Occupational licensing is costly.
Dr. Morris Kleiner of the University of Minnesota, widely regarded as a leading expert on occupational licensing laws, has found little evidence that these mandates are worth the cost. He writes, “The evidence from the economics literature suggests that licensing has had an important influence on wage determination, benefits, employment, and prices in ways that impose net costs on society with little improvement to service quality, health, and safety.”
He suggests that states conduct a cost-benefit analysis for all proposed licenses as well as for those already on the books. States should reject new proposals and repeal existing licenses and associated rules that do not offer better consumer protection over what competitive market pressure can provide or that can be replaced by less restrictive types of regulation, such as insurance mandates, registration or certification.
Kleiner also recommends reciprocity of licenses across state borders — workers should be allowed to work legally in one state if they have already been working legally in another. The federal government may need to facilitate these best practices, according to Kleiner. In the end, his findings suggest that adoption of these practices at the federal, state and local level would lead to greater employment, lower prices and better access to goods and services for consumers.
A recent paper from the White House Council of Economic Advisers, the U.S. Department of Treasury and the U.S. Department of Labor reviewed the bulk of the economic research literature on licensing laws nationwide and found that they likely cost millions of jobs and artificially raise prices for consumers by over $100 billion, in the aggregate. The report states:
There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across state lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing.