Column: Scrap the licensing bottleneck

Lee McGrath and Kathy Sanchez

A growing chorus of policymakers across the political spectrum is championing a way to create more jobs for ordinary Americans: reform the nation’s occupational licensing laws. Today, one in four workers in America must obtain government permission to earn an honest living — a dramatic, fivefold increase from the 1950s.

A new study by the Institute for Justice,License to Work, takes a comprehensive look at licensing barriers for 102 lower-income occupations across all 50 states and the District of Columbia. On average, Michigan forces workers in these occupations to pay $242 in fees, pass about two exams, and spend 255 days in education and experience. Instead of earning a living, many Michiganders have to earn a license.

Worse, Michigan’s licensing barriers are often irrational. For example, a license to become a cosmetologist or barber takes 1,500 and 1,800 hours of training respectively. But a license to become an emergency medical technician, who must administer urgent, life-saving care, merely requires 194 hours of coursework. It makes no sense why a barber should have to complete nine times as much training as an EMT.

That red tape adds up. According to a report by the Mackinac Center for Public Policy, the state’s excessive licensing requirements could mean 125,000 fewer jobs and cost consumers $10.4 billion every year. Additionally, the study found that Michigan spends over $150 million each year to manage and enforce the state’s 164 occupational licenses.

Proponents argue that licensing is necessary to protect health and safety, but researchers have found little evidence to support these claims. Instead of protecting consumers, licensing laws often protect those who already have licenses from competing rivals. These “bottleneckers” seek to create bottlenecks that limit entry, which allows them to charge higher prices.

Michigan provides a textbook example of bottleneckers in action. In 2012, the state’s Office of Regulatory Reinvention (ORR) released a report that called to repeal many occupational licenses, including for dietitians and nutritionists. And when a state lawmaker introduced a repeal bill, bottleneckers mobilized. Members from the Michigan Dietetic Association (MDA), the Michigan Academy of Nutrition and Dietetics (MAND) and several practicing dieticians all testified against the reform, while others personally lobbied legislators to kill the bill.

The bottleneckers didn’t cite any actual cases of consumer harm. That’s because they couldn’t. The Michigan Nutrition Association, a competing professional group to MDA and MAND — and whose members were excluded from the state’s licensing regime — backed the repeal bill and as part of their efforts completed research that found “almost no data pointing to significant, discernible harm” in states without those licenses. Tellingly, the closest any bottlenecker came to a specific example was mentioning a fitness teacher who promoted the paleo diet.

But the hearings did confirm what reform proponents have claimed all along. Licensing poses real barriers to workers by killing competition and hoarding opportunity. In fact, one former member of the Board of Dietetics and Nutrition testified that during her tenure, the board only received complaints ratting out unlicensed competitors, all of which came from licensed dietitians.

Fortunately, reformers were able to beat the bottleneckers that time. HB 4688 passed both the Michigan House and Senate by wide margins, before Gov. Rick Snyder signed the bill in 2014. Since then, dietitians and nutritionists have been free to practice without a permission slip from the government. And during that legislative session, Michigan also scrapped regulations for auctioneers, community planners, interior designers and several other occupations. In the new year, lawmakers should build on these past successes and eliminate needless licenses to free workers from red tape.

Lee McGrath is senior legislative counsel at the Institute for Justice. Kathy Sanchez is a strategic research associate there.