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Occupational Licensing Hurts Just About Everyone, Says White House

Licensing restrictions cost millions of American jobs and raise consumer costs by billions, federal officials say.

Piulet/FlickrPiulet/Flickr

Horse masseurs. Hair braiders. Funeral attendants. Florists. All are subject, at least in some states, to "occupational licensing," defined by the Treasury Department as "a government permit allowing workers to legally practice." Since the 1950s, the number of U.S. jobs where workers are required to be licensed by the state has increased five-fold, now encompassing about a quarter of our working population. Far from being merely a minor inconvenience for workers, this excessive licensing regime "creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job," according to a new report from the Treasury, the White House Council of Economic Advisers, and the Department of Labor. 

Libertarians have been objecting to occupational licensing on these grounds for decades, of course; the free-market friendly Institute for Justice has even been systematically suing to bring about their demise. But it's rare to see federal agencies recommend against more economic regulation, so let's all just savor this small victory a moment. The scathing report paints occupational licensing as a regulatory scheme that serves almost no one any good—raising consumer costs while failing to deliver improved quality; reducing employment opportunities, especially among the most economically vulnerable; and hampering state-to-state mobility and market innovation. 

"By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars," the report authors write. 

"Consumers are likely most familiar with licensing requirements for professionals like dentists, lawyers, and physicians," they point out, "but today licensing requirements extend to a very broad set of workers," including auctioneers, scrap metal recyclers, barbers, manicurists, eyebrow threaders, and tour guides. This means that an ever-growing share of jobs "are only accessible to those with the time and means to complete what are often lengthy"—not to mention expensive—licensing requirements, while the penalties for working without a license can include job loss, fines, and even incarceration.

Yet stringent occupational licensing seldom delivers improved services or safety to consumers. In 10 out of the 12 empirical studies reviewed by the report authors, stricter licensing was not associated with quality improvements.

Here are a few other key findings from the report:

Occupational licensing laws raise consumer prices. Studies may show that strict licensing laws do not increase the quality of goods and services, but they do drive up their costs. In nine of 11 studies reviewed, "significantly higher prices" came with stricter licensing, note the report authors. For instance, stricter nurse-practitioner licensing requirements drove up the price of standard child medical exams by three to 16 percent. And more vigorous requirements for dental hygienists and assistants led to 7-11 percent higher prices for dental patients. 

Nearly one third of U.S. workforce is subject to occupational licensing. The percentage of the U.S. workforce subject to state licensing requirements grew from 5 percent in the early '50s to 25 percent in 2008. When you add in workers subject to federal and local licensing requirements, it ups the total to 29 percent of the U.S. workforce. While some of the increase can be explained by a shifting jobs landscape (i.e., today more people work in health care than on assembly lines), the bulk of the increase (about 66 percent) is attributable to an increase in the number of professions which are licensed, according to the report authors. 

avitable/Flickravitable/Flickr

Requirements vary widely by state. The state with the least percentage of its workforce licensed is South Carolina, at 12 percent, and the highest is Iowa, at 33 percent. More than 1,100 jobs now require an occupational license in at least one state, but fewer than 60 do in all 50 states. This suggests the bulk of these requirements are unnecessary, seeing as [insert regulated profession here] manages to operate unlicensed in many other states without widespread harm or chaos.

The average occupational license was required in only 22 states. Even within the same job categories, licensing particulars can vary substantially around the country, making it hard for workers to move across state lines. "For example, while all states require manicurists to be licensed, some also require proof of English proficiency," the report notes, "and the required amount of training at a state-approved cosmetology school varies from 100 to 600 hours."

They hit some populations especially hard, including...

Immigrants: In many cases, immigrants with education and training from their home countries are expected to "complete duplicative and costly requirements in order to acquire a U.S. license in their chosen career," write the report authors. This makes "it difficult for immigrants to work in fields where they have valuable experience and training" which "deprives the U.S. market of a large share of their skills, and makes it difficult for these workers to make their full contribution to the workforce." 

People with criminal convictions: In 25 states, occupational licensing can be denied if an applicant has any kind of criminal conviction, regardless of how long ago that conviction was or whether it's at all relevant to the job in question.

Military spouses: Around 35 percent of working military spouses are in professions that require state licensing or certification. Military spouses "are ten times more likely to have moved across State lines in the last year than their civilian counterparts," making it especially difficult for those who need occupational licenses to easily transfer jobs between states. 

People who default on student loans: In 21 states, defaulting on student loans is sufficient grounds for the suspension or revocation of person's occupational license. The policy is "misguided," suggest the study authors, "as losing an occupational license may make it more difficult for the worker to repay the student loan." 

Entrenched interests benefit most. The only groups that really benefit from liberal use of occupational licensing and stringent licensing requirements are public officials and those already working in licensed fields. "Empirical work suggests that licensed professions' degree of political influence is one of the most important factors in determining whether states regulate an occupation," the report notes. And while many state licensing boards are revenue-neutral, plenty also turn a profit. 

The report authors offer an array of recommendations for state occupational-licensing reform, lumped into three main categories:

1) Ensure that licensing restrictions are closely targeted to protecting public health and safety, and are not overly broad and burdensome

2) facilitate a careful consideration of licensure’s costs and benefits

3) work to reduce licensing’s barriers to mobility.

Giuseppe De Marinis/FlickrGiuseppe De Marinis/Flickr

To the first aim, they suggest using voluntary licensing or registry systems where public safety concerns are minimal, minimizing the "procedural burdens" (such as paperwork, fees, training hours required) of getting a license, and allowing those obtaining a license "to provide services to the full extent of their current competency, even if this means that multiple professions provide overlapping services." To reduce mobility barriers, they suggest that states streamline requirements "to the maximum extent possible" and "form interstate compacts that make it easier for licensed workers to practice and relocate." 

As far as federal reform efforts go, the authors suggest that federal resources "can help to incentivize state collaboration and expand resources for states to use when making their own reforms." They note that the president’s fiscal year 2016 Budget includes $15 million in new Labor Department funding for the study of licensing requirements, and suggest that this go toward funding a consortium of states to analyze and establish cross-state licensing reciprocity agreements and funding research into "measurable criteria" for jobs that shouldn't be regulated. 

Scott Shackford noted this Obama-budget item back in February, but he's not optimistic that the money will be used to reduce licensing burdens. "The grants feel like more like bribes to try to convince some states to take federal dollars in exchange for backing off here and there," he wrote. After all, Obama's budget also called for $500 million for "spreading the development and adoption of industry-validated credentials" and creating "employer-validated credentials where they do not yet exist." The White House's new report critical of occupational licensing may be a good sign or first step, but we're a long way at best from states actually making reforms. 

Photo Credit: Giuseppe De Marinis/Flickr

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  • Rebel Scum||

    Occupational licensing functions, essentially, as a tax. That is why something as innocuous as hair-braiding needs to be licensed.

  • Jerryskids||

    In my experience the biggest proponents of licensing aren't state leeches looking for tax revenues, it's industry groups seeking barriers to entry. 'Regulatory capture' doesn't even begin to describe the process, it's more like in vitro fertilization.

  • Rebel Scum||

    That too, being the most prominent reason the system exists. It is no doubt a protectionist racket. Though, something can still be a tax without being significant to state revenue.

  • AlmightyJB||

    Yeah, this report is nothing a few golf/hooker junkets won't make go away. Perhaps that was the point. What have you done for me lately?

  • Fist of Etiquette||

    To the first aim, they suggest using voluntary licensing or registry systems where public safety concerns are minimal...

    Or, alternate suggestion, make it all voluntary. Let those members of the public who fear their teeth-whitening service might give them brain amoebas if not properly licenses seek out those practitioners duly sanctioned by the state and everyone else toss caution and tooth health to the wind. Methinks the line between minimum public safety concern and certain death will get moved frequently.

  • d3x / dt3||

    And what are the chances that the White House will push for actual reduction in licensing? Something less than 0%?

  • UnCivilServant||

    Unlicenced occupations have an unfair advantage and must be brought in line with those paying for the priviledge to work. Therefore, we must expand occupational licencing schemas until every occupation is within our regulatory purview.

    /Whitehouse

  • SusanM||

    ...and you think you're joking...

  • Vincent Milburn||

    Isn't this the position of some "libertarians" on certain issues? "Since we'll never be able to decrease government, let's make sure increased government applies to everyone."

  • Bo Cara Esq.||

    This. We know he's got a pen and a phone, until he picks them up and starts using them against it I'm not going to get excited by a report issued by one of his agencies.

  • Loki||

    I'm not going to get excited by a report issued by one of his agencies.

    A report that he has not and probably will never actually read.

  • Eric Bana||

    I'm sure he reads Reason though.

  • C. S. P. Schofield||

    He can read? I though he learned everything from watching cable news.

  • retiredfire||

    Didn't you read the part about the groups most affected?
    Three of the four - newly arrived immigrants, former felons and student loan deadbeats - are big-time demoncrap constituencies. Not to mention, the brothers don't want to have to toe the line for any whitey rules.
    This is just the kind of thing Emperor Oblama could see as a way to redeem himself with the hood.

  • Mike M.||

    Isn't this shit hilarious, coming from the biggest regulator in American history?

  • Pulseguy||

    The only reason they are even bringing it up is because THEY aren't doing the licensing. If it were their rules they would take it to the SC to keep them. These are the other guys rules, ie the States.

  • ||

    Horse masseurs should be licensed, otherwise sickos would flock to the occupation

  • Rich||

    Eyebrow threaders, too. You could thread your eye out!

  • ||

    Even worse, you could end up with those horrid thin brows that are so terribly ageing

  • Rich||

  • AlmightyJB||

    "otherwise sickos would flock to the occupation"

    I have no idea what you're talking about. /shifting uncomfortably.

  • Medical Physics Guy||

    Gee, maybe this will go as far as this administration's amazing clemency initiatives -- we're up to, what, maybe 50 unjustly incarcerated people released, with the rest still stuck in jail for life. How is it that Washington comes to see these non-action actions as actually doing something? When they could actually do something, today?

  • Bo Cara Esq.||

    Exactly. We've seen Obama go to the mat and stretch executive powers to accomplish things he wants to. On the other hand we've seen him talk and talk about certain goals, like the over-punitiveness of our WOD, where he has broad, explicit powers to actually do something about it now, and yet we see a trickle of action at best.

  • C. S. P. Schofield||

    Well, considering what Washington usually proposes to do, I would think that a predisposition for inaction would be for the best, on balance.

  • Jerryskids||

    After all, Obama's budget also called for $500 million for "spreading the development and adoption of industry-validated credentials" and creating "employer-validated credentials where they do not yet exist."
    .
    That almost sounds like the burdensome state licensing requirements are a problem insofar as they are state requirements rather than federal requirements. Creating a federal scheme to replace the state scheme is sure to be such an improvement that nobody will even mind if the federal scheme winds up being 'in addition to' the state scheme rather than 'instead of'. And who will begrudge our starving leviathan an extra buck or two with which to employ a few more out-of-work Barney Fifes to police the proles?

  • ||

    I was wondering why the White House would even issue such an economically literate report until I read that. It's not about economic freedom. It's about further centralizing power.

  • Elizabeth Nolan Brown||

    tbf, those are from two different reports. the licensing one was pretty consistently econ-literate; the other quotes are from Obama's budget proposal. but yeah, same well

  • Number 2||

    Only Barack Obama could find a way to turn deregulation into a basis for increased government spending…

  • straffinrun||

    If only there were a mechanism which didn't rely on force and cronyism to ensure consumers got treated fairly and safely in a consensual transaction.

  • Jerryskids||

    Maybe you could set up a public interest website whereby consumers could bark out a warning, 'yelp' if you will, about bad actors in the marketplace. Of course, one would have to be aware that some 'public interest' groups are shadier than the the bad actors they're supposedly yelping about. I have no idea how you would go about getting the word out about bad actors in the yelping business.

  • Bo Cara Esq.||

    That idea might just be crazy enough to work. Here's another one, it's far out there for sure but hear me out: businesses dedicated to fairly serving customers could form some kind of alliance, let's call it, I dunno, a 'bureau' that promises to treat customers well or 'better' than other places, and they come up with their own standards to be part of this 'bureau.' They police their own membership because consumers can take some confidence in knowing that dealing with a member they are going to be treated better and this provides the incentive for more members. Crazy, but it could work.

  • 24th Kind Of Deodorant||

    Without government regulation, how will I know this Coca-Cola is actually Kosher for Passover?

  • Galane||

    By the yellow cap or can rim. Despite the amount of jews in this area, Coke won't sell their kosher stuff in Idaho.

    I want it simply because it's made with sugar instead of corn syrup.

  • Galane||

    It's called Angie's List

  • Almanian - Trump's Woodchipper||

    You know who else used state power to favor certain businesses....

  • UnCivilServant||

    The British Raj?

  • Scarecrow & WoodChipper Repair||

    George Washington and whiskey?

  • ||

    Albert Speer?

  • Robert||

    Grand Enwick?

  • Robert||

    Fenwick! I meant Fenwick. See, they got me doing it.

  • Johnimo||

    That's the Duchy of Grand Fenwick.

  • Johnimo||

    Elon Musk?

  • PBnHugh's Woodchipster||

    WDATPDIM?

  • Crusty Juggler||

    In the near future I will be granted my internet commenting license; I just need to fill out a few hundred more documents, take a few dozen more classes, and wait for the background check to be completed. Then you will all finally feel my full power, and I will be unstoppable.

  • Adans smith||

    'We are sorry to infom you that all H&R commentators are not eligable for this license' - U.S.J.D

  • Cloudbuster||

    We've been banned under the "Woodchipper Clause."

  • Robert||

    What license are we eligible for?

  • commodious spittoon||

    What we need is to do away with all the onerous state licensing regimes and institute a federal licensing omnibus responsible for setting standards and issuing licenses to all citizens who meet them.

  • Bo Cara Esq.||

    I don't think federal pre-emption of state regulatory schemes is necessarily a worse thing, it is, after all, likely the original idea behind the commerce clause.

  • RAHeinlein||

    To some extent federal regulations directly impact state regulatory schemes. EPA mandating municipal FOG programs, emissions, OSHA, universal building codes, IRS, etc.

  • Adans smith||

    To open my one man barber shop I had to have a occupancy permit ,a barber,managing barber,state and city licenses.WV also has a business and occupation tax based on your gross.

  • Robert||

    Do the barber & managing barber have to be distinct persons? So you effectively can't have a 1-man barber shop?

    Do you have to have both barbers on your payroll at the time you submit the appl'n? So you have to pay them a retainer while the appl'n pends?

  • Adans smith||

    No you 'manage' yourself

  • ||

    Beam, mote etc.
    Seriously, fuck this guy.

  • Vampire||

    Licensing is there to crowd out competition, and also to enrich the state. The procedure for licensing is just like anything else when dealing with the "state". It's a disaster. God forbid it has to travel from one bureau to the next......the wait time can be months or years.

    Even to have the state or city correct their errors, it takes forever. But heaven forbid you don't pay what you owe them, and they will use violence to get it right away.

  • Loki||

    The report authors offer an array of recommendations for state occupational-licensing reform, lumped into three main categories:

    1) Ensure that licensing restrictions are closely targeted to protecting public health and safety, and are not overly broad and burdensome

    2) facilitate a careful consideration of licensure’s costs and benefits

    3) work to reduce licensing’s barriers to mobility.

    4) Get rid of the licensing requirements completely.

    I'm not surprised that possibility didn't cross their pointy little heads.

  • Robert||

    I'm sure it did. Studies like this usually include evalu'n of a null option. Or maybe "null option" is doing nothing, i.e. status quo, in which case the abolish-it-all option has another name.

  • Johnimo||

    Come on! Without all this licensing, we'd have HELTER SKELTER. Oh, the humanity!

  • Tituspullo||

    There does seem to be some bipartisan wind behind occupational licensing reforms. I just filed an amicus brief in Hines v. Alldredge, along with Cato and a bunch of other organizations, challenging the standards applied to speech restrictions imposed by occupational licensing schemes. Such schemes, as applied to pure speech, are almost entirely about preserving market power of a protected class.

  • JW||

    Decriminalizing marijuana during the Nixon administration was a hot topic. A commission of his actually came back to him recommending that his administration begin the process to do so. Tricky Dick decided to ignore their recommendation.

    I don't see anything different happening here.

  • Robert||

    Yes, but he inaugurated several other commissions whose deregulatory recommend'ns were,/b adopted under Ford, Carter, & Reagan. Pot was an anomaly, it seems. Nixon had determined hippies were the enemy; had the Schaffer commission report come out a little later, say while Ford or even better Carter was prez, that recommend'n might've been acted on. They reported too soon, apparently because it was too obvious.

  • Marty Feldman's Eyes||

    Horse masseurs.

    Don't forget the masseurs of humans, which are (in some states) also subject to ridiculous licensing hurdles?

  • Rocks-n-Chicks||

    I recently received an application for a business license from my town. Among its requirements was that all business owners needed to be fingerprinted! I am choosing not to comply.

  • buybuydandavis||

    "Entrenched interests benefit most. "

    Oh no. How can that be? I was assured all that licensing was protecting the poor and disenfranchised from Robber Barons and snake oil salesmen.

  • Robert||

    WTF is going on in that picture? The lady in the foreground is holding in her R hand a braid too long to be from the girl's hair, w some sort of card, her L hand being down. The little girl is wearing a ridiculously skimpy 2-piece swimsuit, & looking apprehensively at the lady pulling whatever that is from her head.

  • Robert||

    But I gotta say, this Piulet's got great photos, judging by his Flickr. The vast majority don't have that WTF is going on here factor, but are just beautiful, interesting, and/or adorably cute.

  • Robert||

    I gather that's how a lot of his models (whom I suspect to be mostly family) are dressed, or maybe that's just the custom in Spain. It wouldn't bother me if they were topless or nude, nor if they had on full 1-piece swimsuits or even a like-a-grownup bikini, but a string bikini on a child that age, especially in a setting that seems remote from swimming, sexualizes them unnecessarily.

    He goes a lot for unusual poses, sometimes trick photography, so I gather that in this one, titled "Burning Braids", which I assume Ms. Brown just looked for as stock under "braids", we aren't supposed to think other than momentarily that the girl's own hair is actually being braided.

  • johne60||

    Start making cash right now... Get more time with your family by doing jobs that only require for you to have a computer and an internet access and you can have that at your home. Start bringing up to $8596 a month. I've started this job and I've never been happier and now I am sharing it with you, so you can try it too. You can check it out here...
    www.jobnet10.com

  • falardea||

    I think there is another unintended consequence people generally overlook when talking about government licensing and regulation of industry, a false sense of security and trust in the licensee. Just because some pizza joint has a plaque on the wall from the health department doesn't mean the proprietor is actually putting out safe food, it just means they passed their last inspection... who knows when that was. People tend to forget that these licenses don't actually make anything safer for the consumer, they just make it easier for the government to find them when/if they do harm someone. They're a lot like cops, they'll show up after the incident has happened. The whole premise makes people think less in terms of buyer beware, and they become far too trusting of the oversight, which is usually done by government lackeys.

  • Robert||

    Around 35 percent of working military spouses are in professions that require state licensing or certification. Military spouses "are ten times more likely to have moved across State lines in the last year than their civilian counterparts," making it especially difficult for those who need occupational licenses to easily transfer jobs between states.


    Why so high among military spouses? Isn't that evidence that it's not a great burden for them, else why would they go for it disproportionally?

    In 21 states, defaulting on student loans is sufficient grounds for the suspension or revocation of person's occupational license. The policy is "misguided," suggest the study authors, "as losing an occupational license may make it more difficult for the worker to repay the student loan."


    Yeah, the attitude is like, "We know you've got that $ socked away & are holding out...fork it over already!"

  • TimothyLane||

    It's unusual for the Feds to admit that regulation does more harm than good -- but in this case, they're talking about state regulation of business, not federal. You'll never see them admit that the lesson can be generalized to them.

  • maw||

    I am a hairdresser in NY state. In recent years, a few states have talked about deregulating my profession. I've noticed is that it is the stylists themselves who are opposed to it, led by educators in our field, who stand to lose students if one could start doing hair without the currently required hours of schooling (at a cost of @10,000 for a basic education unless you go through a BOCES high school program, more in some of the bigger private beauty schools). Their mantra is that without licensing, salons will not practice proper sanitation and this will endanger the public. It's not even about skills and we all know there are some terrible stylists out there who do have licenses. Along comes the NY Times article about unlicensed nail techs and Boom! NY is offering them free licenses while they continue to work, which imo acknowledges that the license has nothing to do with concern for public safety. Not a peep out of my industry's leaders about it either. I could see requiring a basic course in salon hygiene but that shouldn't cost near what it costs to have a license for hair or for nails in either dollars or time. Mind you, people don't tend to patronize a salon they perceive as dirty. It's among the top few reasons people don't come back to a salon.

  • retiredfire||

    I'll bet the NYT article was about minorities not being able to get licenses and voila free licenses.

  • TheGrimStreaker||

    If the White House is in favor of reducing occupational licensing regulations, does that mean Republicans will soon oppose it?

  • Galane||

    One favorite of some States is revoking licenses for failure to pay child support. Right, make damn sure the person cannot pay the child support.

  • IMissLiberty||

    First they admit maybe we shouldn't be force-fed so much fluoride in our water; now this!

  • frankania||

    In the 60's, I lived in New Orleans, worked for IBM, and wanted to quit and start my own electronics repair shop. La. bureaucrats told me to take a course and pay a fee and wait 3 months for a license.

    I drove 30 minutes away to Waveland,MS, and those bureaucrats told me, "fill out this one-page form, pay us $10, and your license will be ready in 10 minutes.

    We moved to Waveland on the beach, built a house, and ran a booming TV shop for the next 25 years.

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