Occupational licensing is a governmental credential for a worker to practice legally in a profession, affecting 25% of the U.S. workforce. This report quantifies the rigidity effect of licensing using the employment fluctuation data in Illinois from 2005 to 2018. The impact of licensing also reduces job loss by one-third during a contracting economy. In addition, the rigidity effect of licensing on the labor market manifests itself as a moderating factor against the 2008 recession and affected about 36% of Illinois workers. This report suggests that the recent wave of licensing reforms throughout the country and to some extent in Illinois should be focus on removing unnecessary job entry requirements, which can then increase labor market flexibility and facilitate worker relocation.
UNIVERSITY OF ILLINOIS URBANA-CHAMPAIGN