March 24, 2020
From plumbing and
floral arranging to landscaping and interior designing (and many others), Americans
face government-imposed barriers to work in a wide range of professions. No
matter how qualified someone is, Americans must re-apply for permission to work
when they move to a new state. That’s a costly and unnecessary barrier for
countless Americans to earn a living—and it’s one that falls particularly hard
on low-income Americans.
A new report out
from the Goldwater Institute examines the ways in which onerous licensing
requirements hurt low-income Americans and how state lawmakers can help fix this
problem. Here are five important takeaways from this new research:
About one out of three Americans needs the government’s permission to
work. Depending on the state, one out of three Americans needs the
government’s permission to work. Back in the 1950s, only 5% of the workforce
was required to hold an occupational license. Today, that number has shot way
up: From state to state, between one-fourth and one-third of the workforce
needs a license—a government permission slip just to be able to do their job.
Defenders of this
exponential increase—oftentimes the occupational licensing boards and insiders
themselves—argue licensing protects the public’s health and safety. But many of
the professions licensed by some states have nothing to do with keeping people safe.
Instead, in many instances, licensing is more about protecting industries than
protecting the public. (Read
Goldwater Institute National Investigative Journalist Mark Flatten’s recent
research on this topic here.)
Government barriers to work have a disastrous effect. Licensing
requirements vary from state to state—and in the vast majority of states, a
worker can’t carry their existing license with them to another state. Every
time they move across state lines, they have to spend more time and more money
to get licensed in their new home. That means they’re subject to a new
licensing board, which imposes new requirements to allow them to continue in
their career.
Statistics on licensing
requirements paint a pretty grim picture for American workers. These
requirements cut down on interstate migration, and one study shows that
licensing requirements shrink annual wages by more than $350 million. There’s
also evidence that occupational licensure suppresses entrepreneurship.
For low-income Americans, the effects are especially bad. All of these
effects hit low-income individuals and families especially hard. Low-income
Americans are those least able to afford the time and money needed to get
re-licensed each time an opportunity across state lines comes up. Having to
meet a state’s licensing requirements upon moving there hampers low-income
Americans’ ability to take advantage of a job opportunity that arises in
another state—in some cases, it may simply be a bridge too far.
In a 2015 report by
Stephen Slivinski, increased occupational licensing burdens were significantly
associated with decreased entrepreneurial activity—and the impact on low-income
people is especially great. In fact, states that license 50% or more of
low-income occupations averaged 11% lower entrepreneurial activity than
average, while states that license less than one-third have 11% higher
entrepreneurial activity than average.
Low-income Americans pay the price as consumers, too. Low-income
Americans are hit doubly hard by licensing requirements—not just as workers,
but also as consumers. Current estimates predict that $203 billion per year is
spent by consumers due to burdensome occupational licensing. This trend is
especially dangerous when considering how
people spend their money. Those residing in the bottom 20% of the income
distribution spend a larger share of their income on items considered
necessities—housing, food, and transportation, for instance—while a lesser
share of their income is spent on insurance, retirement, education, clothing,
and luxury items.
This means that
occupational licensing laws that make services more expensive for everyone disproportionately
hurt low-income families because a larger share of their income is spent on
these services—services like healthcare (nurses and physicians), dental care
(dentists, hygienists, and assistants), emergency medical services, insurance,
plumbing, and HVAC work. The additional expense that many middle, upper-middle,
and wealthier classes incur because of licensure in these occupations goes
largely unnoticed. But for a family of four making less than $40,000 per year,
these costs are not as easily ignored.
Goldwater’s Breaking Down Barriers to Work Act is a solution.
Fortunately, there is a way that states can help low-income workers. The
Goldwater Institute’s Breaking Down Barriers to Work Act is a state law that
recognizes a person’s license earned in another state, so those who have been
competently and safely practicing their trade or profession are not required to
obtain new licenses just because they move across state lines.
In 2019, Arizona
became the first state to enact the Breaking Down Barriers to Work Act, and
since then, Pennsylvania,
Ohio,
Utah,
Idaho,
and Indiana have
passed versions of the bill. Already, the positive impacts of breaking down
barriers to work are becoming clear: To date, more than 800 people have taken
advantage of the new Arizona law, so they can continue working in the Grand
Canyon State.
For more information
on how breaking down barriers to work helps low-income Americans, read
Goldwater Institute Policy Analyst Fellow Trevor Bratton’s new report here.
