As a general rule, I become suspicious when the federal government offers “free” money to the states. That was my immediate reaction when the local news reported that the U.S. Department of Labor has opened up grants totaling $7.5 million to local governments. These funds are designated to enable states to review, reform and eliminate regimes requiring licenses to work. Surprisingly, this seems to be one of those rare scenarios in which funding is earmarked for the purpose of limiting government interference and promoting commercial freedom.
As is often the case, the state of Georgia is ahead of the federal government. Earlier this year, Rep. Brett Harrell, R-Snellville, sponsored HR 1374, and Rep. Buzz Brockway, R-Lawrenceville, introduced HR 744 – both of which aim to reduce the Peach State’s unnecessary occupational licensing burdens.
Since work is already underway to address licensing issues, Georgia may be well-positioned to decline the federal funding. But it seems highly unlikely that the state would refuse the federal government’s munificence. However, the ongoing efforts within Georgia demonstrate the sad truth: Georgians are in dire need of occupational licensing reform, and the proper replacements need to be identified quickly.
According to the Institute for Justice, the Peach State has the 14th most burdensome – and some of the silliest – requirements for lower-income occupational licenses. Strangely, the government requires auctioneers, pre-need cemetery salespeople, librarians and others to obtain a special license before they can provide for themselves and their families.
These licenses aren’t easy to obtain, either. On average, Georgia’s lower-income occupational licenses require almost $200 in fees, over 460 days of costly education and 2 exams. This is a considerable burden that many, especially the underprivileged, cannot afford, and it often prevents individuals from entering the workforce. In fact, it may result in as many as 2.85 million fewer jobs across the nation.
Proponents of occupational licenses will tell you that these licenses exist to protect consumers, but the evidence suggests otherwise. Researchers investigated these claims in the dental and teaching fields and found that stricter requirements do not provide better quality services.
Indeed, public safety doesn’t seem to play a major role in occupational licensing requirements. The fact that emergency medical technicians in Georgia must only have 110 hours of education, while cosmetologists must complete a whopping 1,500 hours, suggests that the state is more concerned with Georgians being attractive than alive. Something is clearly amiss.
In reality, occupational licensing does little good for consumers. Rather, these mandates often exist at the behest of industry professionals who seek to deter competitors from entering the field. Limiting competition offers better job security for insiders, whose wages subsequently surge with their scarcity.
These increased costs are then passed onto consumers, who are ultimately stuck with the tab. Studies looking into this effect in health care services discovered that occupational licensing results in consumer prices rising by 3-16 percent. In fact, the total annual cost to consumers may be over $200 billion.
Occupational licensing is also an impediment to public safety. Many licensing boards require that applicants pass broad background checks, regardless of whether the crime has any relation to the profession. This makes it harder for ex-offenders to find work, which increases their odds of re-offending.
Despite these obvious drawbacks, occupational licenses have proliferated. In 1950, scarcely 5 percent of workers needed the government’s permission to work. Today, that number is closer to 30 percent. Yet this increase has provided Georgians with little more than worker scarcity, higher consumer costs and no discernible improvements in quality, health or safety.
This is not to say that all forms of occupational licensing should be abandoned. Certainly, there are valid arguments for regulating medical doctors and lawyers. But both lawmakers and voters should oppose overzealous licensing requirements when there is no valid justification.
For these occupations, it seems that they could be de-licensed or regulated in other, less-burdensome ways. In lieu of licensing, Georgia could require that certain businesses be insured, mandate that they be inspected, or hand the regulatory reigns over to third-party organizations like the Better Business Bureau, Angie’s List or Yelp.
Unlike government-mandated licensing, these options would protect consumers physically and monetarily, ensure businesses remain in proper working order and inform consumers of unscrupulous business owners. Each of these routes would be less burdensome than current occupational licensing regimes.
It’s encouraging to see the federal and state governments eagerly striving to reform occupational licenses. But history tells us it will be an uphill battle, given that nationally, only seven jobs have been legislatively deregulated in over 40 years. Nevertheless, for the sake of all Georgians, lawmakers need to remain steadfast in their approach and be prepared to repeal or replace these licensing regimes with worthwhile alternatives.
Marc Hyden is the Southeast region director for the R Street Institute, and he is a Cobb County, Georgia, resident. You can follow him on Twitter at @marc_hyden.