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Minnesota ranks 11th nationally for increases in occupational licensing requirements

It is pretty odd that in “the land of the free” 25% of people must be licensed by a state to do his or her job. When federal regulations are added, this rises to 30%. In 1950, the number was just 5%.

New research from the Mercatus Center at George Mason University shows how these burdens have changed more recently at the state level.  Using reports from the Institute for Justice (IJ) which measured each state’s licensing requirements for 102 low-income occupations in 2012 and 2017, allows us to see recent changes in occupational licensure burden across all 50 states and the District of Columbia. As the Mercatus authors write,

This breadth and burden measure accounts for both the stringency of occupational licensing requirements in each state (the burden), as well as the number of occupations that the state licenses (the breadth). The burden, in turn, encompasses five factors: (1) the minimum required grade level, (2) the minimum required age, (3) the required number of exams, (4) the required fees, and (5) the required number of days in training and experience. The figure indicates each state’s percentage change in breadth and burden of licensure across the IJ dataset’s 46 occupations over the 2012–2017 time period. Among the 50 states and the District of Columbia, 41 saw an increase in the breadth and burden of licensure over this time period, though for many of these, the change was negligible. Only 10 states decreased the breadth and burden of licensure among these occupations over this time period, and among only 4 of these states was the change significant. The average state increased the breadth and burden of licensure of these occupations by 4 percent over this time period.

Figure 1

Source: Mercatus Center at George Mason University

What should concern Minnesotans is that our state ranked 11th overall for the increase in the breadth and burden of its occupational licensing requirements between 2012 and 2017. The breadth and burden of Minnesota’s occupational licensing requirements has grown at nearly double the national rate of 4% in the five years covered. This is a worry because Minnesota has had one of the better environments in terms of occupational licensing. The Institute for Justice ranks us the 46th most broadly and onerously licensed state. Recent trends put this environment at risk.

Consensus among economists is rare. So, it is notable that a consensus of economists believes that licensure in the United States is excessive, limits competition, raises consumer prices, has a disparate impact on certain communities, and has little or no effect on either quality or public safety. As Reason reports,

“Licensing may limit entry into a profession and reduce the potential earnings of those attempting to enter that profession,” say researchers from St. Francis University in Pennsylvania, Campbell School of Business in Georgia, and Central Michigan University. Their findings are contained in a study released Tuesday by the Archbridge Institute, a nonprofit that works to promote economic mobility for workers. “In addition to raising prices for consumers, occupational licensing may be creating barriers to opportunity that prevent the least fortunate Americans from achieving the American dream of prosperity.”

Economic mobility is closely tied to physical mobility. But licensed workers often end up locked into place by licensing laws that create not only a barrier to entry, but a barrier to exiting certain states in favor of looking for work somewhere else. A 2017 study by researchers at the University of Minnesota found that workers whose jobs require a state-issued license lose out on between $178 million and $711 million they could have earned by moving to a different state. The new report from the Archbridge Institute is an attempt to go a step beyond that calculation and determine how that lost income affects economic inequality.

Workers in low- and moderate-income professions in states with high levels of licensure—like Louisiana, where Gov. John Bel Edwards, a Democrat, has called for a reduction in licensing requirements—demonstrate less upward mobility than workers in states that have lower licensing burdens, like Oklahoma. Louisiana licenses 59 out of 120 low-income professions included in the study, while Oklahoma licenses only 15 of those same professions. The growth of licensing corresponds with an increase in economic inequality by between 4 percent and 15 percent depending on the state, the study suggests.

Under the guise of ‘consumer protection’ occupational licensing actually only protects producers. This leaves us all worse off. Minnesotans must hope that the state’s recent push for increased occupational licensing is quickly reversed.

John Phelan is an economist at Center of the American Experiment. 

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