Occupational licensing is when the government requires people to complete educational and training programs, pass tests and pay fees in order to do a job legally. State officials, often in unelected administrative or bureaucratic roles, typically determine the requirements. Occupational licenses are meant to protect the public from people unfit to provide certain services.
Proponents of licensing believe that requiring people to get state approval before they can work guarantees a minimum level of quality. But lawmakers and licensing agencies rarely consider how well occupational licensure laws deliver on this goal.
And there are costs. In Michigan, approximately 180 occupations are licensed by the state. This has negative effects for people trying to find jobs and for consumers. State licensing requirements restrict who can practice a trade, which means fewer people will work in those fields. This artificially decreases supply, reduces competition and increases costs to consumers.
Licensing laws tend to become entrenched. Workers who are already licensed adamantly defend them, because they benefit directly when the state restricts who can compete in their industry. The harms related to licensing, meanwhile, are felt only minimally by individual consumers. They are well hidden among all the other factors that contribute to rising prices, such as inflation, tax burdens and energy rates.
Experts and economists across the political spectrum, including the labor departments of the Obama, Trump and Biden administrations, recognize the need for reform. Both the left-leaning Brookings Institution and the libertarian-leaning Mercatus Center agree that these mandates are often arbitrary, do little to enhance consumer safety and primarily benefit special interest groups. Most licensing laws restrict people with a criminal background from obtaining a license, and research suggests these laws contribute to higher crime rates, as ex-offenders have fewer employment options.