The Licensing Maze: How Hard Is It to Work in America—Really?

One in five American workers needs a government-issued license to do their jobs, up from just 5% in the 1950s, according to research from the Federal Reserve Bank of Minneapolis. Licensing often promises consumer safety but creates barriers that disproportionately affect immigrants, lower-income workers, and people with criminal records. The rise of occupational licensing raises questions about who truly benefits and whether the system itself is overdue for reform.

More than one in five American workers—over 34 million people—now need government approval simply to do their jobs, according to the Bureau of Labor Statistics data for 2024. These licenses cover a wide range of occupations, from teachers and healthcare professionals to cosmetologists, florists, and tour guides. For many, securing a license is a costly endeavor: the average requirement includes nearly a year of education and experience, at least one licensing exam, and $295 in fees, according to the Institute for Justice. These figures don’t even include hidden costs like tuition or lost wages.

But beyond the fees and training requirements lies a more fundamental question: why does a system originally intended to protect consumers evolve into an economic maze that locks millions of workers out of opportunity? The recent stabilization of licensing growth—after decades of rapid expansion—suggests the system may no longer be growing, but it has already reshaped the workforce and concentrated benefits among a select few.

“Occupational licensing makes it illegal to work in a job without receiving permission from state government,” said Edward Timmons, vice president of policy at the Archbridge Institute, a research organization examining economic opportunity. “To obtain permission, aspiring workers must complete minimum levels of education and training, pass exams, and pay fees to the state. For many workers, these minimum requirements create barriers to entry that they are unable to overcome.”

The data supports this. Licensing disproportionately reduces economic mobility for certain groups, particularly immigrants, younger Americans with criminal records, and workers of color. According to the Federal Reserve Bank of Minneapolis, Latino workers in the U.S. are 11 percentage points less likely to be licensed than white workers, even when educational attainment is accounted for. The same report found that foreign-born workers often face licensing hurdles, as U.S. states may not recognize credentials earned overseas. In states where criminal records can prevent licensure, nearly one-third of younger Black and Latino men without high school educations—many of whom have experienced incarceration—are locked out of entire industries.

The logic behind licensing often revolves around public safety. But in many cases, data challenges whether these regulations achieve their intended goals. The Federal Trade Commission, in a report on licensing, found, “occupational licensing frequently increases prices and imposes substantial costs on consumers.” At the same time, “many occupational licensing restrictions do not appear to realize the goal of increasing the quality of professionals’ services.”

In some professions, the requirements appear especially mismatched to public safety concerns. The Institute for Justice highlighted that emergency medical technicians (EMTs), who save lives daily, need 36 days of training to become licensed, while cosmetologists often need over 300 days. For jobs like hair braiding, interior design, or tree trimming—licensed in some states but not others—the consumer protection argument loses further ground. “Many jobs require a lot of training despite posing little risk,” the Institute for Justice wrote, noting that in some occupations, licensing costs create barriers in the very populations most likely to benefit from accessible employment opportunities.

According to Timmons, the primary beneficiaries of occupational licensing systems are often not consumers but rather entrenched professionals and their associated institutions. “Professional associations, providers of specialized schooling and training, and existing professionals benefit the most from occupational licensing in the form of higher revenues and higher pay,” he said. These groups often dominate state licensing boards, shaping the rules in ways that cement the advantages of existing practitioners while inhibiting new market entrants.

Reform is possible and, in some states, already underway. Since 2017, more licenses across the U.S. have been eliminated than created, according to the Institute for Justice. Roughly 28 states now offer some form of universal license recognition, simplifying the process for licensed professionals to move and work across state lines. However, delicensure—fully repealing licensing requirements—is still rare. Research by the Federal Reserve Bank of Minneapolis found that when an occupation becomes licensed, 99.9% of the time it remains so year after year.

Licensing reforms may seem like a niche policy discussion, but their implications ripple across the economy. By raising costs for consumers and restricting workforce participation, they act as silent yet powerful limits on economic mobility. As policymakers weigh the trade-offs between consumer protection and economic opportunity, questions about fairness and efficiency remain central to the debate. "Unless licensing can be documented to be protecting consumers from substantial harm, and secondly that no other regulation can protect consumers, occupational licensing should be eliminated," Edward Timmons, Vice President of Policy at the Archbridge Institute, said.

Where does the debate go from here? States possess considerable authority to redesign licensing regimes, but these decisions unfold within competing economic and political forces. Professional associations, peer pressure among states, and concerns about consumer risks all drive inertia toward maintaining the status quo. Yet the emerging focus on targeted reforms, universal recognition, and evidence-based policymaking reveals a shift in how states weigh the costs of locking workers out of opportunity.

What ultimately happens may depend less on regulatory theory and more on how Americans define the value of work itself. Licensing is, fundamentally, a test of the right to earn a livelihood within an increasingly credentialed system. For those waiting on opportunities—barred by barriers that lack compelling public interest—the stakes could not feel more urgent.