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The Problem
One in four workers needs a government license to work, making occupational licensing a major restriction to labor freedom and flexibility. By comparison, just one in ten workers is covered by union collective bargaining.
Occupational licensing costs the American economy two million jobs and $200 billion in economic output. In addition to reducing the number of jobs available, occupational licensing restricts labor mobility, dampens economic output, and increases consumer costs.
The State Solution
States should systematically review their occupational licensing laws to remove unnecessary barriers to jobs and limit new regulations that can be imposed on Americans entering any occupation.
States can use the Institute for Justice’s Occupational Licensing Review Act as a roadmap to systematically review and deregulate licenses across occupations, ensuring that regulations are targeted to public health and safety and impose the least restrictive requirements on workers.
Why This Matters
The American economy is facing a record level unemployed as a consequence of the pandemic recession. Occupational licensing stands in the way of these workers being re-employed. Burdensome occupational licensing rules are beyond justification in the best of economic times. During economic contractions like the pandemic recession, they are outright unfair.
Businesses need skilled workers or workers who can gain skills on the job, and workers need job opportunities. Occupational licensing requirements should not stand in the way of meaningful opportunities for businesses and workers.
What States Should Do Next
States should enact a licensing review law and deregulate their licensing regimes over the course of five years in order to remove unnecessary occupational licensing barriers and limit new regulations that can be imposed upon entering any occupation.
The Institute for Justice’s model legislation enacts less restrictive alternatives to occupational licensing in order to deregulate labor restrictions.
Additional Resources
- Report: Modernizing North Carolina’s Outdated Occupational Licensing Practices (John Locke Foundation)
- Report: At What Cost? State and National Estimates of the Economic Costs of Occupational Licensing (Institute for Justice)
- Report: Occupational Licensing: A Framework for Policymakers (Department of the Treasury Office, Council of Economic Advisors, and the Department of Labor)
Model Legislation
- Occupational Licensing Review Act (Institute for Justice)