Occupational Licensing Is Keeping Americans Stuck in Place
Licensing reform efforts cross partisan barriers. Unfortunately, so do efforts to cripple opportunity and prosperity.
There isn't much that Americans agree on these days, but one of the few issues that brings most of us together is the no-brainer effort to reform the tangle of occupational licensing rules that are strangling Americans' mobility and prosperity. But as party-line-crossing as support for this reform may be—and despite the accumulating evidence of the damage these laws do—state governments across the country continue to launch legal assaults on entrepreneurs and willing customers doing business without government permission.
Earlier this month, Ivanka Trump urged states to end "excessive licensure." And Democratic presidential hopeful Andrew Yang called for easing licensing requirements that make it hard for people to move between states. "Americans are moving across state lines at multi-decade lows. This is bad for our labor market and for people who are seeking new opportunities," Yang pointed out.
Yang's proposal for encouraging state regulatory authorities to recognize licenses issued by other states won support from Arizona Governor Doug Ducey, a Republican. Whatever their differences, the two men agree that restrictive licensing rules are bad for Americans. "@AndrewYang – good policy knows no party," Ducey tweeted. "Arizona has led as the first state to recognize out-of-state occupational licenses. Would love to hear this issue brought up at the next debate."
In April, Ducey signed a law under which his state recognizes all occupational licenses issued by other states, when such licenses are required to work in Arizona. It's an effort to alleviate the damage to mobility done by occupational licensing, since people whose work requires licenses usually must pay the fees and take the time to get licensed all over again when crossing a state border.
"The share of the workforce that falls under some sort of licensing requirement has risen from 5 percent in the 1950s to almost 25 percent in 2008," urbanist Richard Florida noted in 2017. "Such licensing requirements make it hard for people in those professions to move from place to place, where wages are higher or where their services are more needed."
Our ability—or inability—to move is "dividing Americans into three classes," Florida added. "The mobile, who derive the benefits of economic dynamism; the stuck, who are trapped in place and unable to move; and the rooted, who are strongly embedded in their communities and choose not to."
An awful lot of people are arguably stuck because of growing occupational licensing requirements.
"The percentage of Americans moving over a one-year period fell to an all time low in the United States to 11.2 percent in 2016," according to the Census Bureau.
That's unfortunate, because there's a lot of room for agreement on important reforms.
Increasing interstate recognition of occupational licenses helps to increase people's ability to move where the jobs are. But what about completely clearing away the barriers that licensing creates to unlicensed people trying to get a foothold in the economy?
As Ivanka Trump pointed out on Twitter: "In 1950 less than 5% of occupations were licensed. Today it is closer to 30%." That means an awful lot of jobs require a permission slip from the government. That permission slip isn't free.
"On average, the licensing laws for 102 lower-income occupations require nearly a year of education or experience, one exam, and more than $260 in fees," the Institute for Justice found in 2017. "In serving as a bottleneck for entry into an occupation, licensing restricts the supply of practitioners, allowing those who are licensed to command more for their services—a cost that is borne by consumers and the wider economy."
This isn't just an issue for Ivanka Trump and her father's administration. The previous administration shared identical concerns about occupational licensing.
"Estimates find that unlicensed workers earn 10 to 15 percent lower wages than licensed workers with similar levels of education, training, and experience," cautioned an Obama White House report in 2015. "Licensing laws also lead to higher prices for goods and services… Moreover, in a number of other studies, licensing did not increase the quality of goods and services, suggesting that consumers are sometimes paying higher prices without getting improved goods or services."
People who insist on official assurances that their barber isn't lethally incompetent might take heart from a Brookings proposal that voluntary certification of professional skills could replace licensing. Those who want to see a piece of paper could go to certified providers. The rest of us could take our chances with businesses we trust through experience and reputation.
But for now, the sniping continues, and so do the crackdowns.
"Utah Department of Commerce, Division of Occupational and Professional Licensing completes national construction fraud sting, nabs unlicensed contractors statewide with 96 Administrative Citations and $543K in fines," the Beehive State government trumpeted last month in a press release heavy on gloating about interfering in voluntary deals among people seeking work and others eager to hire them.
"Sting Operation by New Jersey Division of Consumer Affairs Catches 29 Unlicensed Movers in 'Operation Mother's Attic'," Garden State officials announced after just one in a series of crackdowns on businesses that operate without jumping through government hoops.
These enforcement actions, under Republicans and Democrats alike, are also nonpartisan efforts. They're the stupid kind of cross-aisle agreement, on which politicians from opposing affiliations can collaborate in crippling opportunity and prosperity.
Fortunately, the weight of evidence, decency, and common sense is in favor of sweeping away the worst excesses of occupational licensing. People like Trump, Obama, Yang, and Ducey all agree that it should be easier for Americans to work without asking for government permission. If they can overcome the partisan cynics and control freaks in their own parties, we all might find common ground for working together to make each other a little freer.