Today almost one-third of Americans need an occupational license to work legally, a number that has increased fivefold since the mid-20th century. Occupations requiring licenses range from practicing physicians to shampooers to fortune tellers.
Uncle Sam appears to be taking notice. Maureen Ohlhaussen, acting chairman of the Federal Trade Commission (FTC), has recently spearheaded an Economic Liberty Taskforce to address many of the issues caused by the current licensing landscape.
The taskforce will be hosting a roundtable on July 27 in Washington D.C. to discuss the barriers of entry caused by state-specific licensing, as well as interstate licensure portability strategies with initiatives directed towards military families.
Because licensing is controlled by the states, requirements for licenses are not uniform or systematic. The Institute for Justice analyzed the occupations that require licenses and highlighted how they vary by state. For instance, a barber’s license requires almost two and a half years of education and training in Nevada, but only 175 days of training in Wyoming. Moreover, a barber from Nevada could not cut hair in any other state, including the less stringent Wyoming.
Cities can further complicate matters by spawning unnecessary restrictions, such as New York City’s new ban on pet sitting without a kennel license. Another traditionally teen job is eliminated by the bureaucracy.
Research by Morris Kleiner from the University of Minnesota concludes that occupational licenses decrease interstate mobility, raise prices, and have no clear effect upon the quality of services provided. Using standard models, Kleiner estimates that licenses can result in 2.8 million fewer jobs with an aggregate cost of $203 billion to consumers annually.
Military families are particularly harmed by occupational licenses. According to a report by the Department of Defense and the Department of the Treasury, 35 percent of military spouses are among those who need a license to practice their profession. In addition, military families are ten times more likely to move across state lines than the average citizen. Every time a military family moves, the spouse will probably be forced to restart the process.
Not surprisingly, military spouse unemployment rates have consistently been above 20 percent since 2010. The federal government tries to treat our service members with the utmost care, but state licensing policies have been punishing their families.
Portability strategies are a good starting point for occupational license reform because they are a non-controversial step to reduce the burden on military families. But reform will be an incremental process, and state policy makers will have to cooperate with the FTC to remove barriers to opportunity for more people.
Wisconsin’s Governor Scott Walker set an example when he recently included a proposal for a panel to review occupational licenses to determine which of them are “truly needed” and which are ones are just “barriers to employment.” This panel could also serve as a model for FTC to evaluate occupational licenses nationally in order to spread awareness to state policymakers and propose solutions against needless constraints.
The FTC’s new taskforce is an attempt to address a complex problem. Chair Ohlhaussen’s first major policy initiative with is a refreshing gesture of economic liberty and will potentially help catalyze the process of unshackling labor markets, competition, consumers, and the economy.
Charles Henderson is a contributor to Economics21.
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