Reasons to reform the occupational licensing system

Today more Americans than ever are working in occupations that require a state license.[i] The increase in occupational regulations has raised concerns about whether this practice is in the best interest of the American workforce. The shortage of jobs across the U.S. has prompted states to push for reform processes in the occupational licensing system.[ii] This reform initiative has been spearheaded by think tanks, governors, and the past administrations of Barack Obama and Donald Trump.[iii]

Foto: Grasroot Institute of Hawaii

By the 1950s the percentage of American workers holding an occupational license was about 5 percent.[i] In 2018, according to the U.S. Bureau of Labor Statistics (BLS), approximately 22 percent of the U.S. workforce held an occupational license in order to work.[ii] Similarly, the percentage of licensed workers varies from state to state, as the requirements and processes for obtaining an occupational license for the same job may change in each state. This lack of uniformity among states makes it difficult for people with occupational licenses to move to other states and practice their trade without limitations using a "reciprocity" system. In other words, making licensing requirements uniform across states.

One of the biggest problems with occupational regulation is when jobs are regulated in an onerous, capricious and arbitrary manner. At times, special interest groups influence government regulations to control supply in order to sustain and raise prices. Sometimes it is even the interest groups that are then appointed to the Examining Boards that administer the corresponding occupational regulation and make determinations about the burden of regulation. Thus, significant barriers and costs are imposed on workers, employees and employers, as well as on the economy in general, without generating measurable benefits to society.[iii] A report published by the Institute for Justice in 2018, found that: licensing had a national cost of up to 2 million jobs; the monetary cost of licensing was between $6.2 and $7.1 billion; and misallocated resources following licensing were estimated to cost nationally between $184 and $197 billion annually.

Other issues are that some of the occupations are only regulated in a few states, the same occupations have different training requirements in other states, and licensing requirements are only sometimes aligned with public health or safety issues.[iv] In the case of Puerto Rico, between 2016 and 2022 the unemployment rate fluctuated from 11.8 to 6.4 percent.[v] This considering that, on the Island, occupational licensing reforms still need to be implemented to reduce the number of regulated trades and some of the burdens they present to consumers, employees and employers. If such reforms had been implemented, the unemployment rate would be lower today. This is considering that the burdens to exercise a regulated trade would be lower, thus promoting greater economic freedom.

The report “A Look at Occupational Licensing Reform Across the United States” of the Arkansas Center for Research in Economics (ACRE) shows how states such as Michigan, Arizona, Florida, Utah, Nebraska, among others, have already implemented occupational licensing reforms. For example, Michigan created the Occupational Licensing Rules Advisory Committee, which evaluated 87 occupations. Of the occupations evaluated, six were eliminated and the hours for obtaining a barber's license were reduced. Among the licenses the committee recommended eliminating were acupuncturists, auctioneers, dietitians and nutritionists, community planners, among others. On the other hand, between 2016 and 2017 Arizona Governor Doug Ducey called for reforming the occupational licensing system. In that effort, five licenses were eliminated, a government review requirement for licensing mandates was established, and the Right to Earn a Living Act was passed creating a cause for challenging occupational regulations.[vi] In addition, since 2015, 39 states have reformed their occupational licensing laws to make it easier for ex-offenders to gain employment in regulated occupations.[vii] However, Puerto Rico has not yet implemented such a reform.

Those who have the tools at their disposal to carry out these reforms and reduce unemployment are the policymakers. Policymakers develop and shape these systems by periodically reviewing the requirements of existing and proposed laws in light of their public health and safety benefits and risks; proposing strategies or principled guidance to improve the way occupational regulations are approached; establishing and modifying licensing requirements for specific occupations, among others.[viii] The second edition of the report “The Evolving State of Occupational Licensing Research, State Policies and Trends” del National Conference of State Legislatures (NCSL) exposes how state policymakers have taken an active role in the occupational licensing reform process with the goal of boosting economic growth and employment opportunities. In 2017, the Department of Labor's Employment and Training Administration awarded funding to NCSL for a three-year project to ensure that licensing requirements were not overly complex, and improve the interstate portability of some occupational licenses.[ix] In the occupational licensing project, 16 states joined together to form a learning and technical assistance consortium to study and propose reforms. The states are Arkansas, Colorado, Connecticut, Delaware, Illinois, Indiana, Kentucky, Maryland, Nevada Utah, Wisconsin, Idaho, Oklahoma, New Hampshire, North Dakota and Vermont.

Research has shown that occupational licenses frequently do not fulfill the intention of ensuring the quality of service, safety and public health of the people involved. Therefore, it is essential to address the problems generated by the occupational regulation system.

[i] Arkansas Center for Research in Economics. (2018). A look at occupational licensing reform across the United States. University of Central Arkansas.

[ii] National Conference of State Legislatures. (2019). The evolving state of occupational licensing: research, state policies and trends, 2nd edition.

[iii] ACRE. (2018).

[iv] Nunn, R. (2016). Occupational licensing and American workers. The Hamilton Project.

[v] U.S. Bureau of Labor Statistics. (2019). 2018 data on certification and licenses.

[vi] ACRE. (2018).

[vii] Carpenter, D. M., Sweetland, K., Knepper, L., & McDonald, J. (2017). License to work: A national study of burdens from occupational licensing.

[viii]Departamento del Trabajo y Recursos Humanos. (2022). Empleo y Desempleo en Puerto Rico: Encuesta de Grupo Trabajador.

[ix] ACRE. (2018).

[x] Institute for Justice. (s.f.). State Occupational Licensing Reforms for Workers with Criminal Records. Recuperado de

[xi] ACRE. (2018).

[xii] NCSL. (2019).

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