Occupational Licensing

Clinton Suggests Paying States and Cities to Fix Bad Licensing Laws

What Hillary Clinton gets right (and what she gets wrong) about occupational licensing and the need for reform



In a policy brief released last week, Hillary Clinton's campaign promises "a national initiative to break down unnecessary barriers to starting a company" including reforming occupational licensing laws that "increase costs for everyone and stand in the way of those who are eager to start new careers or open a business."

She's spot-on about the need for licensing reform. Though they are usually defended as being in the interest of public health, licensing laws serve as barriers to entry in many professions, protecting incumbent businesses by making it more difficult for competitors to enter the marketplace. In some cases, they are even crafted and enforced by the very businesses they are protecting—with limited evidence of actually protecting health or safety.

More than one-third of all jobs in the United States is now subject to some form of licensing (up from just one in 10 jobs in 1970, acording to research by Morris Kleiner at the University of Minnesota). Licensing is bad enough for people who want to work in one of those professions, but it drives up the price and goods and services for everyone else, too. A 2015 report from the Heretage Foundation found that the average American family spends more than $1,000 every year on hidden costs from licensing—more than the average family spends on Christmas.

Give Clinton's campaign credit for recognizing the obvious, even if she's not exactly staking out a bold position. There's already a broad bipartisan consensus that onerous occupational licensing laws are bad for the economy. Conservative and free market groups like the Heritage Foundation, the Cato Institute and the Reason Foundation (which publishes this blog) have been taking for years about the need to reform licensing laws. They're joined by left-of-center groups like the Brookings Institution and the ACLU. Even the Obama White House last year published a report detailing how licensing limits individual opportunity and economic growth.

Clinton's policy brief is evidence of that consensus. It cites a report on licensing produced by the Institute for Justice, a libertarian law firm that successfully has challenged onerous licensing laws in a number of states—including a recent victory for hair-braiders in Iowa.

It's good to see candidates on both sides of the aisle embracing the need for reform, Lee McGrath, IJ's legislative counsel, told Reason via email.

"One does not have to pray at the altar of free-markets to realize that reducing licensing would increase opportunities," McGrath said. "Licensing laws exacerbate income inequality, disproportionately hurt minorities, and block reentry into the work force of women and those with criminal records."

After acknowledging the problem, Clinton's campaign lays out two potenital solutions. Both are well-intentioned, but its questionable whether they would be effective.

First, like any good politician, she promises to throw money at it. Any state and city willing to "meaningfully streamline unnecessary licensing programs will receive federal funding to support innovative programs and offset foregone licensing revenue," Clinton's campaign promises.

The question should be obvious: if these licensing programs are "unnecessary," why are they being streamlined instead of abandoned?

More broadly, there's good reason to be skeptical about the effectiveness of essentially bribing states to fix their bad licensing laws. While they might create some revenue for the government, the main reason why many licensing laws exist (and why they are so difficult to change, as Sasah Volokh pointed out last week) is because they serve the interests of private businesses that have captured an arm of the government.

Promising federal cash to states and cities might help break that relationship, but then there's also the question of whether federal taxpayers should have to pay for states to solve these types of problems—something we're already doing, by the way, since the Obama administration handed out $7.5 million in grants last year to "reduce overly burdensome licensing restrictions."

Clinton also plans to work "with states to standardize licensing requirements and reduce barriers for Americans seeking to work across state borders—particularly for military families and spouses who are mobile and often employed in licensed occupations."

This is a well-documented problem within the military community. Imagine a soldier with a husband or wife working in a licensed profession, like being a makeup artist (yes, that's really a licensed profession in most states). Applying makeup to a human face works the same way in Alabama as it does in Florida, but moving across state lines would require getting a whole new license—and going through the 280 days of training that Florida requires before anyone can be licensed as a makeup artist—and that license could be useless if your spouse ends up getting reassigned to a different state in a year or two.

Clinton's right that this is another problem with licensing, but she's wrong to focus only on military families when it comes to a solution. For one, many states already have special exemptions written into their licensing laws to ease the burden for members of the military and their spouses. What about other people with equally legitimate reasons for moving across state lines to pursue economic or personal growth who are prevented from doing so because they're unable to afford the time or money to go through the licensing process all over again? Clinton's porpose seems to ignore them. She would do better to focus on getting states to broaden reciprocal licensing rules so everyone can carry licenses across state lines.

Clinton's also wrong to call for standardization. At first this seems like an obvious answer—if all states had the same requirement, it would be easier to move between them and retain your license—but it ignores the fact that states have a wide range of occupational licensing rules within in the same profession. Does standardization mean all states should adopt Florida's terrible 280-days-of-classes-plus-two-exams requirement for makeup artists or does it mean everyone should use Nebraska's licensing rules that require a $10 registration fee and nothing else.

I know which I'd pick, but the cosmetology schools that benefit from mandatory licensing schemes like Florida's are likely to prefer a different choice.

Instead of calling for a sort of interstate compact based on bad policy, Clinton should encourage all states to loosen occupational licensing laws and abandon licensing requirements that serve no public health interest.

If there's going to be any interstate standardization of licensing rules, Clinton should follow the example outlined by U.S. Sen. Mike Lee, R-Utah, who has sponsored the Allow Act, a bill instructing governments to choose the least restrictive regulation to address real and substantial threats to consumer safety, says McGrath.

"The federal government can lead by cleaning its own house through repealing and replacing its use of occupational licensing," he said.