National view: Increasing licensing requirements raises costs for consumers
It’s clear that some professionals, like airline pilots and doctors, need licenses. After all, their competence in specific skills could mean the difference between life and death. But unnecessary requirements for licenses in other professions, like hair braiding and auctioneering, are raising costs for consumers and limiting opportunities for job seekers.
An increasing number of professions require licensing — that is, specific training and fees paid in order to perform a job. While only 5 percent of workers needed a license in 1950, the figure stands at 25 percent today. That number is growing mostly because states are issuing requirements, not because doctors and pilots make up a greater share of the workforce.
The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights recently held a hearing on occupational licensing. Despite their different political views, witnesses at the hearing largely agreed on the impact this trend in licensing is having and how the current system can be improved. Jason Furman, chairman of President Barack Obama’s Council of Economic Advisors, presented the findings of a White House report (Occupational Licensing: A Framework for Policymakers), which said, “There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across state lines.”
Robert Everett Johnson, of the libertarian Institute for Justice, quoted that very language.
Maureen Ohlhausen, the Republican commissioner at the Federal Trade Commission, and professor Morris Kleiner, the AFL-CIO chair in labor policy at the University of Minnesota, made the same point.
The increasing number of professions subject to licensing is making services more expensive for consumers — by as much as $200 billion per year — and it’s making it more expensive for people to pursue those professions. It’s easy to see why. If we require hundreds of hours of training to become a florist or hundreds of dollars in yearly fees to be an interior decorator, fewer people can enter those professions, and customers, with fewer choices, are likely to pay more.
But do these licenses improve the quality or safety of florists and interior designers? Probably not. Neither of the states we represent requires licenses for those professions, and we would match our professionals against any in the country. According to Kleiner, studies on entry-level occupations show that “occupational licensing has either no impact or even a negative impact on the quality of services provided to customers by members of regulated occupations.”
Many of these professions are entry-level occupations. Licensing restrictions disproportionately harm millennials, people of color and others seeking to climb the ladder of economic opportunity. Similarly, spouses of members of the armed forces may have to go through a new licensing procedure every time the family moves because requirements vary from state to state.
There is broad agreement about how to address this issue. For example, both Minnesota and Utah have sunset laws that force periodic reviews of licensing requirements. Minnesota recently passed legislation that exempted hair threading from licensing. And the Utah Supreme Court convened a task force to study expanding the services that can be provided by paralegal professionals.
The White House report outlines other common-sense reforms. Licensing requirements should address only legitimate public health and safety requirements to ease burdens on workers. Cost-benefit assessments can reduce the number of unnecessary requirements. States should adopt similar standards or recognize each other’s licenses to increase worker mobility. And we should allow practitioners to offer services to the full extent of their competency. These are reforms we can all agree on.
Sens. Amy Klobuchar, D-Minn., and Mike Lee, R-Utah, are members of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights. Readers may send them email at firstname.lastname@example.org and email@example.com.