Occupational Licensing

Does the Federal Government Have a Role to Play in Combatting Bad State Licensing Laws?

Yes, but only because states have abdicated the responsibility themselves.



It's still illegal to sell flowers in Louisiana without being a licensed florist. You're still not allowed to sell caskets in Virginia without being a licensed funeral director.

Those are outliers inasmuch as most states don't require licenses for those activities. But they're typical in that, like many licensing laws, they don't protect the health and safety of the general public. All they really do is restrict economic freedom by unfairly limiting competition in certain professions.

They are also exactly the types of laws that the Restoring Board Immunity Act, introduced last week by Sen. Mike Lee (R-Utah), wants to convince states to repeal, or at least reform. Lee's bill would create a limited, conditional exemption shielding licensing boards from federal antitrust lawsuits, but only for states that change how their licensing boards operate and how courts handle disputes between those boards and individuals subjected to their rules.

That sounds complicated, but it's not. The bill gives states a two options for reform; states that choose one of the two will be protected against future lawsuits challenging their licensing boards for behaving like private cartels. It allows states to retain licensing boards that serve legitimate public health and safety interests, but nudges them to change laws that serve no such purpose. If they want, of course, states can choose to do nothing.

Lee has positioned his bill as a federal solution to a state problem, but that opens up a legitimate criticism. Should the federal government play any role in telling states what to do? That rarely works well for states, warns Sarah Allen, a senior deputy attorney general in the state of Virginia. Allen predicted Wednesday that Lee's bill would be "unworkable" at the state level.

"I think this bill highlights a common problem when the federal government tries to mandate state behavior," Allen said at a discussion of licensing issues hosted by the Federalist Society. "It really doesn't have any idea how difficult and time consuming and expensive it is to implement these big ideas into 51 existing and different state governments, and how many revisions to state codes would be required to do so."

She's not wrong to worry. The federal government has a long history of pressuring states to do one thing or another.

Under the terms of Lee's bill, states could face more scrutiny for violating federal antitrust laws if they don't take action to bring rogue licensing boards under greater supervision, or if they don't change state laws that often tip the scales of justice in licensing boards' favor when they are challenged by individuals or businesses harmed by licensing provisions.

One option included in Lee's bill would have states increase the level of judicial scrutiny applied to licensing boards when their rules are challenged in court. Most licensing laws are currently given rational basis review—the lowest level of legal scrutiny, in which a state only has to show a law or rule is "rationally related" to a legitimate government interest. Lee's proposal would push states to impose "intermediate scrutiny" on licensing laws.

Allen says removing the legal deference granted to licensing boards will mean more challenges against their rules; without antitrust immunity, she fears, states could face huge legal bills and settlement costs. "Efforts like this bill that will increase litigation again boards will significantly add to state budgets," she warned, previewing a line of argument that a variety of interest groups are likely to raise against Lee's legislation.

The threat of those costs is very real. But that's a feature, not a bug: It's meant to motivate states to make changes that increase economic freedom.

If state officials believe the changes suggested by Lee's bill are too steep, they are free to ignore it and carry on without immunity from federal antitrust lawsuits. To reverse an argument so often made by governments: If their licensing boards aren't doing anything wrong—in this case, if they're not acting as anticompetitive cartels—then they have nothing to fear. No changes are needed.

"Nothing in the bill forces a state to take any action whatsoever," says Conn Carroll, Lee's spokesman. "In fact, the bill enhances states' freedom of action while also furthering the freedom of workers by offering states incentives to revisit occupational licensing policies that too often lock workers out of the workforce and harm consumers."

It's not improper to worry about the federal-state relationship in situations like this. But there is now an academic and political consensus about the problems created by onerous licensing laws, and about who suffers from them and who benefits.

Research from Morris Kleiner, a labor economist at the University of Minnesota, and the Heritage Foundation, a conservative think tank, shows that American households pay between $400 and $1,500 more annually for goods and services because licensing laws distort prices. Licensing laws take more than 3 million jobs out of the economy, according to the Brookings Institution, a center-left think tank.

While everyone pays for those laws, the benefits flow mostly to politically connected special interests. "Empirical work suggests that licensed professions' degree of political influence is one of the most important factors in determining whether states regulate an occupation," a 2015 White House report on licensing concluded. President Donald Trump's secretary of labor largely agrees with those Obama-era conclusions, and he has promised to work to roll back onerous occupational licensing laws. This is not a partisan debate.

Lee's bill is "a signal of the fact that a lot of people are seeing this is a problem—a problem for consumers, a problem for workers, a problem for the economy," says Maureen Ohlhausen, the acting director of the Federal Trade Commission, who earlier this year opened a new task force to focus on economic liberty issues.

And still these licensing laws persist. That's why the federal government is getting involved. Complying with Lee's legislation may pose some difficulties, as Allen argues. But try telling an unlicensed florist in New Orleans that she can't have a legitimate job because it's too hard for states to change a few lines of their legal code.

NEXT: Trump Administration Blocks an Obscure Regulation, Hysteria Ensues

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  1. “It really doesn’t have any idea how difficult and time consuming and expensive it is to implement these big ideas into 51 existing and different state governments, and how many revisions to state codes would be required to do so.”

    Eff state legislatures. They didn’t have much problem with the difficulty, time and money it took to set up unelected boards and their schemes to choose economic winners and losers in their respective domains. The one thing the federal government could do more of in my estimation is limiting state government intrusions into the marketplace.

  2. Guess what, Skippy. For every truly shitty law there are millions of people who support it. Stop focusing on the shitty laws themselves and start focusing on how to get people to stop wanting them.

    1. “Stop focusing on the shitty laws themselves and start focusing on how to get people to stop wanting them.”

      But that’s the point. In a republican government, representatives should usually support only laws that a majority of their constituents would support. The licensing laws are well-supported by the minuscule percentage they would benefit (established florists, for example) while the rest of the populace don’t even know about them until several years later they wonder why no one will open up a less-expensive shop.

      Done privately, it’s called an illegal trust. Wash it through the legislature, and it’s called licensing.

  3. Yes, but only because states have abdicated the responsibility themselves

    No the feds do not have that role to make states better even if states abdicate the responsibility. Licensing is not an interstate commerce issue so the only role of the feds is if licensing becomes a 14th Amendment issue (eg the Jim Crow South). And even there the fed role should only be to ensure that individuals have standing in federal court to sue/appeal – not to preempt that.

    Maybe libertarians should become more involved in state/local level politics/legislation rather than hanging their hat on federal congresscritters or national thinktanks. Liberty is local and personal – not global and top-down.

    1. But there is now an academic and political consensus about the problems created by onerous licensing laws, and about who suffers from them and who benefits.

      And this sentence should be a bright warning sign to anyone who actually ponders a federal role. Since when is personal liberty validated on some notion of academic or political consensus at the national level?

    2. I was just going to say pretty much the same thing – just because those obstructionist Republicans in Congress refused to pass any of the legislation Obama thought necessary and proper didn’t mean they were abdicating their responsibility and thereby leaving the authority to Obama to create legislation, even if he did have a pen and a phone. That phrase has no business being there.

      1. Sometimes “obstruction” and “gridlock” are the most important work a legislature can do.

    3. What if local politics is more susceptible to regulatory capture ? Why is it that we tend to see more arbitrary regulation and corruption and cronyism in local politics?

      I don’t know about you, but it certainly seems to me that my local government is WAY more corrupt than the state or federal government, because fewer people are watching.

      1. Why is it that we tend to see more arbitrary regulation and corruption and cronyism in local politics?

        Outside of the issue of zoning, I don’t see much of it in my hometown. If it’s in yours, then CHANGE it. Meanwhile, I want to focus on zoning cronyism in my town. And I have absolutely nothing to offer you in your attempts to change your own town.

        This gets straight to Hayek’s notion of knowledge in society. The peculiar character of the problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess. Decentralized governance is the only way of incorporating that diffuse knowledge on those issues where govt itself may have a role.

  4. I don’t see why this is so difficult – just invoke the Interstate Commerce Clause and eliminate all of them at one whack. Turnabout’s fair play, sauce for the goose and all that, if you want to claim that a farmer growing grain on his own land for his own chickens is implicating interstate commerce by not engaging in interstate commerce, surely licensing schemes in Louisiana affect consumers from out-of-state who might want to do business with residents of Louisiana.

  5. A lot of people advocate more local control but I’m not sure that’s necessarily a good thing.

    What we actually tend to see in politics is that local governments are the most corrupt, most captured by local economic interests, because people pay less attention to local politics and vote less in local elections. There’s if anything more regulation at the local level than at the federal level, and it’s even more byzantine.

    I’m not sure why this is, but perhaps public choice theory has something to say about it. Maybe more localized democracy actually makes things worse.

    1. because people pay less attention to local politics and vote less in local elections.

      Well then CHANGE that. The notion that the solution should be to eliminate the ONLY venue where a not-well-connected individual can influence something – in order to move the decision to a higher level far far away where there is zero chance of outsiders even knowing what is going into the sausage – is just plain silly.

      Don’t get me wrong. I am not some neo-confederate who’s just using this ‘local’ argument as a dogwhistle for some post-1950’s ‘states rights’ crap. I think the feds have an obligation to strongly – and with force if necessary – intervene to prevent that sort of perversion of the idea from occurring. But if that perversion is not happening, then any fed intervention is both wrongheaded and destructive of self-governance.

      I see the same sort of thing re ‘education control’. Where national thinktanks are so enamored of mandating ‘school choice’ everywhere that they deliberately undermine the one change that can hugely improve schools – which is getting rid of ‘school districts’ for most stuff and reverting back to individual school boards. IOW – it all becomes a national-driven agenda – with ‘professional pedagogues’ on one side and ‘school choice’ on the other. That is a fake agenda.

  6. Yeah I am not too thrilled about this approach. Best to get rid of antitrust laws altogether. Barring that, don’t use them as a stick to beat state governments into complying with your demands.

    I wonder if a liberty of contract lawsuit would survive in this day and age? That is, if I hire a person to fix my widget, but my employee doesn’t have the correct Widget Fixer’s License, wouldn’t the state preventing me from hiring him violate my right to contract with whom I please for work that I wish done? Presuming of course that it satisfies minimum wage stuff, so as not to open up another can of worms.

    1. “Best to get rid of antitrust laws altogether.”

      If you don’t have a free market, it’s of little consequence whether the intrusion is by government licensing, by a cartel of businesses engaging in trusts, or by Vito and Tony arranging an “accident” for a competing business owner. Either way, the consumer is denied the benefits of a free market that encourages competition.

    2. “Best to get rid of antitrust laws altogether.”

      If you don’t have a free market, it’s of little consequence whether it’s because of government abuse of licensing authority, illegal trust activities by a cartel of companies, or by Vito and Tony arranging an “accident” for a competitor.

      Either way, the consumer is denied the advantages of a free market that encourages competition.

  7. Yes, but only because states have abdicated the responsibility themselves.

    States haven’t *abdicated* the responsibility. I don’t know how you could think they have when its the states themselves that have taken up the responsibility to emplace those very restrictions. Licensing laws, bad or good, don’t just appear out of nowhere. State agencies – you know, those things that are part of the state, not private organizations – take positive actions to put them in place.

    You might say the state’s legislature has abdicated its responsibilities, but the state itself hasn’t abdicated anything – at best its simply shifted where the control lies.

  8. In any case, I’m not necessarily cool with shifting the burden to the Federal government. One of the drawbacks to federalism is that sometimes a state will make stupid decisions. That has to be allowed or we may as well dissolve the states altogether if we’re only allowed to do whatever Washington deems ‘best practices’.

    And this particular bill doesn’t look great from that perspective. Its very much a ‘do what we say and we’ll exempt you from the threat of prosecution, don’t and we’ll be all up in your shit’ best practices bullshit.

  9. But how will it effect the unlicensed selling of lemonade by tiny gangsters?

  10. End licensing completely, replace with certification by a private non-governmental agency. Licensing was created in the first place by groups seeking higher incomes through monopolization. A good example of this is the AMA, created in the 1840’s with the express purpose of increasing the incomes of doctors through restriction upon the supply of doctors. Effectively a criminal organization like all such organizations that uses “force” to get its way. No different than labor unions except that unions are more “honest” in their own objectives.

    1. While that may be their goal, the AMA is not a good example. I think you’d find that licensing of someone who, if incompetent, might easily kill you has fairly broad support.

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