(Foto: Job Creator Network Foundation)
Occupational licenses are regulations imposed by the state on the workforce. The state requires that to practice certain trades, employees must acquire a degree of knowledge for a certain period of time, pass examinations, and pay fees to the state, among others. The purpose of these regulations is to safeguard public health and safety, protect consumers by ensuring educational requirements and industry oversight, and support job development and enhanced professionalism.1 If a person does not have a license or certification to practice a trade that requires it, he or she may face fines and/or jail time.2 This state regulation presents barriers to the economic freedoms of the individual and his or her right to earn a living as he or she chooses. For example, such regulations have been shown to reduce employment in licensed occupations, reduce geographic mobility, reduce innovation and market competition, increase prices for goods and services, and impose disproportionate burdens on low-income populations as well as on military veterans, people with criminal records, immigrants authorized to work, and unemployed persons.3 In addition, they are often used by elites and interest groups to annihilate competition and exclude small trader.4
In the 1950s, about one in 20 Americans required an occupational license to practice a trade. Today, that figure is estimated to be one in four Americans.5 According to the researchers of the index License to Work (LtW), of the Institute for Justice, the increase in new occupational licensing is due to regulatory expansion into occupations not previously regulated by the state. The increase in occupations that are regulated by the state has raised concerns for individuals, legislators, and multi-sector leaders who have recognized that licensing carries costs - fewer opportunities and higher costs - and does not necessarily increase quality and protect consumers. These licensing burdens can vary among jurisdictions and are often disproportionate to public health and safety risks. Such inconsistencies invite us to question whether certain occupations need to be regulated.6
For example, occupations such as cosmetology, massage therapy, and barbering, among others, that promote the upward mobility of modest individuals are being regulated. As such, these regulations can reduce access to jobs, seriously impeding the ability of low-income people to better themselves and move up the ladder to prosperity. This has been seen in jurisdictions where particular occupations are regulated.
As mentioned above, another way in which occupational licenses impact access to jobs is by hindering geographic mobility. Each jurisdiction varies in terms of the occupations it regulates and the requirements. As a result, when a person moves from one jurisdiction to another, they may be forced to have to reacquire the credentials that qualified them to practice their occupation in the previous jurisdiction. This implies the disqualification of a person in an occupation simply for having crossed a border. Similarly, this discourages mobility to jurisdictions that may offer better opportunities for an individual.
In theory, occupational licensing is supposed to improve the consumer service experience and protect public health and safety by establishing minimum qualifications and preventing incompetent practitioners. However, through indices such as LtW, it has been shown that requiring a license or certification to practice an occupation increases costs to consumers, employers, workers, and the government without ensuring better services and outcomes.
In view of the above, the urgency of promoting reforms in the area of occupational licensing has been recognized. It is essential that cost-benefit analyses be conducted to determine the need to regulate certain occupations. This argument is supported by the report “Framework for Policymakers” of 2015 recommending that legislators adopt best practices of "facilitating careful consideration of the costs and benefits of licensure."7 In 2015, the U.S. Treasury Department, the Council of Economic Advisors and the Department of Labor under the administration of former President Barack Obama issued a report outlining occupational licensing issues and calling for reform.8 Similarly, in 2017, the Secretary of Labor under President Donald Trump, Alexander Acosta, highlighted that issue and encouraged lawmakers to push for occupational licensing reforms.9
1 National Conference of State Legislatures. (2019). The evolving state of occupational licensing: research, state policies and trends, 2nd edition. https://www.ncsl.org/Portals/1/Documents/employ/Occu-Licensing-2nd-Edition_v02_web.pdf
2 Carpenter, D. M., Sweetland, K., Knepper, L., & McDonald, J. (2017). License to work: A national study of burdens from occupational licensing.
3 NCSL. (2019).
4 Carpenter, D. M., Knepper, L., Erickson A. C., and Ross J. K. (2012). License to Work: A National Study of Burdens from Occupational Licensing. Institute for Justice, Arizona Profile. https://ij.org/report/license-to-work/ltw-state-data/?state=az
5 U.S. Department of Labor, Bureau of Labor Statistics. (2016). 2016 data on certifications and licenses. https://www.bls.gov/cps/certifications-and-licenses.htm
6 Carpenter, D. M., Sweetland, K., Knepper, L., & McDonald, J. (2017).
7 Morris Kleiner, Reforming Occupational Licensing Policies (Washington, D.C. The Brookings Institution, 2015), 2. https://www.brookings.edu/wp-content/uploads/2016/06/THP_KleinerDiscPaper_final.pdf.
8 Department of the Treasury Office of Economic Policy, Council of Economic Advisers, & Department of Labor. (2015). Occupational licensing: A framework for policymakers. Washington, DC: White House. https://obamawhitehouse.archives.gov/sites/default/files/docs/ licensing_report_final_nonembargo.pdf
9 Department of Labor. (2017, July 21). U.S. Secretary of Labor Acosta addresses occupational licensing reform [News release]. https://www.dol.gov/newsroom/releases/opa/opa20170721