Relaxed licensing requirements could help solve Arizona's labor shortage

Despite the economic recovery, Arizonans are grappling with inflation and a troubled labor market. A recent executive order from Gov. Doug Ducey should help prevent legal barriers from keeping people out of work.

Although the unemployment rate has returned to the pre-pandemic level, not enough people are participating in the labor force. Many have given up hope.

To help people get back to work, Gov. Ducey has renewed limits on state agencies’ ability to implement new regulations. Each new regulation must be approved by his office and be accompanied by the removal of three existing (and likely outdated) regulations.

The January executive order goes further for troublesome occupational licensing laws. The boards that grant permission to work in certain professions must now prominently display information about how people moving to Arizona can transfer their licenses.

Licensing laws can lower the number of workers

This move is not unprecedented.

Gov. Ducey’s administration has removed 2,751 Arizona regulations since 2015. Rather than simply designing new regulations and leaving old, outdated regulations in place, the moratorium helps agencies focus on designing the best regulations.

And it’s had a real effect on the economy, removing an estimated $149 million in operating costs for businesses, according to the Governor’s Office. Compliance with a constantly growing regulatory code is expensive. It’s often enough to kill new businesses before they have much chance, or to keep existing small businesses from hiring new employees.

Less stringent occupational licensing laws could have a big impact moving forward.

While licensing laws are intended to improve the quality of services workers provide, they often manage to discourage aspiring workers, decreasing the number of professionals in a licensed field by as much as 27%.

Consumers not only receive less convenient services, but also are forced to pay higher prices. Strict licensing laws also can reduce entrepreneurship and even lower the number of people who move to a new state.

4,000 people have used universal licenses

The January executive order prevents licensing boards from creating new entry requirements without removing others. That’s good, because now is not the time to make it more difficult to find work.

In 2019, Arizona became the first state to universally recognize out-of-state licenses. This has successfully allowed 4,000 people to move to Arizona and begin working without a long delay, according to the Goldwater Institute.

Now, all boards must prominently display information about the licenses. As a result, we should expect quite a few more talented professionals to move to Arizona and start offering their services to customers.

Universal recognition does not mean weaker protection for the public. These workers are already licensed by other states and have practiced for at least a year. It just removes the unnecessary red tape.

Since 2019, no professional that received a universal license in Arizona has been brought before a board with a complaint. While some critics have made hypothetical arguments, we’ve seen no evidence of harm.

Reconsider the tougher requirements that remain

But leaders still have work to do.

Arizona has tougher existing licensing requirements than a number of states. Opticians, veterinary technicians and water well earth drillers, for example, all face initial fees that are much higher than in most other states.

In situations where Arizona has a lot of regulation without better outcomes, it should consider whether the requirements are really necessary. Arizona is one of only 22 states that license opticians, but we don’t have evidence that those states receive better eyecare.

Similarly, in some cases, Arizona requires licenses to practice professions that are only required in a handful of states. Perhaps other forms or regulation, like the inspection of facilities or requiring insurance, can better address specific concerns about services than occupational licensing can.

Despite a few blind spots, Arizona is a national leader in licensing reform. The next step is to find even more ways to make it easier for people to find work and move to Arizona.

Conor Norris is assistant director and Edward Timmons is director of the Knee Center for the Study of Occupational Regulation at West Virginia University. Timmons is also a senior affiliated scholar with the Mercatus Center at George Mason University. Reach them at conor.norris@mail.wvu.edu and edward.timmons@mail.wvu.edu.