The Bipartisan Appeal of Licensing Reform

As Vox’s Matthew Yglesias pointed out in a recent piece, the Obama Administration has shown willingness to take on an issue that the Institute for Justice has been combating for years—occupational licensing.

While some regulations may always create partisan rifts, the desire to scale back needless and easily exploited occupational licensing laws has gotten support across the political spectrum. The reason for the agreement is pretty straightforward: occupational licensing laws stifle competition and keep less well-off entrepreneurs from entering the market. Yglesias explains:

“And while licensing regimes can offer useful benefits in theory, they can also do some real harms in practice, since it’s tempting for insiders to use them to simply block competition. In many states, for example, dentists and doctors restrict what dental hygienists and licensed nurse practitioners are allowed to do to care for patients well beyond what studies show to be necessary.

What’s more, because licensing is generally done at the state level, it tends to create a fractured labor market. You might be allowed to do your job in New Jersey but not in Iowa, which makes it harder for you to move even if overall economic conditions suggest you’d have a better shot at earning a decent living in Des Moines.”

The story also noted that the White House claims partial credit for new state deregulatory initiatives. This recent White House press release gives facts that IJ has long used to build a case against excessive licensing laws. For example:

“Today nearly one-quarter of all U.S. workers need a government license to do their jobs. The prevalence of occupational licensing has risen from less than 5 percent in the early 1950s with the majority of the growth coming from an increase in the number of professions that require a license rather than composition in the workforce. While licensing can offer can offer important health and safety protections to consumers, as well as benefits to workers, the current system often requires unnecessary training, lengthy delays, or high fees. This can in turn artificially create higher costs for consumers and prohibit skilled American workers like florists or hairdressers from entering jobs in which they could otherwise excel.”

Just last weekend, The New York Times also gave a critique of burdensome licensing laws by publishing a story on one of IJ’s licensing cases, as well as a five-question quiz  on the absurdity of certain states’ requirements. As IJ Legislative Counsel Lee McGrath was quoted:

“Across the political spectrum, everyone agrees” occupational licensing needs reform, said McGrath. “There is no labor economist who thinks it is good for the economy,” he added.

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