Burdensome licensing laws can have a wide-ranging effect on a state’s economy. When a state imposes a far-reaching and unnecessary licensing regime, competition shrinks and the price of basic services increases. In many instances, these laws are unnecessary; government involvement does not guarantee better or safer services.
The New Hampshire General Court is now beginning an effort to examine the state’s licensing rules in to eliminate unnecessary mandates that block the creation of new jobs and businesses. Rolling back excessive certification and using voluntary certification are viable alternatives that empower consumers to choose the best services on their own, allowing the free market to self-regulate. By regulating occupations through registration, certification permits, and licensure, states often have a strong influence on dozens of industries, making it more difficult for new and existing businesses to operate or expand.
The new Occupational Regulation Review Commission (ORRC), which would be created if state Rep. Bill Ohm’s (R- Nashua) proposal passes, would focus on improving the rules and regulations of New Hampshire’s state licensing boards. ORRC would be empowered to review regulations and repeal or modify them, if needed. The proposal has already received the endorsement of Gov. Chris Sununu (R).
The proposal would mandate ORRC only require licenses if there is “credible empirical evidence of a systematic problem” that warrants government intervention. If such a condition exists, the regulation would need to be implemented in the least restrictive form possible, imposing the lowest burden needed to provide for public safety and consumer protection.
The bill would also help to trim back existing laws through a sunset review process. Under the legislation, ORRC would each year be required to review one-fifth of the state’s occupational regulations to identify any rules or laws that should be repealed or modified. The same standards created by the legislation to review new rules would be used to evaluate existing regulations.
In a 2015 article published by The Hamilton Project, Morris Kleiner, a professor of public affairs at the University of Minnesota and a chair in labor policy for the AFL-CIO, examined the effects of occupational licensing laws on the price and quality of products and found these laws unnecessarily harm consumers by increasing prices of goods and services without providing any appreciable quality increases.
Occupational licensure laws have an especially strong effect on lower-income consumers and entrepreneurs and the licensing process places unnecessary hurdles for jobseekers. According to the Institute for Justice, on average, low- and medium-income jobseekers in licensed professions are required to spend nine months in education or training, pass an exam, and pay more than $200 in fees.
New Hampshire has already taken steps to limit burdensome licensing laws. In 2017, New Hampshire became the 23rd state to cease licensing African-style natural hair braiders.
New Hampshire lawmakers should make more economic opportunities available by rolling back additional unnecessary licensing requirements, which are still holding back countless Granite State entrepreneurs.
The following documents examine occupational licensing in greater detail.
New Hampshire House Passes Bill to Streamline Occupational Licensing
Nick Sibilla of the Institute for Justice examines an important occupational licensing reform proposal in New Hampshire and considers how, if passed, it would affect licensing regulations throughout the state.
Bottleneckers Beware: Occupational Licensing Reform Bills Filed Across the Nation
Matt Powers of the Institute for Justice examines the growing trend in states to cut back on burdensome occupational licensing laws, which hold back dozens of industries nationwide.
Right to Earn a Living Act
In this paper, the Goldwater Institute argues the burdens of occupational liscening in many states are excessive and they should not be placed on those who want to earn an honest living; instead, governments should bear the burden of justifying the restrictions. The authors argue states should enact a Right to Earn a Living Act to protect freedom of enterprise. By doing so they will ensure that economic opportunity is not merely a promise but a reality.
We’re All Licensees Now
Jack McHugh of the Mackinac Center documents the lack of evidence behind the claims of a need for occupational licensing. “Protecting the public” is the disguise the government uses to impose unfair regulations that hurt consumers and workers, he writes. In a specific example, he notes the average citizen of Michigan usually loses as a result of licensing laws.
Case Example: Occupational Licensing Unveiled—It’s Huge
Occupational licensing has increased dramatically in recent years. There is little evidence these laws protect the public or improve the quality of services. The restrictions hinder competition within professions and fail to produce the results the government claims. It is crucial to establish a check-and-balance mechanism to ensure licensure laws are actually effective. Otherwise, consumers pay for the unnecessary increased regulation.
Occupational Licensing: Ranking the States and Exploring Alternatives
Adam Summers of the Reason Foundation addresses the impact of occupational licensing on the labor market. Service quality and health and safety “may actually be diminished by occupational licensing,” he finds. Through high prices, reduced competition, and arbitrary requirements, the government thus hurts the average consumer and worker. Licensing is for special interests, not public interests, he writes. These laws hurt the poor and minorities disproportionately, he notes, proving the government is not helping those they say they are.
Occupational Licensing: Protecting the Public Interest or Protectionism?
Morris Kleiner reflects on the growth of the strictest form of occupational regulation, licensing. The result is potential job losses and an increase in prices, he finds. The costs of occupational licensing show the practice must be ended or changed, he says, and he proposes certification of occupations which does not limit entry and mobility and may prevent job losses.
The Prevalence and Effects of Occupational Licensing
Morris Kleiner and Alan Krueger note research shows nearly 30 percent of the U.S. workforce is required to obtain a license to work. The authors find licensing costs consumers more and reduces their ability to choose services for themselves.
License to Work: A National Study of Burdens from Occupational Licensing
The Institute for Justice conducted a national study to measure how burdensome occupational licensing laws are for low-income workers. The authors found “the barriers imposed by licensure schemes on those wishing to enter the 102 lower-income occupations we studied are not only widespread but often severe, arbitrary and irrational.” The authors conclude, “As millions of Americans struggle to find productive work, one of the quickest ways legislators can help is to simply get out of the way: Reduce or remove burdensome regulations that force job-seekers and would-be entrepreneurs to spend precious time and money earning a license instead of working.”
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
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