Andy Koenig is senior policy adviser at Freedom Partners Chamber of Commerce.
It’s not often that President Obama and conservatives in Congress agree, but Sens. Mike Lee (R-Utah) and Ben Sasse (R-Neb.) recently introduced a bill to address a serious problem highlighted by the White House last summer: restrictive occupational licenses in the District.
Occupational licenses are essentially government permission slips required for many jobs, and they hurt those at the bottom of the economic ladder the most. They typically require that individuals obtain approval to work from a government-chartered board, which is usually expensive, time-consuming or both. Historically, licenses applied only to people in a limited number of professions, such as doctors, pilots and lawyers, yet the list of licensed industries now covers hundreds of entry- and mid-level jobs, too. One in 20 jobs required a license in the 1950s; today, it’s up to 1 in 4.
The District is no exception — dozens of jobs are covered by senseless licenses. A cosmetology license requires 1,500 hours of training, costing as much as $20,000. Heating and air conditioning contractors must have five years of experience — double the national average. Shoe shiners must seek four separate permits.
These requirements obviously harm job-seekers and entrepreneurs trying to break into these industries. This year, a freshman at American University thought he’d shine shoes on the sidewalks downtown. He soon found out he would need to comply with 83 pages of regulation, obtain a vendor’s license and a sidewalk permit, meet regulators, wait about six months for approval and hand over $1,537. Needless to say, he didn’t make it through the process.
While licensing proponents claim the regulatory hoops are in place for the community’s health and safety, the details tell a different story. In the District, a barber must complete 350 days of training; an emergency medical technician none. An interior designer must have six years of experience (and be prepared to fork over $925 in fees); a security guard? Zilch.
Who benefits from these bizarre barriers? The industries that licenses cover. It turns out that licensing requirements limit competition, protecting existing businesses at the expense of start-ups and innovators.
“Empirical work suggests that licensed professions’ degree of political influence is one of the most important factors in determining whether States regulate an occupation,” the White House concluded in a 2015 report. This is a classic case of the well-connected colluding with the government to keep the new kid off the block.
And everyone else suffers. Start with consumers: After reviewing the academic literature, the White House reported that stricter licensing has no correlation to better service. On the other hand, licensing typically leads to higher prices. One estimate, by Morris Kleiner of the University of Minnesota, found that licensing costs consumers $203 billion every year.
The worst harms, however, fall on job-seekers, especially those who need opportunity the most. Kleiner estimated in 2011 that occupational licensure results in 2.85 million fewer jobs, mostly in low- and middle-income professions. In 2015, Stephen Slivinski, a senior research fellow at Arizona State University, found that states with the highest rate of occupational licensure “had an average entrepreneurship rate 11 percent lower than the average for all states.” States with minimal licensing experienced increased low-income entrepreneurship.
Fortunately, lawmakers are beginning to recognize these barriers and take steps to break them down. District dwellers in particular would benefit from the ALLOW Act, introduced this summer by Lee and Sasse to rein in the District’s unnecessary licensing rules.
The act includes several reforms the White House suggested last year. It would establish “sunrise” and “sunset” reviews. The former would give Congress the authority to shut down proposed occupational licenses that are harmful to the economy and unrelated to the public’s “health, safety, and welfare.” The latter would give that same authority to Congress for existing licensing rules. Both provisions would enable Congress to hold licensing boards accountable, ensuring they do not favor special interests at the expense of job-seekers and consumers.
The act also beefs up “certification,” a private-sector alternative to licensing that is far less burdensome but still beneficial when it comes to informing consumers about a business or individual’s skill level.
D.C.’s least fortunate could reap the benefits of these reforms. According to the 2014 Census report, nearly a fifth of D.C.’s population lives below the poverty line, and unemployment is still above the national average. The ALLOW Act unlocks the government-created deadbolt that’s preventing people from finding jobs and careers that they desperately need. That’s a worthy goal — and opportune chance — for bipartisan achievement.
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