Strict Occupational Licensing Requirements Hurt the Poor

'Inconsistent' and costly stipulations damage employment growth and increase consumer costs.

By Lydia Goerner Published on June 22, 2016

Many states have added increased occupational licensing requirements over the years, a burden a recent New York Times article explained in detail.

According to the article, nearly 30 percent of the American work force requires a license to work, up from around 10 percent in the ’70s. These new requirements to receive a license make the process more laborious and can mean years of additional education and fees.

The White House announced last week that it would offer $7.5 million in grants to organizations who work with states to minimize the burden of licensing and “make it easier for licensed practitioners to work across state lines, an issue of particular importance to military families,” according to the New York Times.

Jason Furman, the chairman of the White House Council of Economic Advisers, said this grant is the first time the federal government has directly involved themselves with helping states reform licensing practices.

“It was something a Democratic president proposed and a Republican Congress passed,” Furman said.

According to The Washington Examiner, the end result of unreasonable licensing requirements is “higher wages for licensed workers, higher prices for consumers and higher unemployment for low-income Americans.”

The New York Times article reported that liberal and conservative economists agree that tougher licensing requirements typically do not improve the quality of services. Another disadvantage is the cost to employment growth, as potential workers are less willing to move to different states. This impacts military spouses who move to different states frequently and find their license is not sufficient in in a particular state.

“There is no labor economist who thinks it is good for the economy,” said Lee McGrath, legislative counsel in Minnesota.

There are health and safety concerns that do accompany some licensing requirements, such as nursing or flying a commercial airplane. These requirements can improve standards and quality in some professions, but in many cases, licensing standards are “inconsistent, inefficient and arbitrary,” a White House report found.

For example, the New York Times pointed out, “In Tennessee, a license is required to shampoo hair; in Florida, to sell a yacht. In Montana, you need the state’s approval to be an egg candler; in Utah, to repair upholstery; in Louisiana, to be a florist.”

The article reported that South Dakota requires 2,100 hours of education and a cosmetology license to braid hair, while South Carolina requires a six-hour course.

“These are cartels, plain and simple, that use state power to minimize competition and maximize rents, without any plausible justification besides self-interest,” according to The American Interest. “The result is an array of needless obstacles to gainful employment — especially for less-skilled workers and military families.”

It has proven difficult for these strict requirements to change.

“Even Republican governors with Republican legislatures in pretty conservative states have still found it extremely difficult to effect change,” said Dick Carpenter, strategic director of the Institute for Justice. “When there is an effort to dial back legislation, then the licensed industry turns out with huge counterattack. This is the same story that plays out in every state.”

Despite the slow progress, The New York Times reported that last month, Arizona curbed licensing requirements for yoga teachers, geologists, citrus fruit packers and cremationists.

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