Skorup: Reduce licensing, get Detroit booming again

Jarrett Skorup

If you want to earn a living as a landscaper in Michigan, you typically find a market, open up a business, advertise and get to work.

But in the city of Detroit, it’s a different story.

Michigan’s largest city, trying to come back from the largest municipal bankruptcy in this country’s history, requires landscape gardeners to be licensed and pay a fee if they want to earn a living in that trade. In fact, Detroit requires special licenses for a lot of occupations, including awning installers, window washers, movers, auctioneers, snowplowers and sign erectors.

I was able to find about 60 licenses required by the city. Many, like the above, are not required by the state or other municipalities in Michigan. And for many jobs for which the state does require a license, Detroit tacks on more fees and mandates for would-be workers.

Detroit’s strict licensing system creates artificial worker shortages. For example, Mayor Mike Duggan recently noted that constructing the new Little Caesars Arena requires the work of 120 plumbers every day. The problem is only 58 licensed plumbers live in the city. Perhaps that’s because Detroit requires plumbers to go through a uniquely complicated regulatory process and pay high fees just for the legal right to work.

The story is the same for other occupations. Elevator, mechanical, and boiler contractors all need to be licensed by the state. Once licensed, they are free to work in most any city in Michigan, except Detroit. There they have to pay extra fees and sometimes take an additional exam to get an extra license from the city.

This licensing scheme may pad the city budget in the short-term, but in the long run it leads to fewer jobs and more people working illegally. That’s not good for a city desperate for entrepreneurs and new investments.

Overly aggressive and burdensome licensing requirements are not just a problem in Detroit, however. They plague the entire state and the nation as well. Michigan mandates people in at least 160 occupations to pay fees, meet training and education requirements, and take tests before they are permitted to work.

My recent study reviews our state’s laws as well as the best research on this issue. Studies of occupational licensing, coming from academics, think tanks and the Obama White House, are very clear: Licensing laws lead to fewer jobs, higher prices for consumers, and are associated with exactly zero positive public health or safety effects. Licensing also exacerbates income inequality and increases the recidivism rate for ex-offenders by making it harder for them to find gainful and legal employment.

But back to Detroit: With state help, the city has improved its fiscal balance sheet. Crime is down and new construction up.

But if the Motor City wants to reclaim its standing as one of America’s great cities again, it must provide opportunities for people to want to work and live there. Improving its regulatory structure is something the City Council has shown little interest in, but doing so would pay long-term dividends. And the best place to start would be eliminating its needless licensing rules.

Jarrett Skorup is a policy analyst at the Mackinac Center for Public Policy. His study on the effects of state licensing can be found at www.mackinac.org/licensing.