Mackinac Center Educates Lawmakers on the Burdens of Occupational Licensing

Since the country's founding in 1776, Americans have held that the pursuit of happiness is an unalienable right. Understood correctly, a fundamental aspect of one’s pursuit of happiness is the ability to freely pursue a profession without unnecessary restraints imposed by the government. 

But American legislators have increasingly abandoned this principle, at least when it comes to occupational licensing laws. These mandates, enacted by state governments, hinder tens of millions of men and women from their pursuit of a job and a better life. 

In at least 163 different Michigan occupations, people must get permission from the government to conduct business legally. To acquire this permission, an individual must complete tedious education and training requirements, take time-consuming tests, and pay expensive fees.

Consider a handyman who wants to earn extra money for his family. To paint professionally, he must acquire a maintenance and alteration contractor license. This requires 60 credit hours of education (approximately $600), taking a test ($90) and paying for the license itself ($205). So before he even begins working, the handyman must spend almost $900, not including the actual startup costs for his business. 

A report commissioned by the Obama administration titled “Occupational Licensing: A Framework for Policy Makers” concluded, “The costs of licensing fall disproportionately on certain populations.” These populations include military families, low-income workers and ex-convicts. Consequently, occupational licensing laws inhibit these groups from providing for their families and becoming productive members of society. 

These laws also hurt consumers. When government artificially increases the barrier of entry to an occupation, fewer people join it, which reduces competition and creates a higher demand for people already on the job. Due to reduced competition and higher demand, prices begin to rise. While this raises the wages for these workers, their services cost consumers more than they would otherwise willingly pay.

This phenomenon is not isolated to handymen. As the federal report said, “more restrictive State licensing of nurse practitioners raises the price of a well-child medical exam by 3 to 16 percent, and imposing greater licensing requirements on dental hygienists and assistants increases the average price of a dental visit by 7 to 11 percent.” A study by University of Minnesota Professor Morris M. Kleiner agreed. It said, “standard economic models imply that the restrictions from occupational licensing can result in up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.”

Occupational licensing is an overlooked burden on the American economy. Under the guise of promoting safety, it has quickly engulfed many industries throughout Michigan. Those who lobby for these licenses are typically those already within the occupation. They benefit from keeping their future competitors out of the market and so have an incentive to favor restrictions. Those who suffer most — the consumer and future workers in the affected industry — have little say about the legislation because they are typically unaware of the consequences.

The Mackinac Center is working to raise awareness of this issue. For years, we have published news articles and commentaries to bring attention to licensing. We are now stepping up our efforts by putting together a comprehensive study that will focus on arbitrary rules that have a disproportionate effect on Michiganders compared to residents of other states. Our staff has hosted events and met with legislators on both sides of the political aisle to share this research. Reducing burdensome, unnecessary occupational regulations will enhance job opportunities for all citizens while increasing competition and lowering prices for consumers.