Occupational Licensing

Job Training Ideas in Obama's Budget: Fewer Occupational Licenses but More Credentials. Huh?

Proposals call for $15 million to eliminate unneeded state occupational licenses, but $500 million to develop new credentials and training program.


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Buried deep within (pdf) the "key issue fact sheets" of President Barack Obama's proposed budget is a tiny little possible gem not given any attention, because it is extremely small potatoes in federal budget terms (potatoes visible only through an electron microscope). Reason Magazine columnist Veronique de Rugy unearthed the item and made note of it over at National Review. The president has his eye on unnecessary occupational licensing:

Reducing Unnecessary Occupational Licensing Requirements. The Budget seeks to reduce occupational licensing barriers that keep people from doing the jobs they have the skills to do by putting in place unnecessary training and high fees. The Budget proposes a $15 million increase for grants to States and partnerships of States for the purpose of identifying, exploring, and addressing areas where occupational licensing requirements create an unnecessary barrier to labor market entry or labor mobility and where interstate portability of licenses can support economic growth and improve economic opportunity, particularly for dislocated workers, transitioning service members, veterans, and military spouses.

From de Rugy's perspective, she sees this as a potential good, pointing out the charts from the Institute for Justice (IJ) that illustrate the growth and burdens of occupational licensing. She concludes, "Whether the president's $15 million will move us closer to states getting rid of these laws, I don't know. Certainly, it's up to states to repeal their own licensing laws, which will require people taking on special interests. But I do welcome the attention it will draw to the issue."

Looking at the summary, I feel skepticism. It's not as though the people who arranged to put such licensing requirements into place didn't know they were unnecessary. If they did, it wouldn't be such a constant legal battle for IJ to beat down unneeded licensing requirements for everything from building caskets to braiding hair. Licensing processes help feed money to government via fees and to training providers who have captured the process to profit off the licensing mandates (and also protect existing businesses from new competition). These barriers didn't just come about by accident. As such, the grants feel like more like bribes to try to convince some states to take federal dollars in exchange for backing off here and there. And the list of priority beneficiaries at the end makes me worry about a licensing system where favored classes are exempted from licensing, while potential competitors who aren't "dislocated workers" or connected to the military are still required to pay with money and time to get permission from the government to work.

Feeding my cynicism is another proposal one page before the occupational license incentives:

Spreading the Development and Adoption of Industry-Validated Credentials. The Budget provides $500 million for Industry Credentialing and Career Pathways Grants, including $300 million specifically targeted at information technology jobs. These grants would be competitively awarded to create employer-validated credentials where they do not yet exist, drive additional employer uptake of credentials that do exist, and develop curricula and assessments that lead to the credential. Grants would be awarded to employer collaboratives in partnership with the workforce system, post-secondary institutions such as community colleges, and other innovative education and training providers.

So $15 million would go to eliminating unnecessary occupational licenses, but $500 million would go to creating new credential processes where credentials do not currently yet exist. And then grants would go to instructional facilities to teach students the training necessary to receive these new credentials.

Employer-supported credentials are not inherently bad things, particularly in the complicated world of information technology, but all sorts of certifications exist in that field, have for a long time, and are constantly being updated as innovations in technology require. It's very easy to imagine the incentives here to manipulate this program to favor grants for certain types of training over others wanted by competing tech firms or the inability of the government or college to accurately predict what credentials are really needed down the line. Furthermore, obviously with $500 million being tossed out, positive outcomes will be demanded. Will this lead, in fact, to the creation of new occupational licensing programs to make sure people who want to work in these fields get the necessary credentials promoted by the government?