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Another View -- Will Ruger and Dana Wade: NH should remove licensing barriers to the workplace

March 20. 2017 9:43PM

It should come as no surprise to most Granite Staters that their home state has ranked first and second in the nation as the “freest” and “best” place to live, respectively. But what you may not know is that New Hampshire has a long way to go in providing its citizens with the freedom to work and earn a living.

It has the 28th most burdensome occupational licensing laws in the country. These rules, or government “permission slips” to work, are the most onerous for those who can least afford their extensive training, fees and other prerequisites. By reining them in, New Hampshire can be a model of freedom for all of its residents, not to mention the rest of the nation.

In every state, occupational licenses erect significant barriers to job opportunity and flexibility. They can be both obstacles to entering the workforce and deterrents to switching jobs in a changing economy. And the burden is only getting worse. In the 1950s, less than 5 percent of the workforce needed an occupational license. Today, in New Hampshire, 14.7 percent holds a license, or roughly the same percentage of workers employed in the state’s entire retail sector.

Further, occupational licenses disproportionately harm struggling families. On average, licenses for low- to moderate-income professions in New Hampshire require 230 days of training, $209 in fees and two exams. Some occupations fare even worse. For example, it takes $860 in fees to become a licensed sign language interpreter, 731 days of training to become a mobile home installer, and 350 days of training to become a cosmetologist. Can’t afford to become a full-blown cosmetologist? In New Hampshire, even working as a makeup artist requires a license.

Having a license can mean the difference between climbing the ladder of success and getting left behind. But for many low-income Americans, especially those supporting families and working other jobs, making this type of investment is simply infeasible.

Most of the time, trade associations and other interest groups claim that licensing requirements are necessary for health, safety and quality control reasons. But these arguments don’t hold water for many professions, like auctioneers and hair braiders, where the cost of getting a license clearly outweighs the benefits.

Data across occupations fails to demonstrate that having a government-issued license provides its stated benefits. In fact, a 2015 report from the Obama White House concludes that “empirical research does not find large improvements in quality or health and safety from more stringent licensing.” Furthermore, user applications with real-time reviews like Yelp and Angie’s List provide benefits to consumers that may obviate the need for a government stamp of approval.

It’s telling that the growth in occupational licensing has been largely driven by professional associations and not consumers. These requirements tilt the playing field in favor of those already working in a specific area, reducing competition for incumbents, creating barriers for those looking to start or switch careers, and often pushing workers toward their second- or third-best option. Unlicensed workers on average earn 10 to 15 percent less than licensed individuals with similar qualifications. Prices are driven higher as a result, and consumers have fewer choices of providers for all sorts of services.

Instead of further expanding occupational licensing regimes, it’s time to take a hard look at their impact on opportunity as well as their effectiveness. Reforms that eliminate the most egregious requirements and encourage optional or third-party certification for low-risk jobs could be steps in the right direction. In addition, sunrise provisions, which require compelling evidence for establishing new licenses, as well as sunset provisions, which require regular re-evaluation of existing licenses, could be considered. New Hampshire can lead the way in these areas — with the added benefit that such actions would help it maintain its place on the “freest” and “best” state lists for years to come.

Most importantly, reforming occupational licensing rules would increase competition and choice for consumers, thus providing a chance to climb the economic ladder for those who need it the most.

Will Ruger is the vice president of research and policy at the Charles Koch Institute. Dana Wade is a senior research fellow at the Charles Koch Institute. Both will participate in a discussion of occupational licensing in New Hampshire tonight at the Radisson Hotel Manchester Downtown, starting at 6 p.m.

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