The Obama White House on Tuesday said states should limit occupational licenses to areas of legitimate public safety importance, handing a boost to conservative and libertarian organizations that have pushed to get rid of the regulations.
For jobs that concern customers' safety, such as doctors or pilots, licenses are warranted, the report from the Council of Economic Advisers says. But for florists, auctioneers, scrap metal recyclers and barbers — all of whom are required to pass onerous and expensive licensing requirements in some states — the licenses aren't necessarily adding any quality.
The report called for states to impose less burdensome requirements, such as permits or simple registries, for less dangerous roles. It also recommended cost-benefit analysis for new license requirements as well as sunsetting requirements and harmonization of license requirements between states.
"Bringing attention to this problem can only help," said Dick Carpenter, director of strategic research at the Institute for Justice, a libertarian public interest group that has pushed hard to reform state occupational licenses.
The Council of Economic Advisers report on occupational licensing published Tuesday sounded many of the same notes often found in the institute's briefs.
Citing Adam Smith, the founder of free-market economics, the council found that in some cases, licensing may reduce competition, driving up the costs of goods and services in the licensed industry. Specifically, the council reviewed a range of literature to find that licensing raises the cost of goods and services by 3 percent to 16 percent, without necessarily boosting quality.
Furthermore, the nearly 80-page analysis concluded, workers excluded by occupational licensing are hurt, because they likely have to settle for jobs outside the licensed field that pay less.
The report said that the share of workers licensed at the state level has increased five-fold since the 1950s, and that more than a quarter of U.S. workers now require a license to do their jobs.
The White House report concludes that licensing may hurt some low-skilled workers, especially among military families, immigrants or people with criminal backgrounds.
"We are thrilled with the administration's interest in this important issue, as occupational licensing controls entry into an increasingly large segment of the economy," wrote Clint Bolick, vice president of litigation at the Goldwater Institute, in an email to the Washington Examiner. "The study recognizes that the barriers especially limit entry into the economy by people with few skills or economic resources."
The Goldwater Institute, named after former senator and Republican presidential nominee Barry Goldwater, is one of several state-level think tanks that have sought reforms to licensing. Bolick said the administration's stance on the issue was not merely rhetoric, citing the administration's lawsuit against the North Carolina state dental board for trying to prevent people without dental licenses from whitening teeth.
The report isn't everything that libertarians could want. Carpenter said that he "would go a step further to say there ought to be a presumption of freedom" in granting licenses. He also criticized the report for failing to push for outright abolishment of existing license requirements that serve only to protect incumbents from competition.
Nevertheless, it is a report that will be welcomed by conservatives and libertarians.
Bolick said that the last time a White House was as interested in reform was under Ronald Reagan. "It is ironic that the most conservative and liberal administrations in modern times both identified occupational licensing as a barrier to economic opportunity," he noted. "It underscores that this issue transcends the ideological divide."