The House Committee on Higher Education and Workforce Development held a hearing last Wednesday to discuss occupational licensing. For those unfamiliar with the issue, it was an excellent primer on the effects of occupational licensing and possibilities for reform.
Bryan Schneider, Secretary of the Illinois Department of Financial and Professional Regulation’s testimony included not only a discussion of the economic and policy implications of occupational licensing, but also an excellent analysis of the political dynamics of occupational licensing reform.
[I]t is much easier to play defense against a new license type than to eliminate an existing license type. This session we proposed a practical review process used by 19 other states in which an unregulated profession would have to undergo a thoughtful cost/benefit analysis prior to introducing legislation. The analysis would be performed by an unbiased, trained economist within the university system and would focus on the imperative question of whether public harm would result from the unregulated practice of the profession and what the potential costs to the public are if the profession were to be licensed. The analysis must be provided within a year and would be contained in a user-friendly report that would aid the legislature in making the determination whether licensure is necessary.
Testifying on behalf of the National Conference of State Legislatures, Albert Downs confirmed state legislatures’ shift away from creating new licensing requirements for previously-unlicensed professions.
In 2018, two thirds of proposals to create new licenses or expand the scope of practice covered by an existing license were rejected by state legislatures – this represents a 12-percentage point increase over the average rate of rejection from the previous two years.
Even in cases where licensing requirements are created by statute, courts have struck down some licensing requirements. Robert McNamara of the Institute for Justice testified on recent attempts to license interior designers, tax preparers, and teeth whiteners. Attempts to license tax preparers and teeth whiteners failed, thanks in part to the Institute for Justice’s efforts.
In addition to the more traditional arguments about the costs of occupational licensing, Rebecca Vallas from the Center for American Progress testified on the costs that barriers to licensure faced by those with criminal convictions. Employment is key to preventing recidivism, but policies that restrict employment have substantial costs to the economy at large, about $87 billion per year in lost output.
You can watch the full hearing here.