Occupational licensing

Occupational licensing, also called licensure, is a form of government regulation requiring a license to pursue a particular profession or vocation for compensation. It is related to occupational closure. The often stated rationale is that licensing ensures that professions provide a minimum quality standard while the drawback is that licensing leads to higher prices for those services.

Licensing creates a regulatory barrier to entry into licensed occupations. 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. Scholars have raised concerns that licensing boards frequently enact arbitrary standards that hinder competition while also turning a blind eye towards unethical behavior by incumbent practitioners. It can also harm consumers by raising prices and reducing innovation by new market entrants, and may slow overall economic growth. Some occupational licensing can violate competition law due to anti-competitive practices.

Alternatives to individual licensing include only requiring that at least one person on a premises be licensed to oversee unlicensed practitioners, permitting of the business overall, random health and safety inspections, general consumer protection laws, and deregulation in favor of voluntary professional certification schemes or free market mechanisms such as customer review sites. Some studies find consumers are more responsive to reviews than to occupational licensing status.