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Opportunity: Rein in Occupational Licensing (Federal, State)

Occupational licensing erects barriers to workers entering certain fields and to prospective entrepreneurs creating businesses that can compete with incumbent firms benefiting from licensing protection. Policymakers should:

  • Replace licensing with less onerous forms of regulation, such as certifications or permits, in industries where public health is not seriously threatened.
  • Streamline remaining licensing requirements. States can develop regional or interstate compacts to ensure occupational licenses are transferable to or recognized by neighboring states, just like a driver’s license. Federal pre-emption would accomplish a similar purpose.
  • Reduce blanket bans and “good character” clauses in remaining licensing requirements, which erect barriers to entrepreneurship for the formerly incarcerated.

Supporting Evidence

  • Today, about 29% of jobs require a government-issued license, a dramatic increase from the 1970s, when just 10% of workers were licensed.
  • Research suggests that stricter occupational licensing requirements lead to higher recidivism rates, increasing recidivism by more than 9% in strict states and decreasing it by as much as 2.5% in more lenient ones.

In 2017, Arizona’s governor issued an executive order requiring all state licensing boards to perform a review of all existing licensing requirements. The Arizona Legislature also passed legislation to establish a cause of action that allows workers to challenge licensing requirements that serve no legitimate health or safety purposes.