Commentary

States Look to Rein in Occupational Licensing Laws, Reduce Burden on Workers

By Charles Hughes | January 24, 2018 | 12:23pm EST
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The inability of the federal government to organize its affairs should not distract from progress at the state level. Even though an increasing number of Americans work in occupations subject to licensing requirements, from 5 percent of the workforce in 1950 to about 30 percent today, some states are fighting back.

A bill introduced in Florida would scale back licensing requirements for some professions and remove them completely for others. South Dakota Governor Dennis Daugaard recently proposed creating an interstate compact to facilitate people to continue working when they move to another participating state. Such reforms could improve the lives of many Americans by reducing barriers to work and mobility.

Overly-burdensome licensing requirements can limit the number of people that are able to work in licensed occupations. As I’ve written previously, a recent paper from the Wisconsin Institute for Law and Liberty estimated that if licensing requirements for the ten occupations were equivalent to requirements in the least burdensome states, employment in some professions would increase by over four percent.

For some professions, such as hair braiders, policymakers may determine that the occupation can be removed from the licensing framework altogether. For others where such a move is not practical or the arguments in favor of a move are less clear cut, they can consider reducing the requirements to levels already in place in other states, whether by reducing the number of required hours, the number of tests, or scaling back other measures.

Policymakers in Florida are taking this approach. This is welcome news, because the most recent report from the Institute for Justice found the state had the 5th most burdensome licensing laws. On Friday, the Florida House passed a licensing reform bill 74-28. If it were to become law the bill would remove seven professions, including hair braiders, nail polishers, and my personal favorite, timekeepers and announcers, from the state’s occupational licensure framework.

For other occupations the bill would significantly reduce the number of hours of training required to get a license. Barbers would require 600 hours of training, down from 1,200. Restricted barbers, with a narrower scope of practice clarified in the bill, would require 325 hours.

By shrinking the number of occupations subject to licensing regulations, and lowering the burden for some other occupations, the bill would reduce barriers to entry and increase the number of opportunities available to Floridians. A similar reform effort passed the House last year, but did not ultimately become law. However, it is a positive sign that this bill was one of the first to be taken up in 2018, and makes enactment more likely.

South Dakota Governor Daugaard recently wrote in the Wall Street Journal about the introduction of legislation to establish a multistate “Compact for the Temporary Licensure of Professionals.” Under the compact, individuals living in one state who have been licensed in an occupation in another participating state can receive an in-state temporary license within 30 days of requesting one. The ability to obtain a temporary license quickly would allow people in these occupations to avoid disruptions in their ability to work if they move from one participating state to another. They could continue to work while they work on fulfilling the requirements for a permanent license.

 

Previous research concluded that the interstate migration rate for workers in state-specific licensed occupations was 36 percent lower than for people in unaffected professions. Occupational licensing can increase the costs related to moving, as people who move miss out on earnings and have their career trajectories derailed. The authors of that study found that the increase in occupational licensing since 1980 can explain 6 percent of the decline in interstate migration since then. The higher costs deter some people from moving, and make it harder for those that do end up doing so.

The compact would not go as far as a full reciprocity agreement, in which participating states would accept licenses issued in other participating states. However, the compact would go some way towards reducing the cost and disruption introduced by occupational licensing on interstate migration.

Florida and South Dakota offer an example to other states with their occupational licensing reforms. These efforts are a step forward in terms of reviewing the occupational licensing framework in place, and seeking to find practical, actionable ways to reduce the related burdens. 

Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes

Editor’s Note: This piece was originally published by Economics21 at the Manhattan Institute.

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