Two Newly Released Reports Demonstrate the Need for Occupational Licensing Reform

Two organizations have recently released new reports that reveal the extent of the economic losses caused by occupational licensing and that make a powerful case for the need for occupational licensing reform.

The Institute for Justice (IJ) has released a new report, titled “At What Cost? State and National Estimates of the Economic Costs of Occupational Licensing,” that found the cost of occupational licensing includes almost 2 million lost jobs and billions of dollars in lost output.

According to IJ’s report, which analyzed the data set of 36 states:

  • Approximately 19% of American workers are now licensed, an increase from just 5% in the 1950s.
  • Licensing may cost the national economy more than 1.8 million jobs, with a range from 6,952 in Rhode Island to 195,917 in California.
  • Licensing may cost the national economy more than 6.2 billion in lost output, with a range from $27.9 million in Rhode Island to $840.4 million in California.
  • Licensing may cost the national economy more than $183.9 billion in misallocated resources, with a range from $675 million in Rhode Island to $22.1 billion in California.
  • Occupational licensing hurts both consumers and the national economy because it restricts competition, which leads to higher prices, fewer jobs, and reduced economic activity.

And last month, the Foundation for Government Accountability (FGA) released a new study urging occupational licensing reform. According to FGA’s report, occupational licensing “has little effect on public safety,” “can reduce service quality,” and “harms low-income individuals” who may not have the time or money to complete licensing requirements.

Occupational licensing has existed in many forms and industries throughout the states, such as requiring licenses to braid hair in Missouri and New Jersey, to teach make-up application in North Carolina, to arrange flowers and thread eyebrows in Louisiana, and to groom pets in New Jersey, among many others. These requirements make it difficult for people to earn a living or to move between states.

“With record-low unemployment and millions of available jobs across the country, now is the opportune time to unleash the freedom to work. Lawmakers have an unprecedented opportunity to reform unnecessary and burdensome regulations that prevent people from finding jobs—while also protecting public safety and ensuring quality control,” said Jared Meyer, Senior Fellow at FGA.

This summer, President Trump signed the Strengthening Career and Technical Education for the 21st Century Act, which provides states with funding to study the effects of occupational licenses and certifications. The reports from IJ and FGA show that unnecessary or overly burdensome occupational licensing hurts Americans, and governors and state legislators should use this information to make it easier for Americans to earn a living.

The views expressed here are those of the author and do not represent those of any other individual or entity. Follow Sarah on Twitter: @sarahmquinlan.