RE: License to Compete: Occupational Licensing and the State Action Doctrine
Dear Senators Lee and Klobuchar:
On behalf of Koch Industries, thank you for convening a hearing on occupational licensing. We commend you for shining a light on this little-known—but far-reaching—issue. As a growing number of policymakers and Americans realize, the steady growth of occupational licensing in recent decades has created many barriers to opportunity that prevent many Americans, including the less fortunate, from finding a career or starting a small business.
We support occupational licensing regimes to the extent they protect public safety and health, and improve quality. However, the exponential growth of required occupational licenses is a burden on the U.S. economy, and their harm often falls on those who can least afford to bear it. Before you can work in many professions, you are forced to seek permission from your state or local government in the form of an occupational license. To make matters more difficult, you often have to pay a significant sum of money or spend months or even years in training before beginning your career. In July 2015, the White House released a report,' detailing how occupational licensing laws have proliferated: "[M]ore than one-quarter of U.S. workers now require a license to do their jobs." At the state level, "the share of workers licensed... has risen five-fold since the 1950s." One recent academic estimate even puts the number of licensed jobs at nearly one in three.
The list of licensed professions is long and appears over inclusive. Regrettably, it covers jobs in which the barriers to entry — costly fees and excessive training hours — are disproportionate to the work being licensed. Included in the list are barbers, cosmetologists, packagers, tree trimmers, landscape workers, locksmiths, travel agents, upholsterers, and many other entry and mid-level professions. In May 2012, the Institute for Justice surveyed 102 of the most common low- and middle-income jobs in 2012 and found that all are licensed in at least one state—with seven licensed in all 50 states and the District of Columbia.2
Overall, more than a thousand professions are licensed in one or more jurisdictions across the nation. For many of these occupations, a certification process, which is less onerous and less expensive, could ensure public safety, health, and quality in a more efficient manner for the individuals seeking to enter a profession.
The effects are widespread and deeply concerning. A growing body of data shows that occupational licensing harms economic growth, stifles entrepreneurship, and limits economic mobility for the people who need it most. In some situations, the licensing regimen unfairly allows a competitor to restrict competition with no real benefit to public safety, health or quality.
In its July report, the White House correctly noted that licensing can "raise the price of goods and services" and "restrict employment opportunities" for those who need them most. A 2015 study by Professor Morris M. Kleiner found that occupational licenses have prevented the creation of nearly 3 million jobs and cost consumers a stunning $203 billion in higher costs every year. 3
Additionally, occupational licenses turn away potential entrepreneurs, especially in low-income communities. A 2015 Goldwater Institute study found that heavier licensing correlates with an 11 percent lower entrepreneurship rate for people at the bottom of the income scale.4
Moreover, licenses harm those who have run afoul of the criminal justice system. Once nonviolent ex-offenders pay their debt to society, they should be encouraged to rejoin it by finding a job or starting a business. It is elementary that a job is key to reducing recidivism and allowing ex-offenders to get their lives back on a productive path. Sadly, these returning citizens' own government too often imposes a blanket prohibition that prevents them from pursuing a career that requires a license without regard to the individual circumstances involved in their offenses. These blanket prohibitions can compromise public safety by increasing recidivism and the associated fiscal costs of incarceration.
Finally, the burden occupational licenses place on military families is particularly troubling. The need to obtain a new license to practice the same work simply because of a move to a new state seems unnecessary and most obtrusive. We commend the White House for their efforts in advocating for state reciprocity in such instances, and believe that such reciprocity should be extended to all Americans.
Once again, thank you for convening a hearing to highlight this important issue, and thank you for the opportunity to submit this letter of support. We hope your leadership will encourage your fellow lawmakers—at the local, state, and federal levels of government—to begin identifying ways to eliminate those occupational licensing requirements that do not further public safety, health, or quality, and that act as barriers to entry and opportunity for many people in this country. The well-being of millions of Americans, especially the less fortunate, depends on principled lawmakers breaking down these barriers to opportunity for their constituents.
Mark V. Holden
Senior Vice President and General Counsel
Koch Industries, Inc.
Occupational Licensing: A Framework for Policymakers;
https://www.whitehouse.govisites/default/files/docs/licensing report final nonembargo.pdf
for Justice, License to Work,
May 2012; http://ij.org/report/license-to-work/
M. Kleiner, Reforming Occupational Licensing Policies,
The Hamilton Project, Jan. 2015 6;
http://www.hamiltonproject.org/assets/legacy/files/downloads and links/reform occupational licensing policies k le iner_v4 .pdf
Goldwater Institute, Bootstraps Tangled in Red Tape,
May, 2015; http://goldwaterinstitute.org/en/work/topics/free-enterprise/entrepreneurship/bootstraps-tangled-in-red-tape/