Prioritize licensing reform for health and economic recovery

This article was originally published in the Washington Examiner.

For months, the COVID-19 pandemic has upended daily life and inflicted enormous human and economic costs. However, amid this unprecedented challenge, there have been a few bright spots worth highlighting, from neighbors volunteering to help one another to local organizations stepping up to meet the needs of their community.

One of the most encouraging responses to the pandemic has been the willingness of policymakers at every level of government to suspend unnecessary regulations that made it harder for medical professionals to serve or for businesses to operate. Now, as communities begin to reopen and seek to recover economically, it is more important than ever to remove the barriers that would inhibit those efforts while still protecting the public if the virus reemerges in the fall. Though there are many examples of unnecessary regulations that would hinder an economic recovery, occupational licensing restrictions should be at the top of the list.

Suspension or relaxation of occupational licensing restrictions was among the first action policymakers took to ensure a quick and effective response to the pandemic. So far, 35 states have allowed out-of-state medical personnel to receive temporary licenses to work in their jurisdictions. Furthermore, 31 states waived or modified certain licensing requirements, and 25 states allowed inactive or retired licensees to practice legally.

These were commonsense reforms that boosted healthcare capacity across the country at a time when it was most needed and should be continued for the duration of the pandemic. In addition to the changes for medical professionals, states should now consider broader reforms to occupational licensing restrictions as businesses reopen and people return to work.

An essential component in ensuring the swiftest possible economic recovery will be allowing the labor market to bounce back as quickly as possible. Occupational licensing restrictions affect nearly 25% of workers and already cost the American economy nearly 2 million jobs annually and increase costs for consumers. Furthermore, studies have yet to establish a conclusive link between occupational licensing restrictions and improvements in the quality of services.

Typically, such restrictions only serve as a barrier to low-income workers and aspiring entrepreneurs, raising the cost of entering into the occupation, and allowing current providers to block new competition. These are costs that decrease economic growth in the best of times and could be devastating to local economies looking to recover from pandemic-related shutdowns.

Because of their high costs, little benefit, and diminished opportunities, many states were already enacting occupational licensing reforms before the pandemic. In 2019, Arizona became the first state to recognize occupational licenses from out-of-state — a bold reform that will allow licensed service providers from other states to continue working in Arizona without having to get relicensed (with all the fees, educational requirements, and other obligations that entails).

Other states, such as Nebraska and Ohio, have adopted processes to review their licensing requirements on a regular basis. Missouri recently passed a law that would allow military spouses to transfer their licenses from out of state. States such as IowaLouisiana, and others are also considering various reforms to their occupational licensing laws as well. Building on this momentum makes even more sense as states look for ways to help their economies recover.

Finally, reforming occupational licensing laws would allow workers who experienced an unprecedented disruption to get back on track more quickly. Losing a job means more than just losing the income that it provides. Job loss also means missed opportunities to build new skills, make professional connections, and gain the experience necessary to launch a potential entrepreneurial endeavor.

Between 1993 and 2012, the average state added between 15 and 59 new low-income occupational licensing requirements, with an average of 31 new requirements. Economic research has indicated that such restrictions have both increased income inequality and decreased economic mobility (the ability for someone to earn as much or more than their parents did at their age). Removing such barriers would be an important step in allowing people to gain the skills and opportunities necessary to succeed far into the future.

Reopening businesses and getting people back to work will be challenging, especially with COVID-19 still posing a risk. Fortunately, with 510 regulations already waived to help fight the pandemic and the Trump administration’s executive order encouraging regulatory relief to support a robust economic recovery, there are actions policymakers can take to help the economy bounce back.

For state leaders, occupational licensing reform should be at the top of the list.

Director of Programs Ben Wilterdink has written numerous articles, op-eds, and analyses for the Archbridge Institute in several different outlets, on topics ranging from occupational licensing to youth employment.