Study: Occupational Licensing has no effect on consumer choice

According to the National Conference of State Legislatures;

Licensing laws are implemented with the intention of protecting the health and safety of consumers by creating barriers to employment—through testing, training, and fees—in professions determined to be sufficiently dangerous.

And over the last couple of decades, the number of professions requiring licensing has grown due to this reasoning. This growth in licensing has, however, come at a cost to both consumers and workers. Low-income individuals are barred from entering some professions due to licensing requirements while at the same time consumers face high prices.

What makes it worse is the fact that research finds no connection between occupational licensing and consumer protection.

Just recently, a new NBER research paper used data from an online labor market where people can hire home improvement professionals to see whether licensing status has an effect on consumer choice. And according to the study, licensing status has no effect on whether customers hire someone or not.


more stringent licensing regulations are associated with less competition and higher prices but not with any improvement in customer satisfaction as measured by review ratings or the propensity to use the platform again.

While consumers care a little about licensing status, they care much more greatly about price and online rating. And if protecting consumers is really what licensing is all about, shouldn’t the rules reflect what consumers care about?