Licensing Laws Cause 31,000 Fewer Jobs, Cost Consumers $2 Billion in Wisconsin

Occupational licenses are “one of the most substantial barriers to opportunity in America today,” a new study by the Wisconsin Institute for Law & Liberty (WILL) found. According to WILL’s estimates, licensing laws raise prices for consumers by $1.93 billion each year and results in roughly 31,000 fewer jobs. Over the past two decades, the number of license holders has jumped by 34 percent in Wisconsin. Meanwhile, the number of occupational licensing categories has soared by 84 percent.

“While some credentialing serves to protect public health and safety,” report authors Collin Roth and Elena Ramlow note, “much is rank protectionism – a device to ‘fence in’ those who already have permission to work and ‘fence out’ those who do not.”

In 1900, the Badger State licensed only 14 occupations, including dentists, pharmacists and veterinarians. Today, the Wisconsin Department of Safety and Professional Services (DSPS) alone licenses 166 occupations, including auctioneers and dance therapists. On the local level, cities license even more occupations, including harmless trades like selling Christmas trees, beekeeping and peddling ice cream. Thankfully, a new law bans municipalities from adding new licenses onto an already over-burdened workforce.

Further reform is sorely needed. A recent report by the Brookings Institution found that one-fifth of Wisconsin’s workforce is either licensed or certified. Separately, the Heritage Foundation conservatively estimates that licensing raises prices for the average household in Wisconsin by $754 on average. In 2012, the Institute for Justice found that the average license for low- and moderate-income occupations forced workers to “pay $209 in fees, lose 145 days to education and experience and take one exam.”

IJ has also drafted model legislation to protect economic liberty of all Wisconsinites from overbearing red tape. Policymakers should adopt the “least restrictive means” to regulate an occupation, starting from market competition and third-party ratings as the least intrusive to inspections, bonding,  registration, voluntary certification and finally with occupational licensing as the most controlling.

Moreover, Wisconsin legislators should establish in rule or statute sunset reviews of all licenses.  Those processes would ensure that each license is reviewed and then repealed or converted to a less restrictive type of regulation. That would reduce the state’s exposure to antitrust litigation following the U.S. Supreme Court’s 2015 decision in North Carolina State Board of Dental Examiners v. FTC.

WILL’s report is just the latest salvo in the bipartisan fight to roll back licensure. Wisconsin Assembly Republicans have prioritized reducing and eliminating licensing in the next legislative session. According to their agenda, “excessive and unnecessary occupational licensing and regulations can discourage individuals from entering the workforce and attaining financial independence.” To that end, the Assembly GOP will “seek to eliminate licenses in Wisconsin that do not provide legitimate public safety benefits.”

Notably, even the Obama administration has concluded that “instituting a more rational approach to occupational regulation would improve economic opportunity.”

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