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.
- 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.