Not-so-sweet home Alabama: Occupational licensing laws hurt workers

© Contributed Edward Timmons, left, is director of the Knee Center for the Study of Occupational Regulation, and Conor Norris is a research analyst.

Alabama’s occupational licensing laws are making the state a not-so-sweet home. But some common-sense reforms can help Alabama residents. 

Recently, next-door neighbor Mississippi passed comprehensive licensing reform. Licensing laws have grown substantially in recent decades, which is why these reforms can have such a large impact. In the 1950s, just five percent of workers required a license in the United States. Today, that number exceeds 18 percent. 

Supporters of licensing claim that its growth results in benefits for consumers that outweigh costs. By setting standards that aspiring professionals must meet before entering a profession, licensing is designed to improve quality and protect consumers from harm.

How does licensing live up to its goals? Not so well, it turns out. A report from the Obama administration in 2015 found little evidence that licensing had any measurable improvement in the quality of services. Other research shows that consumers care more about other things, such as price and online reviews, than licensing status for service providers. 

And the costs of occupational licensing are quite large. Alabama has the 20th most burdensome licensing requirements in the country, according to a report by the Institute for Justice. A recent study estimated that licensing laws cost the state 21,000 jobs, which translates to $56 million of lost output per year. 

Licensing restrictions pose real barriers for workers that make it more difficult to enter professions. Before someone can earn a living, they must apply to a state board to demonstrate that they’ve met the requirements. These include education, training, exams, and of course fees. It should not be surprising that low income workers find these especially challenging to meet. They often find it the most difficult to take time off of work and sacrifice pay to enroll in education and undergo training. 

Our research suggests that, from 1993 to 2012, Alabama added requirements for 36 occupations that do not require four-year college degrees. This is five more than the national average.  Professions such as bartenders, manicurists, and massage therapists all added licensing requirements in Alabama. These professions give people without a college degree a chance to earn a comfortable living. Reducing the career opportunities for lower-income workers only hurts them and makes climbing the income ladder that much more difficult.

We typically think of licensing laws as something for highly skilled professionals like lawyers, physicians, and other health care providers. While it’s true they are licensed, the growth in licensing over the past few decades has been for professions which traditionally require less education to enter. This makes the path to the middle class out of reach for too many workers.

These barriers to entry make it more difficult for people to earn more than their parents and contributes to income inequality. According to our research, Alabama’s licensing requirements increase income inequality by over nine percent. By reducing the supply of workers in a given field, licensing artificially increases those professionals’ wages and forces other potential workers into lower-paying fields. The process hurts the workers trying to enter these fields and the consumers who are forced to pay higher prices.

But we don’t have to accept this fate. Right now, Alabama has several options for effective reforms. One example is a licensing sunset review, where the Legislature periodically reviews evidence to determine if a license improves consumer safety and hurts opportunities for aspiring workers. 

Another potential reform is universal recognition of out-of-state licenses. Most states, including Alabama, require people moving to their state to obtain a new license before they can practice. Universal recognition makes this process easier and simpler, accepting a license granted by another states. Mississippi recently became the eleventh state to pass universal recognition. 

For too long, occupational licensing restrictions have been limiting opportunities for the people of Alabama. Now that neighboring states are enacting common-sense reforms, Alabama should make sure it doesn’t fall behind and let too much regulation crush the American Dream for workers.

Conor Norris is a research analyst and Edward Timmons is director of the Knee Center for the Study of Occupational Regulation. Timmons is also professor of economics at Saint Francis University in Loretto, Pennsylvania.

This article originally appeared on Montgomery Advertiser: Not-so-sweet home Alabama: Occupational licensing laws hurt workers