Occupational licensing and non-competition agreements are two important types of labour market regulation in the United States, both covering around one fifth of all workers. While some regulation is needed to protect safety and ensure quality of services, it also creates entry barriers and reduces competition with important costs for job mobility, earnings and productivity growth. Employment opportunities for low-skilled workers and disadvantaged groups tend to be particularly affected by these barriers. The States are mainly responsible for labour market regulation and the variation across States is similar to the variation in the European Union. Harmonising requirements and scaling back occupational licensing as well as restricting the use of non-competition covenants could help to circumvent the secular decline in dynamism. However, attempts to reform often face stiff opposition from associations of professionals. The federal government has limited influence, but can in some cases help by shifting the burden from workers to meet regulatory requirements onto States and employers to show that high and differing regulatory standards are needed.
