Here’s an issue we can all agree on: End ridiculous, anti-competitive occupational licensing

Reforming excessive state-based occupational licensing requirement is the issue that has a U of M labor professor sounding like a disciple of Milton Friedman and expressing strong support for legislation supported by the Trump Administration and the Republican Congress.

Work to fix this anti-competitive abuse begun under the Obama Administration but progress has been difficult since all this regulation takes place at the state level.  But now a recent court case has opened the door to action by Congress that could spur reform at the state level.

Even so, it was a joy to read in today’s Star Tribune the brilliant op-ed by Prof. Morris Kliener, the AFL-CIO Chair in Labor Policy at the U of M’s Humphrey School of Public Affairs.

He points out that the share of the workforce subject to licensure has ballooned from 5% in 1950 to about 25% today, dwarfing “both the minimum wage and unionization in terms of its coverage of the American workforce.”

Everyone supports licensing for doctors, lawyers, and other professions that effect health and safety.  But what public purpose is served by licensing florists, upholsterers, or interior designers?  The Institute for Justice drives this point home with an entertaining five minute video here.  Ridiculous examples of abuse abound, like the cosmetology student who was targeted for giving free haircuts to homeless men because she didn’t have a cosmetology license.  More infuriating abuses can be found here.  Kleiner explains the toll taken on American workers below:

First, licensing works as a barrier to entry for low-income workers who lack the resources or time to take costly courses and enter apprenticeship programs. This limits their ability to move into higher-paying occupations.

Second, licensing limits the mobility of workers. For example, teachers and electricians have difficulty moving across state lines to seek new opportunities without taking new tests and additional classes. This is a special problem for military spouses, who have little control over where they will live.

Third, licensing makes it far more difficult for ex-offenders to get a new start, as they are often shut out of many occupations, ranging from emergency medical technicians to cosmetology.

Estimated costs to consumers and reduced economic growth top $200 billion annually.  But this hopefully will change as a Supreme Court case found that licensing boards that engaged in anti-competitive practices can be sued under anti-trust laws.  Kleiner explains the exciting news about how a new law could fix the problem of excessive licensing in the states:

Given the problems with licensing, plus the new antitrust liability issues, Congress is looking to curb the former and limit the latter. The Restoring Board Immunity Act (RBI) has been introduced in both the U.S. House and Senate. It would establish that individuals who serve on occupational boards are not subject to antitrust liability provided that their state has implemented clear occupational licensing reforms.

States would be required to actively supervise occupational boards to ensure that they are protecting the public interest instead of advancing private economic interests such as restricting the supply of practitioners or expanding the scope of work over which the regulated occupation has a monopoly. Equally important, states would be required to examine licensing laws through, for example, periodic cost-benefit reviews to ensure that the licensing of an occupation is still serving a public purpose.  …

The nonpartisan approach to these issues is one where consumers, advocates of economic growth, and more efficient and equitable labor markets gain.

Peter Zeller is Director of Operations at Center of the American Experiment.