Want to create jobs? Curb occupational licensure

Halloween is over and election night has passed. But for politicians, the scariest days of the year might be the days after the election, when campaign platitudes – “create jobs,” “grow the economy” – must be reworked into actual policy. The truly terrifying part is that many constructive reforms, those that provide new economic opportunities to the powerless, can raise the ire of well-established businesses and interest groups.

That’s why real reform is often spearheaded by people with nothing to lose. Gov. Susana Martinez’s efforts to reform occupational licensure are a case in point. Through a recent executive order, the outgoing governor aims to make it easier for New Mexicans to find meaningful and rewarding work.

An occupational license is a state-created barrier to employment. Those who wish to enter professions that require licenses must first obtain permission. To do that, one must typically pay a fee: over $800 for an aspiring pre-school teacher in New Mexico; take exams: four to be an installer of HVAC ducts; and undergo a certain amount of training: four years to be an athletic trainer.

The share of Americans needing a license to work has increased fourfold in the past 50 years. This includes nearly 26 percent of New Mexicans, according to the Brookings Institution. It’s not just doctors and nurses: The state licenses some 270 or so professions, including barbers, cosmetologists, sign language interpreters and bartenders. Focusing on low- to middle-income occupations, the Institute for Justice, a public interest law firm, ranks New Mexico as the 11th “most broadly and onerously licensed state” in the union.

The ostensible reason for licensure is to protect public health and safety. A well-designed set of tests and training requirements might do that. On the other hand, licensure limits one of the strongest guarantors of good service: competition.

Consider the data.

Among 19 peer-reviewed academic studies, 63 percent find that licensure has no discernible effect on the quality of the work provided. Among the other studies, 21 percent find that licensure reduces quality (compared to the 16 percent that find it enhances it.)

How about prices? Here, economic theory is unambiguous: licensure limits the supply of people providing a service and that raises costs for consumers. It is no surprise, then, that 100 percent of the reviewed studies found this very effect.

Read more of this Albuquerque Journal article by Matthew D. Mitchell by clicking here.