Why should a young woman who wants to work at a nail spa spend 16 months getting “educated” in Iowa, but less than 8 months in Massachusetts? Or why does it take three years of education and training to become a security guard in Michigan when it only takes 11 days or less in most other states?
Occupation licenses, commonly called the government’s “permission slip” to work, are regulatory hurdles put in the way of Americans who just want to work in an occupation or trade. The standards to obtain licenses are set by states (usually state boards filled with licensed professionals) and are often set so high they discourage people from pursing those occupations.
The mix of instructional time, practice time, and fees can be a costly burden. This is especially hard for low-income workers and people from poor communities who need opportunity most, but can’t afford the funds or time off to pursue the requirements for licensing. Occupational licensing also keep opportunity out of the hands of the formerly incarcerated who find that a criminal record is a barrier to obtaining the licenses.
Licensing has been on the rise over the past six decades increasing from less than 5 percent in the 1950s to almost 25 percent today.
The Obama White House recently announced $7.5 million in grants to anyone willing to reform licensing in their states:
To address these challenges, today the Department of Labor is announcing $7.5 million for organizations to work with groups of states to design and implement approaches that enhance the portability of licenses across states and reduce overly burdensome licensing restrictions in general. This funding represents the first ever Congressional appropriation, provided through the 2016 Omnibus, to address occupational licensing reforms. Recently the Senate included $8.5 million to support the continuation of this effort next year in their markup of the 2017 budget.
The devil is in the details. According to the eligibility requirements, the organizations that could qualify for the federal grants could be the same licensing boards that set the current standards.
According to the rules:
Eligible entities must be a 501(c)(3) non-profit, including but not limited to national or regional organizations across multiple states and/or tribal areas, such as an association of governors’ offices, an association of state legislatures, an association of state licensing boards or agencies, and/or a workforce intermediary or technical assistance organization…
Based on this criteria, we might find that licensing restrictions have not been lifted in any significant way. The door is open to cronyism where state licensing boards conduct faux reviews and find no need to change the rules. They have little incentive to make recommendations that make it easier for new competition. They have a vested interest in maintaining the status quo. They also collect licensing fees, including licensing renewal payments, which sustain them and are used to curry favors such as tax credits.
This kind of behavior occurred North Carolina in the area of teeth whitening prompting a legal action. The Wall Street Journal reported in 2014:
The case, to be heard at the nation’s highest court in mid-October, started with a dispute over teeth-whitening that erupted between the Federal Trade Commission and the North Carolina Board of Dental Examiners.
The dental board—comprised of six licensed dentists, a hygienist and one consumer member—is accused of improperly thwarting competition while the state wasn’t paying attention. The board issued nearly 50 cease-and-desist letters over the past decade to beauty parlors, spas and other small businesses that offer teeth-whitening services. The letters warned that only licensed dentists can legally provide those treatments.
There are legitimate reasons to set standards of training and education for some occupations such as those in the health and medical fields. However, claims of health and safety should pass muster. Otherwise, harsh licensing becomes a tool of the established and connected to wield state power against new competition.
Instead of doling out taxpayer-funded grants to review licensing, why not just set a tone that encourages lifting restrictions where appropriate. This White House effort looks like it will end up being just another tool against competition, not for it.