For those of us concerned that states’ occupational licensing laws are inhibiting economic opportunity and hurting consumers, 2019 is off to a good start.
Occupational licensing laws, which make it illegal to work in an occupation without getting the government’s permission, have proliferated over the last few decades. Today, licensing affects as many as 3 in 10 workers and more than 1,000 occupations in the U.S.
A recent analysis by the Institute for Justice shows just how harmful these barriers to entry have been to our labor markets. Its estimates suggest that licensing costs the U.S. economy between 1.8 and 1.9 million jobs and between $183.9 and $197.3 billion each year in misallocated resources and lost output.
As one Nevada resident with seven occupational licenses put it recently: “Government licensing is a great fraud on the public and another insurmountable barrier for those seeking to escape poverty…It does not mean the recipient is honest, knowledgeable or even competent.”
Happily, state policymakers are beginning to confront the reality that licensing regimes are often counterproductive.
In Idaho, state agencies are implementing the Licensing Freedom Act, signed last year, which requires regulators to search for ways to reduce the burden of occupational licensing. Fees are being lowered, regulatory requirements are being revisited to ensure that they align with the real-world demands of the job, and oversight boards are being consolidated to cut bureaucratic waste. Several more bills, including one to simplify the licensure process for doctors and physicians’ assistants, have been introduced in the Idaho State Legislature.
In late December, Michigan’s then-governor, Rick Snyder, signed a bill that prevents local governments from imposing duplicative licensing requirements on occupations already regulated at the state level. Forcing workers to meet both state and local rules adds to the costs and complexity of licensure without delivering tangible benefits to the public.
In his State of the State address on January 14, Arizona governor Doug Ducey threw his support behind a plan for universal occupational licensing reciprocity, saying: “100,000 people will move here this year. There’s a job available for every one of them. Lots of them are trained and certified in other states. Standing in their way of earning a living in Arizona, our own licensing boards, and their cronies who tell them — ‘You can’t work here. You haven’t paid the piper.’”
A report in December 2018 from the Wisconsin Department of Safety and Professional Services found that “Wisconsin’s licensing requirements impose costs to the workforce—many who are of low and middle income—that do not exist in many other states.” The analysis recommended that lawmakers do away with 28 occupational licenses, including those for dance, music and art therapists, interior designers, and solid waste incinerator operators.
Perhaps the most significant recent reform was the passage of SB 255 in Ohio. Under the law, all state licensing boards will expire every six years unless explicitly renewed by the Legislature. Each board’s staff, budget, and enforcement actions will be periodically reviewed to determine whether it has “inhibited economic growth, reduced efficiency, or increased the cost of government.” The law also removes licensing obstacles for the millions of Ohioans with a criminal record, who were previously barred from about 1 in 4 jobs in the state.
As legislative sessions get underway in state capitols around the country, lawmakers have an opportunity to reinforce this progress and keep fighting these badly dysfunctional regulations.