“Totally out of control,” “insane,” and “disproportionately hurting those who can least afford it” — that’s how Special Assistant to the President Ivanka Trump described occupational licensing at a White House event for millennials in March.
She’s right about the barriers that occupational licensing poses to low-income Americans who are trying to move up the economic ladder. A new Archbridge Institute report is the first to estimate how much the growth in licensing is associated with declines in economic mobility. The results are astounding.
Over the 20-year period from 1993 to 2012, occupational licensing laws expanded drastically across the U.S. The average state created 31 new licenses over that time, with states such as Arizona (54) and Louisiana (59) seeing the largest increase.
Today, nearly 30 percent of workers need to obtain this form of a government permission slip to work. States impose costly, time-consuming requirements on harmless occupations like farm workers, shampooers, and upholsterers. And 1,100 occupations are licensed by at least one state, but only 60 of these occupations are licensed in every state.
Out of control, indeed.
This variation between states reinforces that licensing’s growth has little to do with an increased need to protect public safety. For example, if 47 states can protect their residents’ lives without licensing interior designers, there is no reason why three states and Washington, D.C. need to impose a required six years of education and training to obtain a license.
Though licensing’s effect on public safety is minimal or nonexistent in many cases, its negative effect on economic mobility is real. As the Institute for Justice’s Dick Carpenter says, “occupational licensing is one of the rare public policies that does exactly what it’s designed to do. It keeps people out.”
According to estimates by the Archbridge report’s authors, the growth of licensing corresponded with up to a 6.7 percent decline in absolute mobility, depending on the state. In other words, because of occupational licensing, children who grow up in low-income families are less likely to achieve the American Dream when they are adults.
This report’s release coincides with the Department of Labor’s announcement that it is issuing $7.5 million in grants to help states review and streamline their occupational licensing requirements. Secretary of Labor Alexander Acosta has made the crusade against excessive occupational licensing a cornerstone of his tenure, often commenting on the problems with the government creating barriers to work.
The fight against out-of-control licensing is not only a Republican priority — leading Democrats recognize this clear misuse of government power as well. In fact, the first call for using federal funds to help states reform licensing came from President Barack Obama’s 2015 budget proposal.
To help decrease the burdens that licensing poses to low-income Americans, Wisconsin and Utah passed legislation this year that waives or reduces initial occupational licensing fees for low-income applicants or those on welfare. The average initial license for a low- to moderate-income income occupation is $260. Though that may not sound like much to someone who is already working, it is more than what a family of four spends on groceries for a week. Waiving these fees gives these individuals an opportunity to lift themselves out of dependency.
These positive reforms follow similar successful efforts in Arizona and Florida last year, and initial licensing fee waiver bills are moving through the legislative process in Alaska, Connecticut, Missouri, Oklahoma, and Tennessee.
Researchers are still discovering just how much occupational licensing harms economic mobility, but there is no question that these barriers disproportionately harm low-income individuals. The Archbridge Institute’s new report, along with a continued focus on the problem by state and federal policymakers, offers hope that more positive policy changes are coming.
Jared Meyer (@JaredMeyer10) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior research fellow at the Foundation for Government Accountability.
