Today, more than 1,100 careers are licensed in at least one state; and more than 1 in 4 American workers now need a license to work in their chosen field. In the effort to free U.S. citizens of the burdens of unnecessary licensing, Labor Secretary Alexander Acosta called for federal reform of occupational licensing laws because the current rules often restrict people from entering numerous professions, which hurts the economy.
“Granted, many licenses have valid reasons, particularly when they focus on health and safety. Certifying skills and specialized knowledge helps consumers,” he acknowledged in a speech Friday to the American Legislative Exchange Council in Denver, adding, “That is far different, however, from using licensing to limit competition, bar entry, or create a privileged class. Excess licensing hinders the American workforce.”
The “cost and complexity” of licensing hurts Americans looking for employment, said Acosta, noting that such rules hurt poor people the most, making it much more difficult to attain a better-paying job. It also prevents many people from moving state-to-state, because licenses don’t usually carry over from one jurisdiction to another.
Acosta pointed out a real-life scenario in which the barrier to workforce mobility exists in the case of a military member being reassigned across state lines, usually along with their spouse. “The same is true when a civilian finds another job or is likewise reassigned, the spouse often moves as well,” he said, pointing out that the trailing spouse who needs to be licensed in order to work will have a difficult choice.
Does the spouse move, and potentially give up his or her chosen career until he or she can regain a license? Does the spouse stay behind, creating distance in the family structure?
According to recent estimates, there are 60 occupations regulated in every state, and more than 1,100 occupations are regulated in at least one state. But it’s a fact that millions of Americans move across state borders every year.
“When they do move, the spouse should not have to give up his or her career, while he or she enrolls in duplicative education or awaits an unnecessary license,” according to Acosta, noting that rapid changes in technology cause even more costly, less-rational barriers to business when licensing is involved.
“Telemedicine, for example, offers new opportunities for nurses and physicians,” said Acosta, noting that even though 22 states form the Interstate Medical Licensure Compact, some of the largest states—including California, Texas, New York, and Florida—are not involved. “However, some medical professionals cannot offer teleservices in certain states.”
There are many other careers that could equally benefit from technology that provides access to interstate markets, said Acosta, pointing to interior design advice and other consulting services, which can even be offered online.
“Our goal should be to expand opportunities for Americans, not limit them,” he added, noting that the cost of licensing barriers is real and measurable.
“The Federal Reserve Bank of Minneapolis estimates that licensing requirements reduce total non-farm payroll by 1.3% nationwide,” Acosta notes, explaining that the Federal Reserve estimates that around 2 million Americans do not hold a job, or have given up their career, because of licensing issues. “Deadweight losses total $13 billion annually. Misallocation of resources exceeds $170 billion.”
The labor secretary said that in 1950, only about 5 percent of jobs required workers to get some form of license. Since then, that number has risen to more than 25 percent.
Critics have argued that in many cases, the need for the license doesn’t exist. In many states, for example, beauticians must be licensed, and the time it takes them in order to receive a cosmetology license is, on average, 370 days. In one state, it actually takes 490 days, which serves as a significant deterrent to some who would otherwise go into that profession.
For Americans living paycheck to paycheck, investing time and money into licensing is a substantial burden, according to Acosta.
A 2015 study by the Brookings Institution found there were “far more cases” in which licensing reduced employment than ones where it improved the quality and safety of services. The restrictions have resulted in 2.8 million fewer jobs nationally and raised consumer costs by $203 billion annually, according to Brookings.
“Taking up this issue is one way that you, as legislators, can have immediate, consequential, and measurable impact. You have a tremendous opportunity to help create millions of jobs, without spending a dime. The Trump administration is committed to working with you to strengthen our economy and empower the American workforce,” Acosta told state lawmakers.
Licensing reform has been discussed since the Obama administration. In fact, former President Barack Obama’s 2015 budget request for the Labor Department included $15 million to “help a consortia of states identify, explore, and address areas where licensing requirements create barriers to labor market entry.” The budget proposal noted that licenses often involve “unnecessary training and high fees” that create a “barrier to labor market entry or labor mobility.”