Interstate compacts aren’t the right way to fix occupational licensing laws

This week, special interests all over the country received a belated Christmas present from the Trump administration. In a joint op-ed, Secretary of Labor Alexander Acosta and Republican South Dakota Governor Dennis Daugaard outlined their plan to push for interstate compacts that allow holders of an occupational license in one state to receive a temporary license for that occupation when moving to another state within the compact.

While offering any ideas to decrease the burden of occupational licensing is laudable, the effect of such policies could actually serve to set back desperately needed reform efforts for years to come.

Acosta and Daugaard correctly pointed out that state occupational licensing requirements — laws requiring would-be market participants to obtain a license from the government before they can engage in certain occupations — have gotten out of control. In 1950, only one out of every 20 American workers required a license to do their job. Today, that number has ballooned to more than one in four occupations, including those such as interior designers and florists. Typically implemented under the banner of “public health and safety,” more than 1,100 different occupations require a license in at least one state.

{mosads}Sadly, most occupational licenses have become little more than a mechanism for those already practicing an occupation to shape government regulations to raise the barriers to entry for those seeking to enter their field. This results in higher prices for consumers, fewer employment opportunities, and less innovation.

The unfairness and overabundance of occupational licenses has prompted calls for reform across the political spectrum, from the Heritage Foundation to the Obama administration. Generally, occupational licenses are created at the state level, forcing their proponents to advance new licensing requirements and defend existing requirements in each of the 50 states. Keeping these decisions at the state level enables each state to respond to its individual needs and prevents some states from adopting onerous licensing requirements that others have embraced. When considering a snapshot of just 102 particular lower-income occupations, Louisiana and Washington licensed the most with 77 total; Wyoming licensed the fewest at just 26. 

The proposal for the creation of new interstate compacts put forth by Acosta and Daugaard does nothing to solve the real problem — too many occupations require a license to work. Instead of working to encourage states to examine their licensing requirements and eliminate those that are unnecessary, interstate compacts enable special interests to further entrench their hold on the economy by making their licenses mobile. Acosta and Daugaard bemoan the fact that licensing requirements are often implemented on a state-by-state or industry-by-industry basis and can have dramatically different requirements in different jurisdictions. Alaska, for instance, requires about three days of training to become a licensed manicurist, while 10 other states require four months or more of training.

Rather than recognizing this variation as evidence of the arbitrary nature of many of these licenses, proponents of interstate compacts are pushing for more conformity among state occupational licensing requirements and less state autonomy.

By eschewing federalism in favor of an increased layer of bureaucracy and complication, Acosta and Daugaard invite the creation and adoption of national standards for licensing requirements. Interstate compacts, and certainly national standards, would pressure states with lower training/educational requirements to raise them to the level of the states with the highest requirements. Furthermore, this would allow the special interests to focus their efforts on fewer jurisdictions and make it easier to entrench their licensing regimes permanently.

Rather than pursuing temporary license schemes and reciprocity agreements, Acosta and Daugaard should encourage the elimination of unnecessary occupational licenses. On the federal level, Acosta could aid the efforts of the Federal Trade Commission in pursuing legal action against state licensing boards that violate anti-trust laws, or help Sens. Mike Lee (R-Utah), Ben Sasse (R-Neb.), and Ted Cruz (R-Texas), and Rep. Darrell Issa (R-Calif.) pass legislation that encourages states to adopt reforms to protect consumers and prospective professionals. On the state level, Daugaard could propose comprehensive occupational licensing reforms in South Dakota similar to those already adopted in Mississippi, Arizona, and Tennessee.

Acosta and Daugaard’s proposal does not in fact “make it easier to work without a license.” Rather, it simply makes it slightly easier for already licensed individuals to move — temporary licenses would be only be valid for 18 months — and handicaps essential reform efforts in the process. State leaders should not take the easy way out; strong leadership is crucial, and it must begin with recognition that the problem is not that it is difficult to move with a license, but that these licenses should not exist.

Ben Wilterdink (@BGWilterdink) is the director of outreach and policy research at the Archbridge Institute, a nonprofit group aimed at supporting limited government.