Labor Secretary Calls for Licensing Reform

Did you know that many states require people to get government permission just to braid somebody’s hair, give massages, work as a locksmith, or sell floral arrangements?

U.S. Labor Secretary Alexander Acosta took on such burdensome occupational licensing requirements in a recent speech to the American Legislative Exchange Council in Denver. He enthusiastically encouraged state and local lawmakers from across the country to implement broad reform.  He observed:

The growth of occupational licensing is part of a nationwide trend where we regulate, and regulate, and regulate;

In 1950, the Code of Federal Regulations ran about 10,000 pages long. Today it has ballooned to more than 180,000 pages;

In 1950, only about 1 in 20 jobs required a license.  Today, more than 1 in 4 Americans need a license to legally perform their work;

Granted, many licenses have valid reasons, particularly when they focus on health and safety. Certifying skills and specialized knowledge helps consumers;

That is far different, however, from using licensing to limit competition, bar entry, or create a privileged class; and.

Excess licensing hinders the American workforce in three ways:

First, the cost and complexity of licensing creates an economic barrier for Americans seeking a job, especially for those with fewer financial resources;

Second, excessive licensing creates a barrier for Americans that move from state to state; and

Third, excessive licensing creates a barrier for Americans looking to leverage technology and to expand their job opportunities.

The labor secretary’s speech complemented Federal Trade Commission Acting Chairman Maureen Ohlhausen’s call for the reduction of government intervention in the American economy. Acosta’s comments also echo the Institute for Justice’s (IJ) findings in the 2012 “License to Work” report. According to IJ researchers, it takes an average of nine months of training, one exam and $203 in fees to work in 102 lower-income occupations. Some states even require multiple different—and costly—licenses in order to train students, manage employees, or run a business.

Some states, like Wisconsin, Connecticut and Rhode Island, have recently moved to eliminate some of their onerous licensing requirements on local businesses and consumers. But others, like North Carolina, have taken steps in the wrong direction, or, like Iowa, missed an opportunity to fulfill a governor’s request to the legislature to repeal multiple licenses.

According to IJ research, Denver was a good location for Acosta’s call for reform: Colorado is the second-least onerously licensed state for moderate-income occupations. But Colorado lawmakers still have plenty of work to do to make their economy more welcoming for hardworking Americans. Most of their peers in other states have even further to go.

The secretary’s remarks also leave some cause for concern in their apparent endorsement of certain licenses that move across state lines. While some officials argue this portability would streamline licensing requirements and encourage interstate mobility, it would actually nationally entrench many licenses that should instead be repealed altogether.

“Many state legislators are ready, willing and able to encourage freer markets by repealing occupational licenses and strengthening sunset review processes,” said Lee McGrath, IJ’s senior legislative counsel.  “The best way to eliminate barriers to work is not to stretch burdensome red tape more tightly across more states—but to get rid of the red tape.”

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