May 1, 2019

This May Day, Let’s Liberate Workers

Whether you’re celebrating the ancient European Spring festival or fighting for international workers’ rights today, there is a pro-labor reform that everyone can get behind on May Day: removing barriers to employment for workers across the country.

One of the most pernicious and unjustifiable barriers is occupational licensure for low-risk employment. Different states have different rules, but in every case, the practice of occupational licensure imposes burdens on workers seeking to earn a living. Whether they involve fees, costly classes, questionable testing, or all of the above, occupational licensing requirements can mean the difference between gainful employment and life on the legal fringes.

Occupational licensure regulates a huge swath of the working population. Most people are aware that high-risk professionals like doctors and lawyers are required to pass tests and maintain memberships with certification bodies to make sure that their clients are not exposed to extreme physical or legal risk.

Fewer know that florists are subject to similar treatment in some states. Barbers, personal trainers, interior decorators, and even dog walkers must shell out before they can check in to work in many places. Almost a third of workers in the United States are subject to licensure of some kind.

Occupational licensing is problematic for many reasons. It is often unnecessary, overburdensome, and hurts lower-income workers and consumers alike.

Mercatus senior research fellow Matthew Mitchell points out that while licenses are often “intended to prevent poor-quality service” or “protect public safety,” much evidence suggests that they generally fail on both counts.

Mercatus scholar Patrick A. McLaughlin, along with Jerry Ellig and Dima Yazji Shamoun, surveyed the results of 19 unique studies and found that only three found a positive link between licensure and quality. Of the rest, 12 found “mixed, unclear, or neutral” effects and four found that licensure actually decreased quality. At the same time, all 19 studies found that licensing requirements were associated with considerable prices increases. While they are costly to consumers, occupational licenses seem to rarely accomplish their intended result.

What occupational licenses are quite good at is knocking down the first few rungs of the ladder of opportunity. Entry-level positions that could give qualified and competent (but perhaps non-credentialed) individuals a start in life are preemptively taken from them.

It’s not that these people would not be excellent animal groomers or massage therapists—they simply may not be able to afford the $750 fee to get right with the law. Given that only 39 percent of Americans have enough savings to cover a $1,000 emergency, these license requirements can be insurmountable.

This is what makes occupational licensing so destructive. It prevents low-income people from pulling themselves out of poverty while raising prices at the same time.

Consider this hypothetical: a mother wants to make more money for her family, so she starts the process to become a cosmetologist. She must enroll in several months of classes, pass an exam, and pay several hundred dollars for her certification, which must be periodically renewed. While she is in school, she must pay for daycare for her children. But because daycare providers themselves are licensed, the supply of providers is artificially limited. This means she has to pay more for childcare than she otherwise would, adding to the overall burden that licensure imposes on her life.

Lower-income people are therefore victimized twice by occupational licenses: both in the barriers to earning a living and in the higher prices they must pay. Because such expenditures constitute a larger proportion of low-income household budgets, small changes in occupational licensing rules can have big impacts.

Smart reforms can move the needle towards liberation.

Part of the problem is that licensing rules are decentralized. Reformers must convince leaders in dozens of municipalities to pare back their licensing rules to have national success. And to the extent that policymakers see licenses as revenue-generating schemes, there may be resistance. Currently-licensed workers may also fight reform, a classic example of a transitional gains trap.

Mercatus faculty director Tyler Cowen has one bold proposal: the federal government could preempt as much occupational licensing as possible from state and local governments.

Such top-down federal action makes advocates of federalism nervous. Cowen recognizes that our federal bureaucracy is unlikely to “usher in the reign of Milton Friedman’s Chicago School economics.”

But an entrenched and destructive problem could require a radical solution in the spirit of May Day. By standardizing and limiting occupational license requirements on the federal level, we could lower prices and expand employment access for those who need it most.

Whatever the course, occupational license reform is a policy whose time has come. Whether you are stringing flowers around the Maypole or hoisting the red and black up a flagpole, pro-labor policy is a cause that can benefit everyone.

Photo credit: Scott Olson/Getty Images

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