Hiring more skilled workers: Is licensing getting in the way?

Several states are facing a shortage of skilled workers, and many have responded by cutting red tape around their occupational licensing laws.

Unlike a driver’s license, which you can use across state lines, occupational licenses often impose barriers that limit where you’re allowed to work. That means a worker licensed in one state may have to get re-trained or pay additional fees if they move somewhere else, even if they’re doing the same job.

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The extra hurdles can be expensive and time-consuming, ultimately contributing to labor shortages.

“[Workers] might find that, you know what, I’m going to just do something else because I don’t want to bother with the process of getting my license to transfer,” said Edward Timmons, director of the Knee Regulatory Research Center at West Virginia University.

To address the problem, 21 states have passed universal license recognition (ULR) laws in recent years, making it easier to transfer licenses between states.

In 2019, Arizona became the first to automatically grant occupational licenses to anyone who moved there with a clean credential from another state.

“You don’t lose your skills simply because you pack up a U-Haul truck and make the decision to move to Arizona,” Gov. Doug Ducey said at the time.

So far, over 8,000 professionals have been granted a license to work in the state thanks to the law, according to the Goldwater Institute, which helped write the legislation.

In 2020, Florida lawmakers took action to reduce or eliminate licenses for more than 30 different occupations. Just last month, Nebraska became the latest state to enact similar reforms.

What is occupational licensing, and why is it more common now?

Licensing requirements — largely established by state governments — cover a range of jobs like plumbers, barbers and school bus drivers depending on where you live.

The rules vary from state to state but generally come with an education requirement, paperwork and fees that a person must pay in order to work.

Occupational licensing used to be rare, but as the U.S. economy shifted from producing goods to services, regulations took off.

Over the past 60 years, the share of workers requiring a license to do their job has skyrocketed from about 1 in 20 to almost 1 in 4, according to the National Conference of State Legislatures.

The main argument in favor of regulation is safety. By mandating certain standards, states reduce the risk that may arise from someone who isn’t trained properly. After all, nobody wants a plumber who’s never fixed a pipe or a doctor who failed their exams.

But there’s disagreement about which jobs need guardrails and what those requirements should entail.

Over 1,100 jobs are regulated in at least one state, but fewer than 60 are regulated in all 50 states.

Illinois and Pennsylvania are among 15 states where HVAC contractors don’t need a state license to work. Most others require a credential that comes after years of experience and a professional exam.

With the nationwide push toward green energy, the number of solar installer jobs is expected to surge over the next decade. In Massachusetts, only licensed electricians can install solar panels, while in Indiana, there are no state licensing requirements.

Other restrictions have little to do with safety. Louisiana, for example, requires florists to obtain a license.

Who’s pushed for more licensing?

Some of the strongest advocates for new regulations aren’t consumers. They’re licensed practitioners and associations who benefit from raising barriers to entry.

“You have occupations like music therapists, interior designers, who are knocking on the door of state legislators, asking to be licensed because they see very strong and important economic gains to being licensed and keeping others out,” said Morris Kleiner, a professor of public policy at the University of Minnesota who studies licensing.

Kleiner’s research has found that licensing drives up labor costs by as much as 18%. It also results in an estimated 2.8 million fewer jobs and reduces interstate mobility.

On top of that, a 2015 White House report determined licensing laws lead to higher prices, anywhere from 3% to 16%.

Due to the power of the professions, “it’s very difficult once an occupation becomes licensed to turn the clock back,” Kleiner pointed out.

However, reform efforts have become an area of rare bipartisan agreement, with both Republicans and Democrats criticizing cumbersome regulations in recent years.

“You don’t see a lot of issues where Barack Obama, Donald Trump, Joe Biden — all three have some degree of consistency when speaking about the need for reform,” Timmons said.

For that reason, universal licensure could continue to gain traction in state legislatures across the country. The increased flexibility around licenses could be vital as states work to address ongoing labor challenges in fields like construction and health care.

This article was originally published in NewsNation.

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