Remove Barriers to Jobs

The debate over the benefits and drawbacks of occupational licensing has intensified in recent years. Although it may be in the public’s interest for the government to license certain professions, there is little evidence that many of these licenses increase quality of the goods, service provided, or public safety.¹Patrick A. McLaughlin, Matthew D. Mitchell, and Anne Philpot, The Effects of Occupational Licensure on Competition, Consumers, and the Workforce (Mercatus Center at George Mason University, 2017), https://www.mercatus.org/system/files/mclaughlin_mitchell_and_philpot_-_mop_-_the_effects_of_occupational_licensure_comments_for_the_ftc_-_v1.pdf. Instead, occupational licensing has been shown to restrict the labor market, presenting a significant cost of entry to work.²Chiara Farronato. et al., “Consumer Protection in an Online World: An Analysis of Occupational Licensing (working paper no. 26601, National Bureau of Economic Research, 2020), https://www.nber.org/papers/w26601.

Experts of both the Obama³Department of the Treasury Office of Economic Policy, Council of Economic Advisers, and Department of Labor, Occupational Licensing: A Framework for Policymakers (White House, 2015), https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf. and Trump administrations⁴Exec. Order No. 13966, 85 FR 81,777 (December 17, 2020), https://www.federalregister.gov/documents/2020/12/17/2020-27948/increasing-economic-and-geographic-mobility. have called on states to reform their occupational licensing regimes. Yet many states are creating new licenses almost every year. Today approximately 23%⁵U.S. Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, Household Data, Annual Averages, 53. Certification and licensing status of the employed by occupation, 2020 annual averages, last modified January 22, 2021, https://www.bls.gov/cps/cpsaat53.htm. of the workforce must obtain an occupational license, compared with 5% in 1950.⁶Morris M. Kleiner and Alan B. Krueger, “The Prevalence and Effects of Occupational Licensing” British Journal of Industrial Relations 48, no. 4 (December 2010): 676–687, http://unionstats.gsu.edu/9220/Kleiner-Krueger_BJIR_Licensing.pdfhttp://unionstats.gsu.edu/9220/Kleiner-Krueger_BJIR_Licensing.pdf. These new licenses have a negative impact on upward economic mobility and increase overall income inequality. In other words, occupational licensing harms the ability of the lower-income earners among us to move up the economic ladder.

Licensing also restricts a licensee’s ability to move in search of  better opportunities, as licenses and the requirements to obtain them are inconsistent from state to state. In states with growing economies like Georgia, Louisiana, and Texas, these regulations harm not only skilled workers, but the growing industries that wish to hire them.

Protecting the public from harm and fraud can often be achieved through means much less restrictive than licensing. Lawmakers should explore these options first and implement licenses only as a last resort. This chart shows the many less restrictive ways that governments and markets can regulate professions.

In light of the many negative effects of occupational licensing and the lack of data showing that it increases safety or quality, policymakers should proceed cautiously when proposing new occupational licenses or increasing regulations on already licensed professions. By understanding the limited role that occupational licenses should play, policymakers will champion young workers, empowering them to enter the economy.

At least 14 states (Arizona, Colorado, Florida, Georgia, Hawaii, Idaho, Maine, Minnesota, Nebraska, Ohio, Vermont, Virginia, Washington and West Virginia) maintain a sunrise or sunset process for some or all occupational licensure reviews.⁷Kaitlyn Bison, “Sunrise Review Processes by State,” The Council of State Governments, December 7, 2020, https://licensing.csg.org/sunrise-review-processes-by-state.

A sunrise review occurs at the beginning of the legislative process. It studies a newly proposed occupational license or a new regulation for an existing occupational license to ensure the least restrictive method of effective regulation is applied.      

In 2015 the U.S. Supreme Court ruled that licensure boards are not wholly immune to federal antitrust laws.⁸North Carolina State Board of Dental Examiners v. FTC, 574 U.S. 494 (2015), https://www.supremecourt.gov/opinions/14pdf/13-534_19m2.pdf. In North Carolina State Board of Dental Examiners v. FTC, the court ruled that licensure boards controlled by market participants can only invoke state-action antitrust immunity if they are subject to active supervision by the state. In this case, they were not. The ruling led to many states adding some form of supervision of these licensing boards to bring them into compliance. Although the supervisor(s) can review and veto rules promulgated by a licensure board, they generally do not advise on pre-legislative enactment of newly proposed occupational licenses. The decision in North Carolina State Board of Dental Examiners v. FTC was a step in the right direction but there’s more work to be done to enact truly effective sunrise reviews.

In Louisiana, the Occupational Licensure Review Commission is limited to review only new proposed board rules, leaving the bulk of the state’s licensure infrastructure intact. As of October 2021, this commission has approved every rule proposal that has come to it for review.⁹“Occupational Licensing Review Commission Meeting Minutes,” Boards & Commissions, Division of Administration, State of Louisiana, accessed December 5, 2021, https://wwwcfprd.doa.louisiana.gov/boardsandcommissions/viewMeetingMinutes.cfm?board=658. On the other hand, Vermont’s sunrise review process begins with an independent office, the Office of Professional Regulation, reviewing proposed occupational licenses to advise the legislature on the best, least restrictive options before implementation in statute. Vermont has successfully used sunrise reviews to discourage attempts to create new licenses.¹⁰The 2010 and 2016 Sunrise Reports can be found online at https://legislature.vermont.gov/assets/LegislativeReports/MT-Sunrise-Report-OPR-2016-1-5.pdf and https://www.sec.state.vt.us/media/411936/massagetherapistsunriserpt-2010-1230.pdf.           

It’s not enough to simply restrict new occupational licenses and regulations, states need to remove the barriers that currently exist and disproportionately affect poor and middle-income workers. In some cases, this may be accomplished by simply looking at a list of occupational regulations and targeting outliers. However, in other cases, it may require a more studious approach to assure legislators and the public that public health, safety, and welfare objectives are protected. In general, a systematic process of identifying and removing overburdensome occupational regulations should be done through some form of a sunset review.

Unlike the sunrise reviews that occur at the beginning of the process of creating a new regulation or occupational license, a sunset review looks at occupational licenses that already exist and/or the rules that occupational licensure boards enact. The intention here is simple: An occupational license or rule may be antiquated, ineffective, or unnecessary to serve a legitimate public purpose.

A sunset review identifies such licenses and/or occupational regulations and makes recommendations to the legislature to amend or repeal them. This ensures that future generations are not burdened with regulations that no longer make sense; likewise, it gives legislative bodies a chance to repeal regulations that only serve to protect special interests at the expense of workers. However, similar to sunrise reviews, existing state processes vary in quality and effectiveness.

Examples

Texas & Florida.           

In 2017, Texas had a highly successful effort to eliminate several occupational licenses. These included barber shampoo apprentices, cosmetology shampoo apprentices, bingo unit managers, booting companies, and more. There were additional successes in 2019 and 2021 which eliminated a number of licenses and identified others for further review. Collectively, this success set the stage for more unnecessary licenses being repealed.¹¹Shannon Halbrook and Bruce Wright, “Occupational Licensing in Texas,” Fiscal Notes, Texas Comptroller of Public Accounts, last updated November 2019, https://comptroller.texas.gov/economy/fiscal-notes/2019/nov/licensing.php. In 2020, Florida passed a bill that eliminated licenses for boxing announcers, boxing timekeepers, interior designers, and alarm system installers.¹²Ilya Kukaev, Robert Thornton, and Edward Timmons, “The De-licensing of Occupations in the United States: An Update” (January 4, 2021), 7, https://www.aeaweb.org/conference/2021/preliminary/paper/6AGniDti.

State policymakers must enhance, preserve, and promote the dignity of work. They can do this by ensuring individuals have pathways to challenge unfair, arbitrary, and self-serving licensure decisions.

The process of occupational licensure can be very burdensome and directly impacts people’s ability to find work. At times these burdens may be difficult to justify as a genuine public interest. Traditionally, licensing boards, which are generally made of established practitioners, have been allowed to act with little to no oversight. They can increase fees, hours of training, and similar provisions under the guise of public health and welfare. However, many of these boards really serve their own self-interest by limiting competition. These boards often have the final say on who is allowed to participate in their industry.

Creating a legal independent appeals process would provide a mechanism for individuals who are denied a license to challenge board decisions or reasoning for existing licensing requirements. This can be paired with sunrise and sunset reviews to ensure no unnecessary standards are set. Finally, states should create clear criteria for what constitutes an arbitrary denial of a license.

Examples

The Right to Earn a Living Legislation – Arizona & Tennessee.      

A Right to Earn a Living law provides a route to challenge unfair regulations in court. It gives individuals the opportunity to sue the state if occupational regulations unfairly restrict their economic freedom.¹Kukaev et al., “The De-licensing of Occupations.” They can be combined with reviews of existing regulation. Tennessee passed this legislation in 2016²HB 2201, 2015-2016 Tennessee Legislature (2016), https://trackbill.com/bill/tennessee-house-bill-2201-professions-and-occupations-as-enacted-enacts-the-right-to-earn-a-living-act-amends-tca-title-4-title-7-title-38-title-62-title-63-and-title-67/1238736/ and Arizona did so the following year.³“Governor Ducey Signs Bill Guaranteeing Right To Earn A Living,” Office of the Arizona Governor, April 5, 2017, https://azgovernor.gov/governor/news/2017/04/governor-ducey-signs-bill-guaranteeing-right-earn-living.

The process of acquiring occupational licenses is often tedious and burdensome. However, once the prospective applicant becomes licensed, another burden arises. All 50 states (and D.C.) have a licensure regime. Although these systems are often similar, they are rarely identical. Due to this, it becomes difficult for people with licenses to move to another state without having to go through the cumbersome application process again. This antiquated system erodes a worker’s options and may persuade them to stay put instead of moving across state lines where their services are needed more. Similarly, it harms consumers by lowering the number of options available to them.

Universal licensure recognition is a potential solution to this problem. Once enacted, it allows  anyone licensed within the U.S. for a particular trade or craft to work in another state without doubling up on requirements. This approach is superior to reciprocity, which requires multi-state coordination and would be far more limited in impact. Universal recognition doesn’t create an impetus for states to adopt the stringent regulatory practices of their neighbors. Likewise, if your state passes a universal recognition law and neighboring states do not, your state can more easily recruit skilled workers from other universal recognition states. The same wouldn’t be true for the neighbors that didn’t adopt the law.

Universal licensure typically doesn’t exempt people from all licensing regulations. It simply removes barriers to work by preventing erroneous duplications of requirements for testing and experience. In short, universal licensure forces boards to accept licenses from other states with similar requirements and creates better pathways to work for people wanting to relocate. In most states that have adopted such a law, the new resident would still have to apply for a license in their new state, but may be allowed to work while said application is being processed. These laws typically make exceptions for people facing disciplinary action in one state to ensure an unscrupulous actor can’t simply pick up and move. However, the more broadly defined the universal recognition law, the better. The goal is to increase worker freedom and remove barriers to opportunity.

Ideally, burdensome occupational license regulations should be eliminated. However, it’s not politically feasible to reverse and remove every occupational license, and in some cases, it may not even be desirable. Universal allows workers more freedom and control over their lives.

Examples

Eleven states, including Arizona, Colorado, Florida, Idaho, Missouri, Montana, New Jersey, Pennsylvania, South Dakota, Utah, and Wyoming, have implemented laws that require occupational boards to allow prospective workers with out-of-state licenses to obtain a valid occupational license to practice.