One in five American workers need a government license in order to work. While some licensing schemes might be better justified than others on plausible health and safety grounds, occupational licensing requirements often amount to nothing more than rent-seeking. That is, an effort by existing workers in a particular field seeking to limit competition by throwing up additional barriers to entry.
Government intervention should always be a matter of last resort for this reason. When the government meddles in the market, it risks all manner of deleterious consequences. From unjustly preventing people from working to driving up the cost of services to distorting the labor market, poorly justified and onerous licensing schemes can do far more harm than good.
A new report from the Archbridge Institute shows that this is no partisan matter. States under Democratic and Republican rule can and do impose harmful occupational licensing schemes. Indeed, according to the institute, Oregon, Tennessee and Texas have the highest occupational licensing burdens in the nation. California is ranked by the institute as having the 21st highest licensing burden.
A decade ago, California’s Little Hoover Commission reported on the problems of licensing. “The burden to Californians is significant: Applicants to lower-income licensed occupations — those who earn less than the national average income — on average pay $300 in fees, spend 549 days in education or training and take an exam in order to work. Consumers also bear a burden when the government limits who can practice a profession. Nationally, consumers pay an estimated $200 billion more annually for services due to licensing restrictions,” they reported.
Yet California has made no real movement toward liberalizing its labor market.
Indeed, while most states in the country have implemented some form of universal licensing recognition — that is, allowing workers licensed for occupations in one state to be allowed to work in their state without too many hurdles — California, Oregon, Texas and Tennessee are among those that have not.
As a concrete example, while most states have joined the Nurse Licensure Compact to allow nurses to freely work across the country, the California Legislature has consistently rejected the idea.
Universal licensing recognition would be a good first step for California, but so too would a robust review of which occupations it licenses and whether they ought to be subject to state licensure at all.
As the Obama White House recommended, among the best practices for determining this include, “Limiting licensing requirements to those that address legitimate public health and safety concerns to ease the burden of licensing on workers,” and “Applying the results of comprehensive cost-benefit assessments of licensing laws to reduce the number of unnecessary or overly-restrictive licenses.”
Yes, that was the Obama administration which recommended this. If it was good enough for the Obama administration, it should be good enough for California.
The time to reform occupational licensing is now, for the sake of workers and consumers.