Licensure as a Credential: Evidence on Unemployment Protection and Inequality from the Great Recession and COVID-19

Recent research shows that education shields workers from job loss in recessions. We test whether occupational licensing, another widespread credential, provides similar unemployment protection during recessions. Using individual-level licensing data and supplemental state-occupation measures, we study both the Great Recession and the COVID-19 recession. Licensed workers experienced a 0.8-1 percentage point (27%) smaller increase in unemployment than comparable unlicensed workers in both downturns. Ignoring these unemployment effects understates inequality between licensed and unlicensed workers by 3–7%. Our findings suggest that, like education, licensing not only raises wages but also protects jobs, thereby amplifying inequality during economic downturns.