State view: Repealing Minnesota licensing laws would create thousands of new jobs

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In May, Gov. Mark Dayton signed legislation for a new $975 million Vikings stadium in Minneapolis. Among the supporters’ rationales is the creation of 1,600 new construction jobs in the first year of construction, which Minnesota sorely needs.

But what if there were a way to create more job opportunities at far less cost? And what if those jobs lasted longer than the time it takes to build a stadium?

State leaders can greatly expand job opportunities without taxing or borrowing by repealing many of Minnesota’s unnecessary occupational licenses — particularly for entry-level workers trying to reach the first rung of the economic ladder.

We with the Institute for Justice recently studied 102 low- to moderate-income occupations ideally suited for such entry-level workers. We found Minnesota licenses 36 of those occupations. The burdens associated with earning those licenses are so severe Minnesota ranks higher than 27 other states and the District of Columbia for onerous licensure laws.

Some of these licenses are hardly found in other states. For example, Minnesota licenses 10 occupations that are regulated in fewer than 25 states, such as electrical helpers — who also are licensed only in Maine — or dental assistants, who are licensed only in Minnesota and six other states. That so few states regulate these occupations calls into question the need for their licensure in Minnesota.

Moreover, Minnesota’s licensing requirements often are arbitrary and unrelated to alleged public-safety risks. For example, the state requires barbers to have a minimum of 700 days of training but requires EMTs to have a minimum of just 26 days. Surely the state does not mean to suggest it is almost 30 times harder to learn how to be a barber than to be an EMT.

Occupations that are either unlicensed or have lower barriers to entry in other states or have disproportionate requirements relative to public-safety risk are candidates for reform. The governor could improve job prospects by leading the charge for easing or eliminating these and other barriers to employment in low- and middle-income occupations.

According to Professor Morris Kleiner, a leading labor economist from the University of Minnesota, an even bigger opportunity exists. Across-the-board reforms to licensing requirements could lead to 15,000 new jobs in Minnesota. That would result in a reduction of the state’s unemployment rate by up to 1 percent.

That’s because occupational licensing is one of the biggest issues in labor economics today. An estimated 29 percent of all American workers must secure a government-issued licensed before they can practice their trade. By contrast, less than 5 percent of workers were licensed in the 1950s. Today, more workers are licensed than are members of unions (12 percent) or earn the minimum wage (3 percent of all hourly workers).

Too often, however, these government-demanded licenses are imposed for no other reason than to protect industry insiders from competition. That’s hardly a proper use of government force.

Research done at the University of Minnesota further suggests that licensing costs Minnesota consumers more than $3.5 billion a year because of the reduced competition caused by licensure. This cost could be greatly reduced through deregulation. Not having to jump through unnecessary hoops would allow new entrants to compete with existing businesses by offering consumers similar, if not better, services at lower prices.

Defenders of occupational licensing claim licensure is needed to protect consumers by screening out some of those new entrants who would be incompetent or frauds. There is, however, little evidence that licensing laws increase consumer protection above competitive markets. With help from websites like Angie’s List and a wealth of similar private intermediaries, consumers can judge if service providers have the skills necessary to offer quality services. And consumers can do so more effectively than licensing boards, which often are dominated by the occupations they regulate.

As Minnesotans prepare to foot much of the bill for a new NFL stadium, in part, to stimulate employment, the governor and other state leaders can consider repealing many of Minnesota’s licensing laws that are stifling thousands of job opportunities and costing consumers far more annually than will the stadium.

Dick Carpenter is director of strategic research and Lee McGrath is executive director of the Institute for Justice’s Minnesota chapter, which is based in Minneapolis. They wrote this exclusively for the News Tribune.

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