Occupational Licensure: It’s Not Just Regulations That Are The Problem
The Pelican Institute has long advocated for increased freedom for Louisianans to work and pursue the American dream. In particular, we’ve called to reform government regulation and interference through occupational licensure – a form of government permission slips for individuals to work within a given profession – unless there exists significant risks to consumers or the public at large.
There is very little evidence that licensing improves the quality of services that consumers receive. Research consistently finds that it reduces the supply of workers, increases prices and other burdens for consumers, limits innovation, and reduces workers’ ability to seek opportunity in other states.
There is, however, evidence that entrepreneurship is an avenue out of poverty for low-income individuals. The rate of entrepreneurship is actually higher for low-income individuals and has proven to be a good strategy for improving one’s income over the short and long term. Researchers from the Aspen Institute tracked low-income entrepreneurs over time and found their household assets increased by an average of $15,000, 53% moved out of poverty, and the amount of public assistance they accepted declined by 61%. Given that Louisiana is consistently ranked 1st or 2nd in the country for poverty, enabling and promoting entrepreneurship should be a priority for our state.
But that just isn’t easy in Louisiana. A 2017 report by the Institute for Justice revealed that Louisiana requires government licensing for 77 of 102 low- and moderate-income professions, making Louisiana one of the most widely licensed states in the country. From 1993-2012, states on average added licensing requirements for 31 low- and moderate-income professions. Louisiana added them for 59 of those professions. Our state is tied for 1st in the nation with Washington state for number of occupations licensed, 7th highest for licensing fees, and 6th overall for licensing burden. Louisiana also ranked 7th highest in terms of licensing barriers for ex-offenders who are trying to get back on their feet through work instead of returning to a life of crime.
Why are we making it so hard for Louisianans to work?
It typically boils down to one of three reasons. One, any time there’s an issue in the news or a constituent brings forward a concern, elected officials and/or government agencies rush to try to solve it and claim credit, as opposed to allowing the market to sort things out. It may serve as a small win in a re-election campaign, but in the long-term, it grows the size of government and makes it harder for people to work in the profession. Two, it’s used as a way for current individuals in a profession to keep competitors from entering the profession. Three, it’s become a tool for individuals working within a profession to drive up prices and/or their own compensation, saying after advocating for the new regulations that higher pay is warranted because of the time and money the regulations require.
Thankfully, earlier this year, Louisiana joined a few other bold states in passing what’s known nationally as the Right to Earn a Living Act. This allows individuals to challenge licensing boards’ regulations if they don’t serve a legitimate health, welfare, safety, or fiduciary standard objective, and that challenge can be made directly to the appropriate licensing board or to the courts. That will be a tremendous help for people working or seeking to work in those professions, but there are also many similar requirements in state statute that likely fail to meet that same standard. In order to change or repeal those, the state legislature must act.
For example, state law establishing the state Horticulture Commission specifically mandates that the commission license florists. The statute provides that “the commission shall regulate” florists, and goes on to say that no person engaging in a regulated profession shall receive revenue “unless the person holds a valid appropriate license issued by the commissioner, or has a regular employee who holds a valid appropriate license issued by the commissioner, or is employed by or is working under the direct supervision of a person who holds a valid appropriate license issued by the commissioner.” In case you’re wondering: Louisiana is the only state where florists must be licensed.
There’s work left to be done here; we can’t claim victory just yet. The Louisiana Legislature, which passed legislation earlier this year establishing a health, safety, welfare, or fiduciary standard for occupational licensing regulations, needs to hold itself to that same standard when it comes regulatory requirements in their own state statutes. It’s time for the many laws that don’t serve a necessary purpose to be repealed so that government can get out of the way, and Louisiana’s people can get to work.