effect on individuals, like physicians and lawyers, require occupational licenses in most developed countries, but many jurisdictions also require licenses for professions without that possibility, like plumbers, taxi drivers, and electricians. Licensing creates a regulatory barrier to entry into licensed occupations, and this results in higher income for those with licenses and usually higher costs for consumers.

Licensing advocates argue that it protects the public interest by keeping incompetent and unscrupulous individuals from working with the public. However, there is little evidence that it affects the overall quality of services provided to customers by members of the regulated occupation.

Licensing has been among the fastest growing labor market institutions in the United States. The figure shows the growth of occupational licensing relative to the decline of union membership since the 1950s.

By 2008 occupational licensing in the U.S. had grown to 29 percent of the workforce, up from below five per cent in the 1950s. In contrast, unions represented as much as 33 percent of the U.S. workforce in the 1950s, but declined to less than 12 percent of the U.S. workforce by 2008.

One simple theory of occupational licensing envisions a costless supply of unbiased, capable gatekeepers and enforcers. The gatekeepers screen entrants to the occupation, barring those whose skills or character suggest a tendency toward low-quality output. The enforcers monitor incumbents and discipline those whose performance is below standard with punishments that may include revocation of the license needed to practise. Assuming that entry and performance are controlled in these ways, the quality of service in the profession will almost automatically be maintained at or above standards that are set by the gatekeeper to the profession. Within this approach only those who have the funds to invest in training and the ability to do the work are able to enter the occupation.

...
Wikipedia