A Non-Partisan Way to Help Workers and Consumers

In our hyper-partisan age, what if there existed a reform proposal that almost everyone could get behind because it was guaranteed to:

  • increase new entry and competition;
  • expand economic opportunity and worker mobility;
  • enhance the freedom to innovate and encourage exciting new types of entrepreneurialism;
  • reduce prices and expand consumer choices in the process.

Luckily, there is such a proposal, and it is occupational licensing reform.

In a new report issued this week, the Federal Trade Commission (FTC) outlined a variety of “Options to Enhance Occupational License Portability” to address the concern that “the process of obtaining a license… is often slow, burdensome, and costly.” The agency does not mince words regarding the significant costs associated with over-licensing in the United States, saying occupational licensing “inherently restricts entry into a profession and limits the number of workers available to provide certain services … and may also foreclose employment opportunities for otherwise qualified workers.” “This reduction in the labor supply can restrain competition, potentially resulting in higher prices, reduced quality, and less convenience for consumers,” the report says.

The FTC’s firmly-worded report builds on decades of unambiguous evidence regarding the harmful effects of excessive occupational licensing. Importantly, this research is completely non-partisan in character. In fact, during the Obama administration, the White House issued a major report illustrating how the growing licensing burden results in a hidden tax on consumers of roughly three and 16 percent. That report focused on limitations to economic mobility resulting from “barriers to workers moving across State lines and inefficiencies for businesses and the economy as a whole.” Research for the Brookings Institution by economist Morris Kleiner has found that “restrictions from occupational licensing can result in up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.”

The Trump administration also appears interested in licensing reform. Department of Labor Secretary Alexander Acosta has encouraged states to reduce occupational licensing requirements and increase licensing portability, even offering $7.5 million in federal grants to anyone willing to help the effort.  Unfortunately, earlier licensing reform efforts have not gotten very far for one obvious reason: special interests don’t want them to. Many incumbent interests—licensed companies and professionals, as well as the regulators who enforce protectionist licensing regimes—want to preserve the status quo. They insist that such rules are well-intentioned and serve an important state interest, yet most state licensing boards are comprised of industry members are already licensed with an interest in keeping competitors and innovators out. What does all this protection of existing players result in? Stifled competition, higher prices or lower-quality goods and services, and less economic opportunity and mobility for entrepreneurs and workers.

Photo credit: Rick Bowmer/AP/Shutterstock