Arlington, Va.—Two independently produced reports released today by two of the nation’s leading advocates for entrepreneurs shine a spotlight on the intersection of government and work among lower-income workers and entrepreneurs. Taken together, the reports—released by the Institute for Justice as well as the Ewing Marion Kauffman Foundation together with Thumbtack.com—raise important questions for lawmakers nationwide on government reforms that could create private-sector economic growth and opportunity.
Institute for Justice Report
As a new report issued today by the Institute for Justice discusses, more and more Americans now need the government’s permission before they can pursue the occupation of their choice. The IJ report, “License to Work: A National Study of Burdens from Occupational Licensing,” shows that for lower-income Americans, these government-imposed “occupational licensing” hurdles are not only widespread, but often unreasonably high. License to Work details licensing requirements for 102 low- and moderate-income occupations in all 50 states and D.C. It is the first national study of licensing to focus on lower-income occupations and to measure the burdens licensing imposes on aspiring workers.
For full state and occupational rankings, and to easily compare licensing requirements across states and occupations, visit the interactive version of License to Work at www.ij.org/LicenseToWork.
All of the 102 occupations studied in License to Work are licensed in at least one state. On average, these government-mandated licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than one year to earn. At least one exam is required for 79 of the occupations.
“These licensing laws force people to spend a lot of time and effort earning a license instead of earning a living,” said Dr. Dick Carpenter, director of strategic research at the Institute for Justice and report co-author. “They make it harder for people to find jobs and to build new businesses that create jobs.”
Data show that those practicing the 102 occupations studied are not only more likely to be low-income, but also to be minority and to have less education, likely making licensing hurdles even harder to overcome. In addition, about half the 102 occupations offer the possibility of entrepreneurship, suggesting these laws affect both job attainment and creation.
How States Rank
License to Work finds that Louisiana licenses 71 of the 102 occupations, more than any other state, followed by Arizona (64), California (62) and Oregon (59). Wyoming, with a mere 24, licenses the fewest, followed by Vermont and Kentucky, each at 27. Hawaii has the most burdensome average requirements for the occupations it licenses, while Pennsylvania’s average requirements are the lightest.
Arizona leads the nation with the worst combination of number of licenses and burdensome requirements to secure those licenses, followed by California, Oregon, Nevada, Arkansas, Hawaii, Florida and Louisiana. In those eight states it takes on average a year-and-a-half of training, an exam and more than $300 to get a license, a tremendous burden for would-be entrepreneurs and workers.
Click here to view all of theState Profiles.
Are All These Licenses Necessary?
Noted licensure expert Morris Kleiner found that in the 1950s, only one in 20 U.S. workers needed government permission to pursue their chosen occupation. Today, it is closer to one in three. Yet research to date provides little evidence that licensing protects public health and safety or improves products and services. Instead, it increases consumer costs and reduces opportunities for workers.
License to Work provides additional reasons to doubt that many licensing regimes are needed. First, most of the 102 occupations are practiced somewhere without government permission and apparently without widespread harm: Only 15 are licensed in 40 states or more, and on average, the 102 occupations are licensed in just 22 states—fewer than half. This includes a number of occupations with no self-evident rationale for licensure, such as shampooer, florist, home entertainment installer and funeral attendant.
Second, licensure burdens often vary considerably across states, calling into question the need for severe burdens. For instance, although 10 states require four months or more of training for manicurists, Alaska demands only about three days and Iowa about nine days. Such disparities are prevalent throughout the occupations studied.
Finally, the difficulty of entering an occupation often has little to do with the health or safety risk it poses. Of the 102 occupations studied, the most difficult to enter is interior designer, a harmless occupation licensed in only three states and D.C. By contrast, EMTs hold lives in their hands, yet 66 other occupations face greater average licensure burdens, including barbers and cosmetologists, manicurists and a host of contractor designations. States consider an average of 33 days of training and two exams enough preparation for EMTs, but demand 10 times the training—372 days, on average—for cosmetologists. “The data cast serious doubt on the need for such high barriers, or any barriers, to many occupations,” said Lisa Knepper, IJ director of strategic research and report co-author. “Unnecessary and needlessly high licensing hurdles don’t protect public health and safety—they protect those who already have licenses from competition, keeping newcomers out and prices high.”
Click here to view all of the OccupationProfiles.
Recommendations for Reform
Policymakers should ensure that licensing burdens are truly necessary to protect public health and safety—and eliminate or reduce those that are not. To identify licenses to reform or eliminate, policymakers can use the interactive version of License to Work and start with a few simple questions:
• Is an occupation unlicensed in other states?
• Are the licensure burdens for an occupation high compared to other states?
• Are the licensure burdens for an occupation high compared to other occupations with greater safety risks?
Carpenter concluded, “Finding a job or creating new jobs should not require a permission slip from the government. As millions of Americans struggle to find productive work, one of the quickest ways legislators can help is to simply get out of the way: reduce or remove needless licensure burdens.”
Kauffman Foundation/Thumbtack.com Survey
Thumbtack.com, in partnership with the Ewing Marion Kauffman Foundation, released new data today in their Thumbtack.com Small Business Survey, which asked small businesses nationwide about the business-friendliness of their state and local governments.
Among other things, the survey asked how small businesses view various types of regulations, such as health and safety regulations, tax codes, zoning and licensing. Results show that small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business friendliness of their state or local government. Moreover, among those small businesses subject to special regulatory requirements—such as occupational licenses—the ease of compliance with these regulations was by far the best predictor of their view of the small business friendliness of their respective states.
The full Thumbtack.com results, including state and city rankings, can be found at www.thumbtack.com/survey.
“The Kauffman/Thumbtack.com survey results underscore just how important the issue of licensing is to small businesses,” said Institute for Justice President and General Counsel Chip Mellor. “The fact that both of our institutions created and released these reports on the same day with no prearranged coordination, demonstrates the importance of the issue of government regulations and how they impact job opportunities for lower-income Americans and entrepreneurs.”