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Research & Commentary: Colorado Should Consider Occupational Licensing Reform

March 9, 2018

In this Research & Commentary, Matthew Glans examines Colorado's efforts to reform its occupational licensing laws.

Burdensome licensing laws can have a wide-ranging effect on a state’s economy. When a state imposes a burdensome and unnecessary licensing regime, competition shrinks and the price of basic services increases. In many instances, these laws are unnecessary; government involvement does not guarantee better or safer services. While Colorado is one of the more effective states at limiting its licensing standards, there are still several areas where it can improve.

Rolling back excessive certification and using voluntary certification are viable options for empowering consumers to choose the best services on their own, allowing the free market to self-regulate. By regulating occupations through registration, certification permits, and licensure, states often have a strong influence on dozens of industries, making it more difficult for new and existing businesses to operate or expand, and creating a system in which cronyism thrives.

Colorado legislators are now considering legislation that would require state and local governments to review their licensing rules and determine if they are truly necessary. The act would explicitly require all licensing rules or ordinances “be limited to those demonstrably necessary and carefully tailored to fulfill legitimate public health, safety, or welfare objectives.” This would make Colorado the national leader in occupational licensing.

The new proposal would specifically give state agencies and local governments one year to review their regulations and comply with the law. Once the review period is over, any citizen would be allowed to petition for repeal or a change in specific regulations; the agency then has 90 days to reply. If the petition is denied, a challenge can be made in court, with the court being instructed to rule in favor of the party challenging the rule if the rule is found to either burden the creation or market entry of a business or is not demonstrably necessary to fulfill a legitimate objective. The legal burden for these standards would be the preponderance of evidence.

In a 2015 article published by The Hamilton Project, Morris Kleiner, a professor of public affairs at the University of Minnesota and a chair in labor policy for the AFL-CIO, examined the effects of occupational licensing laws on the price and quality of products and found these laws unnecessarily harm consumers by increasing prices of goods and services without providing any appreciable quality increases.

Occupational licensure laws have an especially strong effect on lower-income consumers and entrepreneurs and the licensing process places unnecessary hurdles for jobseekers. According to IJ, on average, low- and medium-income jobseekers in licensed professions are required to spend nine months in education or training, pass an exam, and pay more than $200 in fees.

Like all states, Colorado needs to create more jobs for its citizens. Loosening its tight occupational licensing laws would be a good step toward opening up additional industries for expansion and empowering entrepreneurs to start their own businesses, the ultimate engine for economic growth.

The following documents examine occupational licensing in greater detail.

Right to Earn a Living Act
In this paper, the Goldwater Institute argues the burdens of occupational licensing in many states are excessive and should not be placed on those who want to earn an honest living; instead, governments should bear the burden of justifying the restrictions. The authors argue states should adopt the Right to Earn a Living Act, model legislation crafted by the Goldwater Institute to protect freedom of enterprise. By doing so, the authors argue lawmakers would ensure economic opportunity is a reality, not merely a promise.

A Brief History of Occupational Licensing
In this article, Paul Larkin of the Meese Center for Legal and Judicial Studies examines the history of occupational licensing and argues today’s licensing regimes prohibit individuals from engaging in conduct that poses virtually no harm to any person or the community at large. Larkin says strict licensing regimes cause economic harm and limit job growth.

Bottleneckers Beware: Occupational Licensing Reform Bills Filed Across the Nation
Matt Powers of the Institute for Justice examines the growing trend in states to cut back on burdensome occupational licensing laws, which hold back dozens of industries nationwide.

Occupational Licensing: Another Government Obstacle to Earning a Living
Byron Schlomach, director of the Center for Economic Prosperity at the Goldwater Institute, addresses the growing problem of occupational licensing. He demonstrates licensing makes services more expenses while limiting people’s ability to enter a chosen profession. Reforms that would improve competition include right-to-earn-a-living legislation, the ability to vet and repeal hindering licenses, and many more.

We’re All Licensees Now
Jack McHugh of the Mackinac Center documents the lack of evidence behind the claims of a need for occupational licensing. “Protecting the public” is the disguise the government uses to impose unfair regulations that hurt consumers and workers, he writes. In a specific example, he notes the average citizen of Michigan usually loses as a result of licensing laws.

Case Example: Occupational Licensing Unveiled—It’s Huge
Occupational licensing has increased dramatically in recent years. There is little evidence these laws protect the public or improve the quality of services. The restrictions hinder competition within professions and fail to produce the results the government claims. It is crucial to establish a check-and-balance mechanism to ensure licensure laws are actually effective. Otherwise, consumers pay for the unnecessary increased regulation.

Occupational Licensing: Ranking the States and Exploring Alternatives  
Adam Summers of the Reason Foundation addresses the impact of occupational licensing on the labor market. Service quality and health and safety “may actually be diminished by occupational licensing,” he finds. Through high prices, reduced competition, and arbitrary requirements, the government thus hurts the average consumer and worker. Licensing is for special interests, not public interests, he writes. These laws hurt the poor and minorities disproportionately, he notes, proving the government is not helping those they say they are.

Occupational Licensing: Protecting the Public Interest or Protectionism?
Morris Kleiner reflects on the growth of the strictest form of occupational regulation, licensing. The result is potential job losses and an increase in prices, he finds. The costs of occupational licensing show the practice must be ended or changed, he says, and he proposes certification of occupations which does not limit entry and mobility and may prevent job losses.

The Prevalence and Effects of Occupational Licensing
Morris Kleiner and Alan Krueger note research shows nearly 30 percent of the U.S. workforce is required to obtain a license to work. The authors find licensing costs consumers more and reduces their ability to choose services for themselves.

License to Work: A National Study of Burdens from Occupational Licensing
}The Institute for Justice conducted a national study to measure how burdensome occupational licensing laws are for low-income workers. The authors found “the barriers imposed by licensure schemes on those wishing to enter the 102 lower-income occupations we studied are not only widespread but often severe, arbitrary and irrational.” The authors conclude, “As millions of Americans struggle to find productive work, one of the quickest ways legislators can help is to simply get out of the way: Reduce or remove burdensome regulations that force job-seekers and would-be entrepreneurs to spend precious time and money earning a license instead of working.”


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

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Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst. @HeartlandGR