While President Trump’s economic agenda seems to have stalled in Congress, it has made gains in the regulatory arena. Most recently, in a speech to the Denver conference of the American Legislative Exchange Council, Labor secretary Alexander Acosta pressured states to eliminate needless, anti-competitive licensing laws. Licensing is almost always a state matter, and Washington can only do so much here, but federal pressure is never insignificant. Any progress on this front should heighten prospects for economic expansion and job growth.
Many licensing laws are essential. Acosta and other reformers understand that some occupations require minimum standards of skill and training, and incompetence among some professionals—medical doctors, pharmacists, or airline pilots, for example—can be deadly. Arguments for public safety fall apart, however, when such standards are applied to less crucial fields. Many states now impose strict licensing requirements on beauticians, cosmetologists, interior designers, eyebrow threaders, hair braiders, landscape contractors, tour guides, funeral attendants, scrap-metal recyclers, and other occupations where lives are clearly not at stake. Rather than protect the public, elaborate licensing standards protect the interests of those already established in these occupations by raising barriers to entry for newcomers. The licensing requirements reflect the lobbying power of those established interests.
Such laws do real economic harm in state after state by artificially limiting job prospects, often for the least-advantaged workers. To take an extreme example, Florida requires more than 2,000 days of training to license an interior designer. Assuming such instruction occurs on a normal academic calendar, it would take 11 years of specialized training to become a licensed decorator—about as long as it takes to become a doctor, when including college, medical school, and internship. A high school graduate with an eye for design would find the required tuition and the time investment insuperable obstacles to pursuing a profession where the greatest harm might be a color clash between wallpaper and upholstery.
The harm goes beyond curtailed opportunities. By suppressing competition, licensing laws let established practitioners charge higher prices for their services, and the general public bears the cost. A recent Brookings Institution study estimates that licensing laws raise the cost of services by between 3 percent and 16 percent. Moreover, because licensing standards vary greatly from state to state, and few states recognize credentials earned in another state, the requirements interfere with the efficiency of markets by discouraging the movement of businesses and individuals. The Brookings study calculates that licensing laws have reduced interstate mobility by 15 percent generally and by over 20 percent among young people.
These burdens have grown over the years. According to the Labor Department, only 5 percent of jobs in the U.S. required permits during the 1950s and 1960s, decades of robust economic growth; today, one position in four requires some kind of license, and by some estimates, it’s one in three. At last count 1,100 occupations required a license in at least one state, and 60 jobs demand licensure in all 50 states. The implied economic and job-growth impediments have surely contributed to economic stagnation.
Some signs suggest that the destructive practice of over-licensure may have peaked. For one, the push for reform has bipartisan support; it was the Obama administration’s Labor Department that first framed the problem. It was also under Obama that the Federal Trade Commission (FTC) prevailed in the Supreme Court against North Carolina’s rule forbidding anyone but a licensed dentist to whiten teeth. Though the court’s decision was narrowly framed, it has prompted many states to review their licensing practices. Mississippi has led the way, pushing to transfer control of licensing boards from industry groups to the governor’s office. Other states have shown less zeal, but review-and-reform efforts have emerged in Iowa, Kentucky, Indiana, Arizona, Missouri, Nebraska, Wisconsin, and even Illinois. Now, in the Trump administration, Labor secretary Acosta is capitalizing on the reform momentum. If his efforts bear fruit, he will advance the cause of liberty while greatly expanding opportunities for ambitious people trying to start careers.
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