How Bad Are Your State's Occupational Licensing Requirements?

You shouldn't need permission to make a living.

If you work in a licensed trade or know somebody who does, you understand the enormous expense and hassle occupational licensing represents, creating barriers to making a living and to moving across state lines where you might have to jump through hoops all over again. Of course, some people like those barriers since they limit the competition they face, but those folks are part of the problem. Reasonable people recognize licensing as a deterrent to prosperity and mobility and so encourage reform around the country. Now, a new report compares state licensing regimes so we can see who is making progress and who needs to try harder.

"Occupational licensing affects more than 20 percent of workers in the United States. The extent of occupational licensing greatly differs across states," write co-authors Edward Timmons and Noah Trudeau, both of the Knee Center for the Study of Occupational Regulation at West Virginia University, in the Washington, D.C.-based Archbridge Institute's 2023 State Occupational Licensing Index, published last week. "From both a research and public policy standpoint, it is important to have a comprehensive measure of occupational licensure across states and occupations."

Growing Evidence of the Damage Done by Licensing

Timmons and Trudeau acknowledge the extensive work done in this field by researchers including those at the Institute for Justice and the Cato Institute, both of which advocate for lower barriers to work to benefit those seeking to make a living as well as the general public which would enjoy the lower prices and improved quality driven by increased competition. They might also have mentioned that reform is a bipartisan issue, with the damage done by occupational licensing recognized by the Obama, Trump, and Biden administrations. The authors' goal is to build on earlier work by making it easier to compare licensing requirements by state (plus D.C.) as well as by trade. The short individual state summaries offer interesting details.

"In 2023, the state with the highest occupational licensing burden is Arkansas (#1), followed by Texas (#2), Alabama (#3), Oklahoma (#4), and Washington (#5); the state with the lowest occupational licensing burden is Kansas (#51), preceded by Missouri (#50), Wyoming (#49), Indiana (#48), and Colorado (#47)," according to Timmons and Trudeau.

My state, Arizona, is ranked as having the 31st most burdensome licensing requirements in the country (first place is most burdensome and 51st is least).

"In 2019, Arizona passed a comprehensive universal licensing recognition law. The law does not recognize other states' licenses automatically; individuals must still apply for licenses, pay applicable fees, and meet requirements. However, it makes it easier to obtain a license by removing duplicate requirements such as education and training."

Arizona's (significant) reform improves mobility by easing barriers for those already licensed. But it doesn't end the requirement for licensing, leaving in place high hurdles of time, rules, and expense.

In total, Arizona imposes 175 barriers to entry (meaning that tasks associated with an occupation require a license even if the occupation itself isn't licensed) and explicitly licenses 146 trades. Among Arizona's quirks is requiring licenses for specialty residential contractors, a requirement in only two states (South Carolina is the other).

By contrast, first-ranked (most burdensome) Arkansas imposes 212 barriers to work and licenses 180 occupations. Least-burdensome Kansas imposes 147 barriers and licenses 133 occupations. These are substantial but not huge differences, and Timmons and Trudeau acknowledge that their rankings differ from those in the Institute for Justice's License to Work report or in Cato's Freedom in the 50 States. That can be accounted for by methodological differences.

"This index ranks based on a simple count of barriers known through the Knee Center Database. License to Work, on the other hand, focuses exclusively on low- and moderate-income occupations," the authors note. "Finally, Freedom in the 50 States uses a weighted sum based on 64 occupations and their proportion of total employment. As noted earlier in the report, the [State Occupational Licensing Index] uses the most occupations of the three rankings."

So, don't get too hung up on specific numbers. What is important is the hurdles to work, prosperity, and competition they represent, and just how ridiculous they are. To demonstrate the arbitrariness of these occupational licensing rules, Timmons and Trudeau tally up 18 occupations that are licensed in just one state each. You can work at these jobs for anybody who will hire you in all but a single jurisdiction (which varies by occupation); that one state will charge you with a crime if you don't first get government permission.

And what do you get for those arbitrary rules? Not much.

High Costs, Few Benefits

"This study finds no evidence that licensing raises quality and some evidence that it can reduce it," Kyle Sweetland and Dick M. Carpenter II wrote in a 2022 Institute for Justice paper on the effects of occupational licensing. "In seven of nine comparisons, there was no statistically significant difference in quality between licensing regimes. In the other two comparisons, quality was higher in the less burdensomely licensed state than in the more burdensomely licensed ones."

Licensing often makes life more difficult for everybody involved.

"There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines," the Obama White House cautioned in a 2015 report.

As mentioned above, Arizona-style universal license recognition (since adopted by Ohio and other states) reduces mobility barriers by making licensing portable. Once licensed, you can take your permission slip with you. But if licensing reduces quality and raises prices, why require it at all?

You Shouldn't Need Permission to Make a Living

"The analysis of the benefits and costs of licensing may find that some occupations would benefit from lesser forms of regulation, such as certification or registration, or even no regulation," the University of Minnesota's Morris Kleiner wrote in 2015 for the Brookings Institution.

With certification, anybody could work in a field, but those who voluntarily submit to third-party exams and standards could advertise their credentials. That makes particular sense given that most occupations are unlicensed in at least one state, and many are licensed in only a few (or one!) with no clear benefit from restrictive regimes. But there is plenty of downside to requiring permission to work.

"States nationally are struggling with a skilled worker shortage," add Timmons and Trudeau. "Licensing erects barriers to entering many of these skilled trades and is making these shortages worse than what they should be."

This study joins a growing body of research documenting the damage that occupational licensing does to opportunity, prosperity, human well-being, and our fundamental freedom to make our own choices.