Promising Occupational Licensing Reform Efforts in the States
The potential government shutdown might be drawing most of the attention this week, but it should not divert all the focus from the meaningful progress on occupational licensing taking place at the state level. An increasing number of Americans work in occupations subject to licensing requirements, as the total share of the workforce affected has grown from 5 percent in 1950 to about 30 percent today.
A bill introduced in Florida would scale back requirements for some professions and remove them completely for others. In South Dakota, the governor recently announced the introduction of legislation to create an interstate compact that would make it easier for people to continue working when they move to another participating state. If these reforms come to fruition, these practical reform efforts could make a tangible improvement in the lives of many Americans by reducing barriers to work and mobility.
Licensing requirements that are overly burdensome can limit the number of people that are able to work in those occupations. As I’ve written previously, a recent paper from the Wisconsin Institute for Law and Liberty estimated that if licensing requirements for the ten occupations included in the analyses were brought to the level in place in the least burdensome state, employment in the professions would increase by 4.5 percent.
For some professions, such as hair braiders, policymakers may determine that the occupation can be removed from the licensing framework altogether. For others where such a move is not practical or the arguments in favor of a move are less clear cut, they can consider reducing the requirements to levels already in places in other states, whether by reducing the number of required hours, the number of tests, or scaling back other measures.
This is the tack taken by policymakers in Florida, which is welcome news as the most recent report from the Institute for Justice found the state had the 5th most burdensome licensing laws. On Friday, the Florida House passed a licensing reform bill 74-28. If it were to become law the bill would remove seven professions, including hair braiders, nail polishers, and my personal favorite pugilistic timekeepers and announcers, from the state’s occupational licensure framework.
For other occupations, the bill would significantly reduce the number of hours of training required to get a license. Barbers would require 600 hours of training, down from 1,200. Restricted barbers, with a narrower scope of practice clarified in the bill, would require 325 hours.
By shrinking number of occupations subject to licensing regulations, and lowering the burden for some other occupations, the bill would reduce barriers to entry and increase the number of opportunities available to Floridians. A similar reform effort passed the House last year, but did not ultimately become law. However, it is a positive sign that this bill was one of the first to be taken up in 2018 and makes enactment more likely.
South Dakota Governor Dennis Daugaard recently wrote in the Wall Street Journal about the introduction of legislation to establish a multistate “Compact for the Temporary Licensure of Professionals.” Under the compact, individuals living in one state who have been licensed in an occupation in another participating state can receive an in-state temporary license within 30 days of requesting one. The ability to obtain a temporary license quickly would allow people in these occupations to avoid disruptions in their ability to work if they move from one participating state to another. They could continue to work while they work on fulfilling the requirements for a permanent license.
Previous research had found that the interstate migration rate for workers in state-specific licensed occupations was 36 percent lower than for people in unaffected professions. Occupational licensing can increase the costs related to moving, as people who move miss out on earnings and have their career trajectories derailed. The authors of that study found that the increase in occupational licensing since 1980 can explain 6 percent of the decline in interstate migration since then. The higher costs deter some people from moving, and make it harder for those that do end up doing so.
The compact would not go as far as a full reciprocity agreement, in which participating states would accept licenses issued in other participating states. However, the compact would go some way towards reducing the cost and disruption introduced by occupational licensing on interstate migration.
Early in the New Year, Florida and South Dakota have made some progress in terms of introducing or moving forward legislation to reform occupational licensing. These efforts could be a great step forward in terms of reviewing the occupational licensing framework in place and seeking to find practical, actionable ways to reduce the related burdens.
Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes.
Interested in real economic insights? Want to stay ahead of the competition? Each weekday morning, E21 delivers a short email that includes E21 exclusive commentaries and the latest market news and updates from Washington. Sign up for the E21 Morning Ebrief.