What Is Occupational Licensing?

Occupational licensing refers to a process where a person obtains a document allowing her to work within in a certain trade or profession. Though the requirements vary from one jurisdiction to another, professionals who are commonly required to have an occupational license include physicians, lawyers, and architects. To obtain licenses, these individuals will generally need to first complete a course of training or education and then pass a licensing exam. Even once an individual is licensed, she is usually limited to operating within the jurisdiction where the license was obtained.

It is is important to differentiate between educational or certification processes and occupational licensing. When a degree or certificate is needed to work in a trade or profession, obtaining it will be part of a different system. Furthermore, a person will be required to have those documents before she can receive her occupational license, which is essentially a permit. The license may be granted by a government agency or professional organization.

One of the primary reasons for occupational licensing is to protect the public. Many of the occupations that require licenses involve services that can have a significant impact on individuals' welfare. These include medical, legal, and financial services. An ideal way to ensure that incompetent individuals or scam artists are not mistaken for credible service providers is to require those who claim to be professionals to get licenses. To achieve the goal of ensuring competency, a certain score on an occupational licensing exam is usually a condition to receiving a license.

The trades and professions that are subject to occupational licensing vary depending on the jurisdiction. For example, in some places a general contractor may need a license, but in others he may not. Furthermore, even when two jurisdictions require licensing for the same professions, a license issued in one is generally not valid in another. The requirements for obtaining, maintaining, or renewing licenses may also differ.

When an occupational license is required and a person is found operating without one, it is usually a crime. The severity may depend on several factors, including the trade and whether anyone was harmed. If individuals were harmed, the person who violated the law may face civil action in addition to the criminal penalties.

There are critics of occupational licensing who argue that in many instances these systems are unnecessary and are contrary to public interest. These individuals argue that licensing requirements limit competition, increase consumer prices, and require professionals to pay unnecessary costs. It is also argued that much of the information that a person is required to learn and know to obtain a license is irrelevant to the actual practice of the trade or profession.