After several years of failed occupational licensing reforms at the federal level, Congress passed the Strengthening Career and Technical Education for the 21st Century Act last week with overwhelming support. The bill marks the first step towards comprehensive reform, and given the Trump administration’s support of licensing reform, governors may soon have new resources available to reduce burdensome occupational licensing regulations across the country.
The wide-ranging bill includes the New HOPE Act, introduced by Rep. Tim Walberg, R-Mich., in 2016, which allows governors to use existing federal funds for technical education to review licenses or certifications that pose an unwarranted barrier to entry into the workforce and do not protect the health, safety, or welfare of consumers.
It’s a necessary reform, given that arguments for occupational licensing (the government requirement that individuals hold a certification or license to work in certain industries) often focus on public safety and consumer protection. The reality is that many licenses are unnecessary and detrimental to economic mobility.
In 2015, the Bureau of Labor Statistics estimated that more than a quarter of workers need a license to work, a substantial increase from the 1950s when this number was only 5 percent. This five-fold increase harms economic opportunity by making it more difficult for people to find work in low- to middle-income jobs, discouraging individuals from climbing the economic ladder and leading to more government dependency.
Much of this problem stems from licensing’s costly and time-consuming mandates. The Institute for Justice evaluated 102 low-to-middle income occupations and found that the average licensing requirement was $260 in fees, one exam, and a year of education and training—a costly investment.
And while little evidence exists to indicate that licensing has improved the quality of service, there is no doubt that it has cost the economy jobs and increased consumer prices. A recent study found that the U.S. has almost 3 million fewer jobs due to licensing, and its effects are estimated to cost the economy between $127 billion and $203 billion a year.
Given licensing’s negative effects on workers and the economy, it’s past time that federal lawmakers address occupational licensing—and thankfully, now they are. Recently, Sens. Marco Rubio, R-Fla., and Elizabeth Warren, D-Mass., introduced the Protecting Jobs Act, which would require states to eliminate laws that revoke occupational licenses when individuals fall behind on their student loans—a counterproductive punishment that takes away struggling individuals’ source of income.
The Restoring Board Immunity Act uses a 2015 Supreme Court decision to hold licensing boards legally liable under federal antitrust law if they unfairly prohibit competition. The bill does this by defining what actions constitute “active supervision” by a state over its public licensing boards, which are usually comprised of private industry professionals.
And the ALLOW Act address occupational licensing in the District of Columbia and other federal property, such as military bases and certain national parks. In addition to easing licensing requirements where the federal government has jurisdiction, the bill also serves as a model for state policymakers to follow, including provisions that promote less restrictive forms of regulation such as certification.
With the New HOPE Act’s passage and the other introduced bills, there is no doubt that federal lawmakers are committed to identifying and tearing down burdensome regulations that undermine growth and impose substantial costs on aspiring workers. These federal reforms address licensing’s increasingly indefensible growth while respecting states’ primary roles in reforming the broken system. Governors should welcome the opportunity that Congress has given them to restore some sanity to their states’ occupational licensing laws and begin to reform the broken system.
Jared Meyer is a senior fellow at the Foundation for Government Accountability, where Mitchell Siegel is an intern. Follow Jared and Mitchell on Twitter.
