Andrew Wimer
Andrew Wimer · November 29, 2022

NEW REPORT: Licensing Burdens Creep Downward Yet Still Weigh Heavily on Too Many Americans

Institute for Justice releases third edition of “License to Work: A National Study of Burdens from Occupational Licensing”

ARLINGTON, Va.—For millions of lower-income Americans, state occupational licensing laws make finding work or opening a small business harder and more expensive—if not outright impossible. Despite widespread and bipartisan acknowledgment of this reality, a new nationwide study shows that licensing burdens remain high and pervasive. The Institute for Justice (IJ) today released the third edition of its comprehensive look at licensing barriers for lower-income workers and aspiring entrepreneurs, “License to Work: A National Study of Burdens from Occupational Licensing.”

Roughly 1 in 4 American workers needs a government permission slip—an occupational license—to work, up from an estimated 1 in 20 in the 1950s. Five years on from the second edition, “License to Work” finds that the burdens imposed by such licenses remain steep: nearly a year of required education and experience, at least one exam, and $295 in fees, on average. This does not include burdens from required schooling. For instance, tuition for cosmetology school averages $16,000.

Still, there have been small steps in the direction of lowering barriers. Compared to 2017, there are slightly fewer licenses on the books among the report’s sample of occupations. Plus, nearly 20% of licenses became less burdensome, including some sizable reductions to education and experience mandates.

“Reductions in licensing and licensing burdens from the past five years show reform is possible—but much more remains to be done,” said IJ Senior Director of Strategic Research Lisa Knepper. “Decades of research has found licensing imposes substantial costs on workers, consumers and the economy at large, often with little public benefit. Yet we found that for lower-income Americans, licensing remains both burdensome and widespread, and often simply doesn’t make sense.”

In all, among our sample of 102 lower-income occupations, the study identified more than 2,700 licenses across the 50 states and the District of Columbia. However, this is likely a large undercount of licenses nationwide as there are many more jobs that require a license.

This broad survey calls into question whether all these licenses are truly necessary to protect health and safety. Most of the occupations studied—88%—are unlicensed by at least one state and 14 have been delicensed by at least one state in recent years. Furthermore, most government studies of licensing proposals decline to endorse more licensing, including for 13 occupations studied.

Many jobs require substantial training despite posing little risk to the public: 71 occupations in the study, including barber, cosmetologist and all the other beauty occupations, require more training than entry-level emergency medical technicians (EMTs). On average, EMTs need about 36 days’ worth of training to care for people in life-or-death situations, while cosmetologists must complete nearly a year, or 342 days, to cut and style hair.

These burdens fall on everyday Americans struggling to provide for themselves and their families. By one estimate, licensing may cost the economy nearly 2 million jobs annually. In particular, new licenses can drive experienced workers out of their job. The report highlights the story of Washington, D.C., daycare operator Ilumi Sanchez. Ilumi has decades of experience in early childhood education, but new regulations threaten to put her and other daycare providers out of work unless they go to college to get an associate degree they do not need to do their jobs.

Lawmakers have alternatives to licensing that still protect health and safety including mandatory inspections, voluntary certifications and registration. Consumers tend to look to internet ratings to determine quality rather than the presence of a license. Most studies, including a recent one from IJ, find licensing has little if any impact on service quality.

“By repealing or reducing occupational licensing requirements, lawmakers can pave the way for people to succeed economically,” said IJ Legislative Counsel Meagan Forbes. “Many aspiring entrepreneurs don’t realize that to earn a living using skills they already have—like braiding and applying makeup—they must invest in expensive and time-consuming training to get a license. There are many ways for the government to protect consumers while still letting people earn a living.”

The most direct way to free workers and entrepreneurs from licensing red tape is to repeal licenses that are not needed and reduce barriers that are too steep. Lawmakers should also exempt services that are perfectly safe and prevent new licenses from getting on the books. Lawmakers and others interested in reform can use the report’s state-by-state results and online “Compare States” feature to identify reform targets.

Former offenders often face special licensing barriers: state laws that limit or bar people with criminal records from getting a license, even if the offense was long ago or irrelevant to the job. Yet employment is particularly important for successfully reentering society after a conviction. Lawmakers can help former offenders get a fresh start by reforming licenses to eliminate blanket bans, allowing people to petition boards at any time to find out if they could be disqualified, and putting the burden on the government to prove someone would be a threat to health and safety.

“People often leave prison with new skills that they could use to earn a living but find their path blocked by licensing restrictions,” said IJ Legislative Analyst Nick Sibilla. “Finding a job is critical to keeping people from re-offending. We need more workers to help fight fires or counsel people struggling with drug addiction and shouldn’t be saying ‘no’ to people who have paid their debt to society.”

For more than 30 years, the Institute for Justice has been fighting for the right of entrepreneurs such as hair braiders, interior designers and tour guides to earn a living without first getting a government-mandated license. IJ sues on behalf of individuals subjected to unnecessary and unconstitutional licensing schemes, advocates for reform in state legislatures and publishes rigorous research on the economic effects of licensing.

Related Reports

Economic Liberty | Occupational Licensing

License to Work 3

This third edition of IJ’s landmark License to Work report finds that for lower-income Americans, licensing continues to be widespread, burdensome and—frequently—irrational. It also provides a blueprint for meaningful licensing reform.