Burdensome licensing laws often produce wide-ranging negative economic effects, including a decrease in business competition and increases in basic service costs. Government involvement does not always guarantee better or safer services. In many instances, licensing laws are unnecessary, which is why Ohio is now considering a proposal to diminish state licensing boards’ authority. If successful, this would promote competition and economic growth in the Buckeye State.
Ohio is in dire need of licensing reform. The Institute for Justice (IJ) ranked Ohio 38th among all states for its burdensome state licensing regime. Ohio law grants occupational licensing boards wide-ranging control over licenses, the application process, and licensing costs. In many cases, industry leaders serve on licensing boards and wield great power, presenting an important conflict of interest. These leaders are able to influence how and when their potential competitors receive licenses, making it easier for them to directly undermine market competition.
The Ohio Senate recently passed a bill that would rein in licensing boards’ power by establishing legislative oversight and empowering the Legislative Service Commission to review licensing policies and dissolve unnecessary boards. If passed, the bill would require the Legislative Service Commission to submit a public report on the impact of new and reauthorized licensing boards.
Under the bill, any occupational licensing authority would need to undergo a review by a licensing committee every five years. If deemed unnecessary, a board would be shut down. The bill would also establish a new standard for licensing reviews that would encourage competition and economic growth. Any board operating under the new standards must ensure all licensing rules and regulations are narrowly tailored and impose the fewest restrictions necessary to guarantee public safety.
The negative impact of Ohio’s licensing laws should not be understated. The state’s licensing requirements have “prevented more than 7,000 people between the ages of 25-45 from pursuing licensed occupations, and has discouraged people from migrating to Ohio to enter the job market,” according to a 2017 study from the Buckeye Institute.
Morris Kleiner, a University of Minnesota professor 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, according a 2015 article published by The Hamilton Project.
Occupational licensure laws have an especially strong effect on lower-income consumers and entrepreneurs, and the licensing process places unnecessary hurdles for jobseekers. 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, according to IJ.
To increase economic opportunities for all Ohio citizens, the Buckeye State should reject unnecessary regulatory hurdles. Removing onerous occupational licensing laws that create barriers to entry and stifle innovation would be a good first step toward achieving this goal.
The following documents examine occupational licensing in greater detail.
Occupational Licensing Is Hurting Ohio
https://www.rstreet.org/2018/04/16/occupational-licensing-is-hurting-ohio/
In this paper, Alan Smith of The R Street Institute examines the effect of occupational licensing laws on Ohio’s economy and the legislative efforts to reform these laws.
Still Forbidden to Succeed: The Negative Effects of Occupational Licensing on Ohio’s Workforce
https://www.buckeyeinstitute.org/library/docLib/2017-12-18-Still-Forbidden-to-Succeed-The-Negative-Effects-of-Occupational-Licensing-on-Ohio-s-Workforce.pdf
In this report from the Buckeye Institute, Orphe Pierre Divounguy, Bryce Hill, and Greg R. Lawson examine the effects of occupational licensing on Ohio’s workforce and economy. The report found “the burden of Ohio’s occupational licensing requirements has a greater impact on middle-aged and low-income workers, and those without a college degree. In essence, occupational licensing erects barriers to employment to those most in need of good-paying jobs,” the authors wrote.
Restoring the Right to Earn a Living: A Common-Sense Solution to Occupational Licensing Job Barriers
https://pelicaninstitute.org/restoring-the-right-to-earn-a-living/
Goldwater Institute Director of National Litigation Jon Riches examines the burdens inflicted by onerous job licensing requirements in Louisiana. “For too many professions, occupational licensing requirements do not exist to protect public health and safety—rather, they exist to protect incumbent industries or special interests,” Riches wrote. “The percentage of jobs requiring a license has exploded over the last 60 years, and in a state like Louisiana, which has slow job growth and low wages, thousands of job-seekers are being unnecessarily blocked from meaningful work.”
Bottleneckers Beware: Occupational Licensing Reform Bills Filed Across the Nation
http://ij.org/bottleneckers-beware-occupational-licensing-reform-bills-filed-across-nation/
Matt Powers of the Institute for Justice examines the growing trend in states to reduce burdensome occupational licensing laws, which impede dozens of industries nationwide.
Right to Earn a Living Act
https://goldwaterinstitute.org/article/right-to-earn-a-living-act/
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 enact a Right to Earn a Living Act to protect freedom of enterprise. By doing so, they will ensure that economic opportunity is not merely a promise but a reality.
Occupational Licensing: Ranking the States and Exploring Alternatives
https://heartland.org/publications-resources/publications/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.
The Prevalence and Effects of Occupational Licensing
https://heartland.org/publications-resources/publications/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
https://heartland.org/publications-resources/publications/license-to-work-a-national-study-of-burdens-from-occupational-licensing-2
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.
The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lindsey Stroud, a state government relations manager at The Heartland Institute, at [email protected] or 312/377-4000.
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance.
