Occupational Licensing and Immigrants

July 10, 2019

Project Summary

Occupational licensing laws create minimum standards that individuals must meet to work in a number of fields. These minimum standards usually include competency tests, hours of practice, application fees, and specific education. This research examines how immigrants, in particular, are impacted by occupational licensing rules in the US.

Immigrants are 34% less likely to obtain government licenses than natives
The researchers suggest several reasons that immigrants may be less likely to pursue work in a licensed field. Some occupations require that workers must be a US citizen, which prohibits many immigrants from working until they are naturalized. In addition, many exams are provided only in English, disadvantaging immigrants with limited English language skills. Even when immigrants have completed schooling or earned other credentials in their home country, those may not transfer and so immigrants may be unwilling or unable to go through training again.

Occupational licensing laws create a disproportionate barrier for certain immigrants
Although all immigrants are less likely than native workers to obtain a license, the research shows that immigrants who are male, highly educated, noncitizens, or have limited English skills are most heavily affected by occupational licensing rules.

Immigrants who receive licenses have a smaller wage gap with other US workers
Licensing appears to shrink the wage gap between native workers and immigrants. Although natives tend to earn more than immigrants, licensed immigrants’ earnings are much closer to natives. The authors argue that this is likely because an occupational license serves as a signal of English abilities for employers. This effect is also more prominent for women than it is for men.

Licensing reduces the mobility of immigrants, slowing the entire economy
An important implication of this research is that licensing limits immigrants’ ability to move between states and may exacerbate worker shortages. Licenses are difficult to earn and are generally only valid in the locality that they were earned in, making workers less mobile. Immigrants tend to move towards existing needs for additional workers, but if occupational licensing rules limit the mobility of immigrants than that is likely to diminish the important role that immigrants play in the economy.

Given these findings, state policymakers should consider how their current licensing requirements may affect immigrants in particular and how to adjust those regulations to avoid penalizing immigrants in a way that slows the entire economy.

Project Authors