By Georgia Jackson, College of Arts and Sciences
Is professional licensing a racket?
According to Rebecca Allensworth, a professor at Vanderbilt University, the answer is “yes.”
In a recent episode of the popular podcast Freakonomics Radio, Allensworth argues that licensing boards help too many bad actors stay in their professions — including everything from medicine and law to hairdressing and interior design — while keeping too many good ones out.
“Professional licensing is too onerous for certain professions, and it just makes the barriers too high,” Allensworth tells podcast host Stephen Dubner. “It keeps people out and the investment in what you’re getting for that regulation is not worth it.”
Bobby Chung is an applied microeconomist at the University of South Florida, where he specializes in labor and education policy.
To support Allensworth’s case, Dubner cites research by Bobby Chung, an assistant professor of economics at the University of South Florida, who found that licensing reduces the labor supply in a given profession by 17 to 27 percent.
“The appropriate level of licensing depends on the balance between public protection and economic efficiency,” said Chung, who was glad to see the topic receive attention from the podcast. “Licensing is crucial for high-risk professions, such as surgeons or structural engineers, where errors can have life-threatening or catastrophic consequences. However, excessive licensing can create unnecessary barriers to entry, limiting workforce mobility and driving up costs without clear benefits to consumers.
“Regulations become overly restrictive when they impose burdens unrelated to competency — such as state residency requirements that force already-qualified professionals to repeat the licensing process. A well-designed system should ensure public safety while minimizing unnecessary obstacles to workforce participation.”
Chung’s research, which was published by the British Journal of Industrial Relations, makes several contributions to the existing literature on the effect of professional licensing on employment by comparing employment in professions across state lines, where the profession is licensed in one state but unlicensed in the other.
“Although professional licensing restricts labor supply, regulatory bodies play a crucial role in ensuring public welfare,” Chung said. “Licensing helps maintain industry standards by setting minimum qualifications, thereby reducing the risk of harm from unqualified practitioners. These boards not only establish competency requirements but also oversee ethical and professional conduct. Through complaint investigations and disciplinary actions, they reinforce accountability, deter malpractice and enhance consumer trust. While the impact on labor markets is significant, the primary justification remains safeguarding public health, safety and service quality.”
Chung’s ongoing research on occupational licensing has led him to examine the impact of edTPA, a widely adopted teacher performance assessment system. He is also exploring how occupational licensing may have exacerbated inequality during COVID-19.
“Unlicensed workers were more vulnerable to layoffs, and unemployment can have lasting negative effects on career trajectories and earnings,” Chung said. “This research sheds light on how licensing requirements influence workforce resilience during economic downturns and their longer-term implications for labor market inequality.”
Listen to the full episode on Freakonomics Radio.