Imagining Post-Coronavirus Labor Market Should Put Spotlight on Occupational Licensing Reform

Occupational licensing will have a profound impact on the U.S. economic recovery in a post-coronavirus world. At least 1 in 5 American workers holds an occupational license, a rate (for comparison) that far exceeds union membership. More than 1,000 jobs — ranging from electrical helpers to animal trainers to fortune-tellers — require a license in at least one state. Licensed professions tend to be low- to middle-income and concentrated in industries hard-hit by the pandemic.

When the current health crisis ends, many Americans will be faced with a crisis of a different sort: getting back on their feet in a labor market that has been reshaped in unpredictable ways. Needless occupational licensing restrictions will only make that harder.

Historical experience, as well as academic research, suggest that the economic ravages of the coronavirus crisis will partly manifest themselves through an uptick in interstate migration. With jobs scarce and thousands of businesses shuttered, more workers will be willing to move in search of opportunity.

For many workers, occupational licensing barriers will be a major obstacle. A barber in Massachusetts seeking to relocate to Iowa, for example, will need to obtain 1,000 hours of additional training (on top of what Massachusetts requires) and pay hundreds of dollars in fees before putting up his shingle. A veterinary technician might have years of successful work experience in Hawaii with only a high school diploma, but is barred from doing the same job in Georgia without first completing a two-year degree. Multiply these examples by hundreds of occupations, and you begin to grasp the impediments these regulations create.

The data bare this out. A 2018 study found that “occupations with state-specific licensing requirements, such as exams, experience the largest reductions in interstate migration, whereas the interstate mobility of occupations that require passage of a national exam for licensure is generally no lower than that of nonlicensed occupations.” Another analysis suggested that if the state with the strictest licensing requirements (Washington) relaxed its standards to the level of the average state (North Carolina), the job hire rate could significantly increase.

Governors and state legislators can improve their licensing practices — and position themselves as an attractive home for dislocated workers — in a number of ways.

The simplest (and in many cases the best) approach is to delicense an occupation entirely, eliminating any government barrier to entry. Louisiana, for example, is the only state to license florists and would do well to join the rest of the country. Other prime candidates for delicensing include auctioneer, funeral attendant, mobile home installer, taxidermist, and dozens of other jobs that are either currently licensed by a minority of states or lack a direct connection to public health or safety.

In just the last few years, nearly a dozen states have delicensed occupations, including shampooists in Tennessee, fruit and vegetable packers and yoga instructors in Arizona, and community planners and auctioneers in Michigan.

In some cases, however, delicensing is not a viable approach. States sometimes have a justifiable interest in ensuring that workers tasked with protecting the public’s health and safety — like nurses and doctors — are properly trained. For these occupations, entering into reciprocity agreements with other states or joining multi-state compacts can help mitigate barriers to interstate mobility without sacrificing quality or safety. For example, three states — Arizona, Pennsylvania, and Montana — now recognize out-of-state licenses across all occupations, making it easier and cheaper for workers to relocate.

In addition, more than 30 states have joined the Nurse Licensure Compact, which allows nurses licensed in one state to practice with patients in other states, and almost as many states have signed on to the Interstate Medical Licensure Compact, a similar agreement for physicians. Despite these isolated advances, however, major interstate agreements do not exist for the vast majority of licensed occupations.

More states must embrace these reforms. Swift action to reduce the inefficiencies of licensing regulations would do much to expand economic opportunity, particularly among low- and middle-income workers, in the aftermath of the pandemic.

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