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 preemption 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.
Several states, including Florida, Mississippi, Missouri, and Ohio, enacted occupational licensing reform in 2020. Florida reduced barriers to occupational licensing through reciprocity, eliminated repetitive business licenses and fees, and reduced licensure education requirements, such as dropping the required training for a barber from 1,200 to 900 hours, removing registration requirements for hair braiding, and preventing license suspension due to unpaid student loans. Missouri also expanded reciprocity by allowing professional licenses in other states to remain valid in Missouri in fields such as nursing, teaching, and cosmetology for those who are in good standing with the jurisdiction from which the license was issued. The reforms in Mississippi and Ohio reduced licensing barriers for military families.
- Since the 1960s, the number of jobs that require an occupational license has increased from about 5% to 25%.
- 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.