Occupational Licensing

Occupational Licensing Locks Workers in Place. Here's One Idea for Fixing That.

Workers in professions requiring state-issued licenses are 36 percent less likely to move across state lines than workers in other jobs.

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Edward M. Eveld/TNS/Newscom

Workers whose jobs require a state-issued license lose out on between $178 million and $711 million they could have earned by moving to a different state, according to a new paper by two labor economists at the University of Minnesota.

Occupational licenses make it harder for workers to pursue opportunities because getting licensed in another state often requires retaking classes and other time- and money-consuming requirements. Researchers have identified that phenomenon before—including in this wide-ranging report from the Brookings Institution—but the new working paper by Janna Johnson and Morris Kleiner takes a stab at figuring out exactly how many workers those state rules hurt.

Johnson and Kleiner examined 22 professions that are licensed across most states. Workers in those professions are significantly less likely to move across state lines than workers in other, non-licensed professions.

"For example, a licensed public schoolteacher with a decade of teaching experience in New Hampshire is not legally allowed to teach in an Illinois public school without completing significant new coursework and apprenticeships," they write. "The existence of such requirements could constitute a significant cost to migration across state lines for those in licensed occupations, and these costs could prevent individuals from moving if the costs of re-licensure had been lower."

Though migration rates vary from profession to profession, the researchers conclude that the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower than the rate for other workers. If so, that means more than 100,000 workers are passing up the opportunity to move each year, potentially leaving hundreds of millions of dollars of potential earnings on the table.

Source:

In fact, the numbers are likely larger. As Johnson and Morris note, their research fails to capture the lost productivity and earnings for people who are forced out of the labor force entirely because they cannot (or choose not to) get relicensed in a new state. If a wife moves to a new state for a better-paying job, for example, her husband who previously worked in a licensed profession might have to change careers entirely.

Licensing is probably not the sole cause of the recent drop in interstate migration by Americans, but it certainly seems to be a contributing factor. As earlier research by Kleiner showed, the percentage of jobs requiring a state-issued license has grown from about 10 percent in the 1970s to around 30 percent today. Meanwhile, the percentage of Americans moving from one state to another in a given year has fallen by about half since 1990.

The best solution would be to scale back the number of occupations where state-issued licenses are required. I understand why people want to license professions where there is a serious risk to public health and safety if a worker messes up, but I don't think the risk of a bad haircut really fits the bill. For professions that fall short of that benchmark, voluntary certification or mandatory bonding can serve the same purpose as licensing, but without creating big barriers to entry or limiting workers' ability to relocate.

And if that's too much to ask, Johnson and Morris offer a more modest solution. They found that reciprocity agreements between states—like the one that allows lawyers to practice across state lines with limited relicensing costs—increase the mobility of workers in that profession. That's something the Federal Trade Commission has been encouraging states to consider as well.

Moving requires a substantial investment of time and money even in the best of circumstances. The government shouldn't be adding to that burden.

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  1. Why would the workers who are locked in place want to change that?

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  2. Yeesh, employees being able to cut and run to better jobs across state lines? No wonder businesses like licenses. Not only does it keep competitors suppressed, it cuts down on the employee’s options.

    1. thats the whole point isn’t it since normally the state doesn’t just up and decide to require licenses someone has to petition the government to do it and its normally those who meet the requirements already and just want to suppress competition

      1. In fairness to dipshit bureaucrats, they don’t even know why they require licenses. Sure they have boiler plate responses to questions but these people are nothing more than barn horses.

        Most of these licenses have been around so long, these minions just know they can harass people about them. I see this power play every March-April from Rhonda Clerk with the city every year.

  3. I doubt there are many teachers looking to move from New Hampshire to Illinois, regardless of licensing issues.

    1. I hardly ever hear of anyone moving to the north anymore. Unless for big $$. Better still, big money keeps relocating down here. At least americans can still vote with their feet to anywhere other than shitty union land.

    2. Texas and Florida have no additional income tax, so those two and Puerto Rico are the entire habitable area of These States by my lights. Puerto Rico has no Federal Income Tax, and with the hurricane blowing away all their windmills and solar panels, the voters who make it the Starnesville of the Caribbean are fleeing. Puerto Rico, not Vermont, may soon be the Libertarian Paradise if entrepreneurs move there.

    3. Moving specifically from one particular state to another particular state wasn’t the issue raised here. It’s that states are artificially putting up road blocks for experience professionals in one state as if they know nothing and have to start over from scratch.

  4. You know who else kept workers locked in place?

    1. Marquis de Sade

  5. ” As earlier research by Kleiner showed, the percentage of jobs requiring a state-issued license has grown from about 10 percent in the 1970s to around 30 percent today” A meaningless measure…the percent of job openings would be more meaninhful

  6. Part of the appeal is Continuing Extortion: being forced to go to classes offered by officious dupes and/or parasites in order to keep the Political State from tearing up your work permit. The more parasitical your profession, the easier it is for these lampreys to fasten toothy suckers onto your right to work. There are even meta-organizations that train “executives” to take over and milk (or bleed) professional associations by these and similar methods. Conventions of medical specialists, for instance, are constantly interrupted by pop quizzes to make sure the proletariat is not falling asleep before the telescreens, and as proof of time spent in Room 101.

  7. Or just have 1 state annex the others. Or better yet, have another country annex the USA & void all laws.

    1. I want whatever drugs this guy is having.

  8. Great to hear about the Occupational Licensing
    .

  9. “Workers whose jobs require a state-issued license lose out on between $178 million and $711 million they could have earned by moving to a different state, according to a new paper by two labor economists at the University of Minnesota.” Just as a public service and to show my selfless generosity, I will happily move to any of the 50 states for 178 million dollars US. This self selection of the low end of the range should cement my reputation of virtue among my peers.

  10. How are professional licenses not a violation under the 14th amendment? Where is the equal protection under the law? Our lives are so heavily taxed and regulated by the government that you cant truly be free. Essentially everyone needs a job so they can pay their regulatory fees and taxes from there interactions with others. So now that your working we will also tax and regulate your income and further regulate and tax your life based on the career choice you make without regard or even application of the regulation or law.

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