This is an excerpt from the policy brief title Reforming Occupational Licensing in North Dakota. Orlando, N, (February 2025). Sheila and Robert Challey Institute for Global Innovation and Growth, North Dakota State University. Available at https://www.ndsu.edu/fileadmin/challeyinstitute/Occupational_Licensing.pdf.
Executive Summary
North Dakota is experiencing a tight labor market with an inability to attract workers for various occupations. While several policies may be considered to alleviate this workforce shortage, policies that remove or reduce restrictions on workers are particularly attractive; they can potentially increase the number of available workers at a very low cost.
One low-cost policy to reduce restrictions on workers is to reform occupational licensing rules. Previous research has shown that occupational licensing has a limited impact on service quality while significantly limiting opportunity.
This research brief highlights several occupations where North Dakota has training requirements, license fees, and/or education requirements that significantly exceed the norm in other states. In professions where the state's licensing requirements exceed those of other states, North Dakota should consider reducing those requirements. Reducing requirements so that they are below (or at least the same as) other states may remove an important barrier preventing North Dakota businesses from attracting needed workers.
One efficient way to reduce licensing barriers for the state would be to adopt Universal Recognition of Occupational Licensing. According to the Institute for Justice, 20 states have adopted universal licensing, where licenses from other states are recognized. By recognizing licenses from other states, an important impediment could be removed for individuals who wish to pursue work in North Dakota in the same occupation where they are able to work in another state.
Introduction
North Dakota faces a significant labor shortage. As of November 2024, the state has approximately 0.4 unemployed persons per job opening[l]. This translates to 2.5 open positions for every unemployed person, meaning that even full employment would leave many jobs unfulfilled.
According to a January 2025 report from the North Dakota Job Service, the state had 15,025 online job openings — an increase of 1,869 from the previous month. The highest number of openings were in "Health Care and Social Assistance" (3,246), followed by "Agriculture, Forestry, Fishery and Hunting" (2,485), and "Retail Trade" (1,239).
This is not a new issue; North Dakota has experienced a tight labor market for several years. In a 2022 North Dakota Business Conditions and Climate Survey, 62 percent of North Dakota businesses believed the number one thing holding back their performance was an inability to attract and retain qualified workers. The workforce shortage experienced by employers is forcing policy makers to consider innovative measures, such as a recent grant aimed at seeking local solutions to workforce issues. Another potential solution is occupational licensing reform.
An occupational license is a minimal legal requirement that is set by a government for a person to work in a specific occupation[V]. A 2015 report from the White House estimated that nearly 25 percent of all workers in the United States require some form of occupational license to formally work in their professions —five times the percentage in the 1950s. Occupational licenses vary in form, ranging from formal educational requirements such as needing a degree or an apprenticeship, to paying a fee or taking a test.
Justifications for Licensing
There are two dominant theories that have been articulated in the economics profession to justify occupational licensing. Robert Thornton and Edward Timmons describe one such theory as the "public interest view", which argues that licensing serves to communicate information regarding the service to the consumer. This idea is rooted in the concept of asymmetric information. As Hayne Leland explains, because certain professions hold an informational advantage over consumers regarding their qualifications, licensing may be a way to certify quality.
Another school of thought argues that occupational licensing constitutes an unnecessary barrier to entry to keep competitors out of the market. Accordingly, licensing can only help those that are already established in their respective industries. Specifically, by keeping the number of new entrants low, they seek to keep the prices of their services high. This opens the possibility that licensing could be adversely affecting employment opportunities.
Conclusion
North Dakota is experiencing a tight labor market with an inability to attract workers for various occupations. While several policies may be considered to alleviate this workforce shortage, policies that remove or reduce restrictions on workers are particularly attractive; they can potentially increase the number of available workers at a very low cost.
One low-cost policy to reduce restrictions on workers is to reform occupational licensing rules. Previous research has shown that occupational licensing has a limited impact on service quality while significantly limiting opportunity.
This research brief highlights several occupations where North Dakota has training requirements, license fees, and/or education requirements that significantly exceed the norm in other states. In professions where the state's licensing requirements exceed those of other states, North Dakota should consider reducing those requirements. Reducing requirements so that they are below (or at least the same as) other states may remove an important barrier preventing North Dakota businesses from attracting needed workers.
This brief also shows occupations where North Dakota has training requirements, license fees, and/or education requirements significantly below other states. The state should work to ensure that these barriers remain low.
An efficient way to reduce licensing barriers for the state would be to adopt Universal Recognition of Occupational Licensing. According to the Institute for Justice, 20 states have adopted universal licensing, where licenses from other states are recognized. By recognizing licenses from other states, an important impediment could be removed for individuals who wish to pursue work in North Dakota in the same occupation where they are able to work in another state.
However, in considering Universal Recognition the state should consider the least restrictive form of Universal Recognition that is possible. Twelve states, including Montana and South Dakota, have adopted Universal Recognition that says the license from another state will be recognized only if there are "substantially equivalent" requirements for experience, education, or training. This still prevents licenses from being recognized from states that have lower requirements for these things.
A preferred form of Universal Licensing is one where the license is recognized if the home state license has a similar "scope of practice" to the new state. By adopting this form of universal licensing, North Dakota could immediately eliminate a barrier created by our state having different standards than others in obtaining occupational licenses.
It is well known that North Dakota has some disadvantages, or perceived disadvantages, in comparison to other states. By streamlining and reducing occupational licensing barriers as much as possible, the state may be able to at least partially overcome disadvantages such as weather to improve our ability to attract workers.
The full policy brief was originally published by North Dakota State University.
