Reforming occupational licensing laws will expand opportunities

You might be surprised to know that in some states it’s easier to become an EMT (emergency medical technician) than a cosmetologist. Wisconsin, for instance, requires workers to go through hundreds of hours more training to follow the cosmetology rather than EMT route. The reason is a convoluted system of occupational licensing laws, which are essentially state permission slips to work in certain regulated professions.

While sometimes well-intended, occupational licensing laws have become a form of regulatory repression pushed by special interests to insulate their position with the force of law. These laws can result in a state-sponsored discrimination against certain classes of people who struggle to comply with the mountains of red tape.

{mosads}Thankfully, people of good faith across the political spectrum are sounding the alarm. In May, acting Federal Trade Commission (FTC) Chair Maureen K. Ohlhausen, an Obama appointee, said, “Unnecessary and excessive occupational licensing destroys jobs, increases costs for consumers, and threatens economic liberty…Overbroad occupational licensing inflicts disproportionate harm on the parts of our society least able to bear it — low and middle income Americans, veterans, and military families.”

A new 50 state study from our organization, the Wisconsin Institute for Law & Liberty (WILL) confirms Ohlhausen’s analysis. We found that states with burdensome licensing laws have fewer jobs. Occupational licensing laws impact about one of every four workers in the United States.

To start work as a barber, cosmetologist or a massage therapist, for instance, states require a prospective worker to accomplish minimum training requirements, pass exams, meet age and grade requirements, and pay fees to the state. 

Our study evaluated licensing regulations for ten low and moderate income professions to determine their impact on employment. Using publicly available data from the Institute for Justice and the Bureau of Labor Statistics, our peer-reviewed study ranked each state according to a Red Tape Index which measured how burdensome each state’s licensure regulations are in relation to one another. The findings were clear: states with burdensome licensing requirements had significantly lower employment across the ten professions.

In addition to being inconvenient, or nonsensical, the variations in occupational laws between states inflict extreme hardship on workers. Regulations and requirements typically differ from state to state resulting in a broad and unreasonable red tape spectrum. According to the Council of State Government, more than 1,100 occupations are licensed in at least one state, but fewer than 60 are licensed in all 50.

For instance, cosmetology licenses in Oregon currently require seven additional months of training (for a total of 16 months) compared to the same license in Massachusetts. Yet, we didn’t find any substantive evidence demonstrating that cosmetologists are better or safer in Oregon.

Sadly, the people hit hardest by these laws are those struggling to get by, or get back on their feet. A 2016 study from the University of Missouri identified licensing regulations as a barrier to re-entry to the workforce for women who may have left a job temporarily as a result of maternity, raising children, or long-term care.  

Immigrants who arrive in the United States with considerable training and skills are often forced to make time-consuming and costly choices that often involve starting over when licensing laws don’t recognize their abilities. And many states’ licensing laws provide broad discretion that serve to prevent former criminals from earning a professional license, even if their crime has no relevance to their chosen profession.

After decades of creeping growth, occupational licensing laws are finally earning warranted scrutiny. States as diverse as Delaware and Arizona, Rhode Island and Michigan, Mississippi and Nebraska, have all taken on licensing reform. Some have taken the path of outright elimination — targeting licenses for deregulation and terminating them through legislative action. Others have opted to create new review processes to evaluate the licenses and regulations already on the books, and create new guardrails to prevent the creation of unnecessary licenses.

In Washington D.C., Congress and the FTC, building on efforts started by the Obama administration, have identified licensing laws as a barrier to opportunity and are looking for ways to incentivize states to reign in their growth. The Reforming Board Immunity (RBI) and ALLOW acts, for instance, would push states to rein in licensing boards and create alternatives to licensure.

In today’s polarized climate politicians don’t seem to agree on much. But there’s a growing consensus that the unintended consequences of occupational licensing laws have gone too far. Liberals, conservatives, moderates, and independents all agree that the American Dream, however defined, still depends on opportunity. And where red tape denies opportunity, as is the case with excessive licensing, the values of liberty and fairness can still unite us as Americans.

Colin Roth is a research fellow at the Wisconsin Institute for Law & Liberty (WILL).