The Declaration of Independence lists the “pursuit of happiness” as one of Americans’ “unalienable rights.” For most, this includes the ability to pursue a vocation of their choice. But occupational licensure laws stand in the way of many people trying to exercise this right. For too many people, the right to pursue their dreams has been halted by governments that require them to jump through hoops, pay fees and meet other often arbitrary and inconsistent requirements.
Unfortunately, there has not been a lot of public debate about the impact that these licenses have on workers. Far more attention has been paid to labor issues such as minimum wages and unions than occupational licensing. But, in Michigan, less than 5 percent of workers are paid at or below the federal minimum wage and only about 15 percent belong to labor unions. Compare that to the estimate that about 21 percent of workers in Michigan are required to obtain a license in order to work legally. Based on these statistics, one could argue that occupational licensing laws have a larger effect on Michigan’s economy than the labor issues most frequently discussed.
And these laws have increased significantly over the past several decades. In 1950, about 5 percent of workers in the United States were required to obtain a license in order to work. Today, nearly 25 percent do. In Michigan, that percentage is only slightly lower than the national average. Michigan spends about $153 million directly managing and enforcing occupational regulations, which includes $24 million coming right out of the state’s general fund budget.
Occupational licensure is the government mandating that individuals pay fees, obtain training, complete educational programs or pass certain exams — commonly a combination of these requirements — before they can legally perform a job. Michigan requires licenses for about 160 occupations, everything from an animal control officer to a well driller. Many of these licensing requirements are also found in other states around the country — every state requires licenses for doctors, lawyers, dentists and opticians, for example, and have for a long time. But for other occupations, Michigan is unique in requiring a license or in mandating training and fees that are far higher than those in other states.
This report gathers data on every occupational license in Michigan. It describes the impact and costs of licensure laws, as documented in the empirical research that has been conducted on this issue. It explains how and why licensing requirements are typically created, but also outlines some of the fundamental problems with a broad licensing regime. Finally, it compares Michigan’s licensing requirements to those of other states and makes recommendations for how the state could reform occupational licensure for the benefit of job-seekers and entrepreneurs and for the state’s economy as a whole.