Congress moves on occupational licensing reform, but there’s more to do

The common refrain in Washington, D.C. and around the country is that Congress is incapable of getting anything done. But amidst the partisan squalor, Congress did something surprising, if relatively unnoticed, last week: it enacted occupational licensing legislation along bipartisan lines.

The House and Senate passed the Strengthening Career and Technical Education for the 21st Century Act. Among the bill’s myriad features was a version of the New Hope Act, legislation that would allow states to use federal education funds to identify and examine licenses or certifications that “pose an unwarranted barrier to entry into the workforce.” States could potentially use this money to, say, form a commission to study existing licensing requirements in the state and identify ones that should be eliminated or curtailed.

{mosads}It’s wise to be skeptical of federal spending in such areas, but if Congress is already going to send these dollars out the door, states should at least be given the leeway to use them for productive uses like occupational licensing reform. While the New Hope Act is limited in scope, it nonetheless represents the first time Congress has substantively addressed occupational licensing. This victory is worth celebrating, but Congress should also consider other steps the federal government can take to tackle excessive licensing burdens.

Occupational licensing has rightly been recognized as one of the predominant labor policy issues in America. Excessive licensing mandates often block middle- and lower-income Americans from pursuing certain occupations since they lack the resources and time to meet the often unnecessary requirements for a license. The result is less competition within certain industries, which translates into higher prices for consumers.

According to the Institute for Justice, one in four Americans must obtain a government license in order to practice their occupation, and the average license requires at least one year of education, passing an exam, and paying several hundred dollars in fees. The Brookings Institution has calculated that licensing has resulted in 2.85 million fewer jobs across the nation, with a cost of $203 billion to consumers annually. 

Occupational licensing will always be primarily a state and local policy issue, but, as we state in our National Affairs article, this does not make the federal government powerless to help, nor does it require it to trample on principles of federalism to achieve worthwhile reforms.

Congress could pass more ambitious legislation, such as the Alternatives to Licensing that Lower Obstacles to Work Act (ALLOW), which would draw upon Congress’ authority over federal land to eliminate licensing requirements for national park guides and those working on military bases. This is particularly important, as military spouses were 10 times as likely to move to a new state in the past year than the average American — making it difficult for them to maintain their professions given the differing licensing requirements from state to state.

Most recently, Sens. Marco Rubio (R-Fla.) and Elizabeth Warren (D-Mass.) introduced the Protecting JOBs Act, which would condition federal funding on the elimination of state laws that revoke occupational licenses when people fall behind in student loans. Laws like these take away the primary source of income for many struggling to catch up on student loan payments. Federal involvement makes sense in this area since it was the Department of Education that originally encouraged states to enact these laws. 

If more congressional action seems unlikely anytime soon, federal agencies could implement their own reforms. The Department of Veteran Affairs recently expanded the scope of practice for nurse practitioners in its system by allowing them to engage in more primary care activities, instead of restricting these activities to licensed doctors. Other federal agencies could follow suit by scouring their regulations and eliminating any similarly burdensome requirements. Agencies like the Government Accountability Office could review federal contracting practices to ensure that contractors are not being hassled with unnecessary licensing mandates.

Another option would be to step up the Federal Trade Commission’s antitrust enforcement efforts that target crony and collusive licensing boards around the country. These boards often face little oversight and are stocked with industry insiders who have an economic incentive to prevent new competitors from joining their trade. The Supreme Court found such arrangements to be unconstitutional in 2015, and the FTC should use this precedent to bring additional enforcement actions against other state licensing boards. To do so, Congress should consider modestly increasing funding for FTC enforcement actions, or simply require the agency to dedicate more of its existing resources to these efforts. 

Any of these ideas would bring about real change in the occupational licensing realm without unduly trampling on state prerogatives. By passing a version of the New Hope Act, Congress has made a promising down payment on licensing reform. Now it is time to pass more far-reaching reforms.

Jarrett Dieterle is director of commercial freedom and a senior fellow at the R Street Institute, a nonprofit group dedicating to promoting limited government. Shoshana Weissmann is a policy analyst and the digital media specialist at R Street.