Occupational Licensing

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The Obama administration will take a stab in it’s new budget at important labor market impediment: occupational licensing. Econ blog readers will be familiar with these laws that set frequently overly burdensom rules for who can do certain jobs. They often require far more training than is necessary, expensive classes and tests, and sometimes even degrees before someone can legally do job.

The president’s budget, to be unveiled on Monday, will include $15 million for states to analyze the costs and benefits of their licensing rules, identify best practices and explore making licenses portable across state lines.

The budget will also include $500 million to develop industry-recognized credentials that community colleges could teach to and employers could use for hiring, potentially reducing the need for state-sanctioned licenses in the future.

Occupational licensing is a little talked about issue, that protects a small group of incumbents while harming an unknown number of consumers by driving up prices and an unknown number of potential producers who like to join the market but can’t due to regulatory issues. Dentists go after people for whitening teeth. Cosmetologists put poor hair braiders out of business. 

If people want to braid hair, they shouldn’t need a cosmetology license. If I enjoy plants and think I have an eye for good design I shouldn’t need a landscape design license.  For God’s sake, what rational is there for a florist or an interior designer to need a license? In my home state of Texas you need 300 hours of training plus a written and oral exam to sell wigs. Who in their right mind came up with that? 

There’s also huge disparities in time required to complete certification among occupations. An EMT only needs only 26 days of training in Michigan but an athletic trainer needs 1,460 (1 month vs. 4 years). Time periods vary widely by state.

This is a new problem. In the 1950’s (1 generation ago) only 5% of workers required a license and these were largely dangerous occupations using dangerous equipment and required a lot of training. Today that number is 38%.

I don’t know if the Presidents tiny $15M will make a difference, but I’m glad somebody is finally talking about it. It’s the definition of an easy, common sense win that is bi-partisan. Republicans or Democrats would be smart to grab this issue and run with it. 

You can find the complete list here, but for some examples about the stupidity of licensing:

1. Locksmith (13 states only)
2. Upholsterers (5 states)
3. Dental assistants (7 states)
4. Shampooers (5 states)
5. Auctioneering
6. Manicurist
7. Home entertainment installers
8. Tree trimmer
9. Tour guides (wtf?)
10. Yoga instructor (in Virginia)

Here’s hoping this tiny, untalked about issue gets some real traction this year. If you have the opportunity, push it with your local/state governments. It’s a win for everybody.