Workforce preparedness is crucial to future prosperity, both from an individual and a societal perspective.

One way to demonstrate having the necessary skills and knowledge is by obtaining a certification or license. For some occupations, such credentials are a requirement, while for others, they open doors to higher-paying jobs. We now have some data that allows us to analyze this phenomenon for the first time.

There are two major types of credentials, though some involve elements of each. Licenses are awarded by a government agency and convey a legal authority to work in an occupation. Certifications are often issued by a non-governmental body (such as a school, trade association, or other organization). People may have more than one certification or license; people with a license may also have a certification.

The Texas Department of Licensing and Registration handles the licensing process for a variety of occupations ranging from air conditioning and refrigeration professionals to electricians to tow truck operators to cosmetologists. For some licenses, the requirements are fairly simple, such as demonstrating adequate facilities and care to become a licensed dog breeder. Others involve tests and apprenticeships, such as for a Master Electrician (which requires 12,000 hours of working under a Master Electrician to obtain). These licenses serve many purposes, including protecting consumers and providing proof of advanced knowledge (and therefore an advantage in obtaining jobs or customers).

Certifications also vary widely. To become a Certified Public Accountant (CPA) in Texas, you must have a college degree (actually more than a typical baccalaureate degree, because the requirement is 150 college hours including 30 hours of upper level accounting classes), pass a rigorous test, take an ethics course, work for a year under a licensed CPA, and then some. Other certifications reflect specialized knowledge, such as the Medical Imaging Specialization certificate offered by Texas State Technical College, which involves 12 credit hours on top of a Biomedical Equipment Technology Associates Degree.

There are also Chartered Financial Analysts and Certified Financial Planners, both of which involve challenging tests and related experience and improve job prospects and credibility with potential clients. Cisco Systems offers five levels of network certification, also only obtained by demonstrating expertise through an examination (among other requirements).

Clearly, certificates and licenses are an important aspect of success in many fields, and we now have a new source of information about them. The U.S. Bureau of Labor Statistics (BLS) began collecting related data last year, and the newly released survey results support the linkage between credentials and better jobs.

Almost 18 percent of the total U.S. civilian population age 16 and older held a certification or license (or both) in 2015, with about 39.2 million licenses and 5.5 million certifications (but no license). They were more common for White non-Hispanics (at more than 18 percent) than for Blacks (15 percent), Asians (16 percent) or Hispanics (11 percent). They were also more common for employed people, with the proportion rising by level of education. Almost 52 percent of employed persons age 25 or older with advanced degrees had a certification or license, compared to about eight percent of workers with less than a high school diploma. For some occupations (such as health care and technical fields), they were very common.

The BLS also found that the median earnings of full-time wage and salary workers with a certification or license were 34 percent higher than earnings for those who did not hold such credentials. Part of the reason people with credentials earn more is that they tend to have higher levels of education, and people with more education in turn have higher earnings. However, there are occupations where a certification can make a notable difference in pay. For systems engineers, for instance, indicates median pay is $92,300 for persons who are Cisco Certified Internetwork Experts, compared to $72,700 for those in the same occupation who are not.

Credentials make a particularly notable difference in earnings at lower levels of education. The BLS data indicate median weekly earnings of people age 25 and over with less than a high school diploma who held a credential were $596, 22 percent higher than earnings of those with the same level of education who did not ($488). However, college graduates with credentials earned only four percent more than those without them (at $1,256 for those with and $1,205 for those without).

Having a credential is linked to better pay and a smaller chance of unemployment. While the picture is complicated by the fact that credentials are also linked to educational attainment (which also plays a role in job quality), there is evidence that the right credential can pay dividends even within the same occupation. In addition, credentials are even more important for those with lower levels of education. A certificate or license can be a powerful way to demonstrate that one has the skills and knowledge required for a job, opening doors to higher earnings and greater opportunity.