The American Dream Isn’t Dead, But It Is Ailing

By Edward Timmons

This article originally appeared in The Hill, November 30, 2017.

Is the American dream dead for young Americans?

Research published by the Equality of Opportunity project suggests that only 50 percent of children born in the 1980s are earning more than their parents. This is down from 90 percent of children born in the 1940s.

There are good arguments that the full picture may not be as bleak as it seems. What we can all agree on, however, is that too many poor children remain poor in adulthood. Nearly half of all parents in the bottom quintile of family income have children that have family income in the bottom quintile during adulthood.

What explains this lack of upward mobility for America’s poor? There are a number of possible explanations such as a lack of access to education or a side effect of growing up in a poor neighborhood.

Are there other possible explanations? I don’t think enough consideration has been given to the role of the growth of occupational licensing laws.

Occupational licensing laws, in short, require individuals to obtain a government permission slip to work. Occupations ranging from physicians and dentists to interior designers and shampooers are all subject to occupational licensing requirements in some states. The percentage of workers directly affected by occupational licensing has grown tremendously over the last several decades. In the 1950s, less than 5 percent of American workers were required to obtain a license to work. Today, that number is more than 22 percent.

Understanding how occupational licensing laws have grown across states and how this has affected opportunities for workers looking to achieve the American dream has previously not been explored. In a new study published by the Archbridge Institute, I investigate this possibility.

Working with Brian Meehan of Berry College and Andrew Meehan of Central Michigan University, we produced new data on the growth of occupational licensing laws over the last 20 years. We found noteworthy differences from state to state.

From 1993 to 2012, Louisiana added new licensing requirements for 59 low- and moderate-income occupations. Louisiana is the only state in the United States that requires florists to obtain a license to work. In Oklahoma, by contrast, new licensing requirements were added for only 15 occupations.

It should be noted, however, that policy makers in Oklahoma should also carefully consider pursuing occupational licensing reform. The second edition of the Institute for Justice publication “License to Work” ranks Oklahoma 18th with respect to the level of burden of its existing licensing laws for low- and moderate-income occupations.

But what does this mean with respect to economic mobility? Our analysis suggests that there is evidence of a negative correlation between growth in low- and moderate-income occupations and economic mobility.

Is growth in occupational licensing the smoking gun? In other words, has growth in licensing killed the American dream?

More research clearly needs to be done, but there is good reason to believe that growth in licensing has played a role. By making it harder for poor Americans to begin working, workers may become discouraged and not participate in the labor market. Research suggests that licensing may also lead to higher recidivism rates — limiting opportunities for those that made a mistake in their past to re-enter the work force.

As policymakers search for ways to help America’s poor, occupational licensing reform should be considered as a means of granting individuals access to climb the income ladder to prosperity, rather than barring them from the climb with unnecessary red tape.

Dr. Edward Timmons is associate professor of economics and director of the Knee Center for the Study of Occupational Regulation at Saint Francis University.