When people toss around the word deregulation, many associate it with pro-business, anti-consumer policy. Removing financial industry oversights can lead to the next banking crisis. Removing environmental protections threatens wildlife and climate change progress.
Many regulations have their purpose and provide a worthwhile benefit that justifies the cost. I know I personally support many of the national park and monument protections that help maintain much of our nation’s natural beauty, even if they restrict private land ownership.
Not all regulations are worthwhile though and some deregulation can be quite beneficial to all parties involved. In particular, many of the policies that states have in place regarding occupational licensing prove to be quite a burden for many people.
A Heavy Weight
According to the Brookings Institution, roughly 25-30% of occupations require a license. Some of these requirements are obvious for safety reasons. Doctors cannot practice until they are licensed, ensuring a minimal amount of knowledge and ability before patients can rely on them for expert opinions.
In many cases though, license requirements were originally implemented as a barrier of entry into a field rather than as a necessary precaution. By limiting the available pool of workers, those who do have a license face less competition in acquiring jobs and see higher wages as a result. Many can be traced back to racist intentions as well. White professionals would want to keep minorities out of their field, so burdensome requirements were implemented as a means of restriction.
Obtaining the license is often where most of the burden is felt. Many states have regulations in place that make the process much harder than it should actually be.
For example, if a resident of Louisiana wants to become a florist, they must first obtain a license by passing a test. To take this test, they must pay $150 and also get to the capital, Baton Rouge, the only place where the test is administered. For those who live the 4 hour drive north of the capital in places like Shreveport, this adds a barrier for entering the floral profession that is not necessarily needed.
On top of this, many requirements vary state to state, and a license in one place may not count in another. Someone in Massachusetts can get certified as a hair dresser, but may not be able to work at a salon in another state that requires their own certification or more hours of training. Does cutting hair change much state to state? Not at all. These regulations put a burden on people as a result.
Disproportionate Effect on Low Income Individuals
Jobs like being a hair stylist or a florist do not require a substantial amount of schooling or training, and can be done with just a high school degree. These more trade based jobs also provide higher wages than other professions like food service that also require only a high school diploma.
As a result, these kinds of jobs can provide meaningful opportunities for lower income individuals who cannot afford college or more extensive job training. Many regulations make it harder for people in poverty to enter these professions, though.
Going back to the Louisiana florist, losing 8 hours of potential work in order to get to and from the capital is quite a lot for someone who may be living paycheck to paycheck. If this person cannot afford a car either, there is no way of getting through this barrier. This person will then be restricted from entering the higher paying field since the barrier of entry is too high. Someone with financial support from other family members or a spouse with a high paying job would be much more able to overcome this barrier, limiting the floral profession to more well off individuals.
The lack of mutual license recognition state to state makes this problem even worse. To be an interior decorator in Florida, a person must first have a bachelors degree. If the interior decorating market is very cold in Georgia, where no degree is required, a decorator from Atlanta may look into moving south to Florida where the market may be stronger with more opportunities. They do not have a college degree though, and as a result, they are barred from working in Florida. The decorator will then be stuck with less job opportunities because of the state to state certification discrepancies. This severely limits opportunity for those low income workers who cannot afford to get a degree or are otherwise limited in their ability to get a license.
Arizona Making Progress
Over the past few years, Arizona has taken steps in order to ease many of these restrictions and make themselves an easier state to work in.
In 2017, Governor Doug Ducey signed legislation waiving licensing fees for those who are below 200% of the federal poverty line. In 2018, state lawmakers also made it easier for people with criminal records to obtain licenses. Ex-convicts have an even harder time finding work (see my older post) and have high recidivism rates due to the lack of opportunity, so moves like this can help provide potential work to those who struggle the most to find it.
More deregulatory measures are being introduced as well that would further reduce the burden. A state senator recently introduced a bill that would eliminate licensing requirements for salon workers who only blow-drive, style, and straighten hair. These workers currently need 1,000 hours of training before being able to perform these tasks, even if they do not use any scissors or chemicals.
Possibly even more beneficial could be the bill introduced this month that would allow the recognition of other state’s licenses. This could remove a significant barrier for individuals in other states who are trying to relocate for work. For example, a Los Angeles EMT struggling to find work could move to Arizona where the job market is potentially stronger and get a job without the burden of having to get re-certified. By removing barriers to relocation, market forces will help attract licensed workers from cooler labor markets in neighboring states to jobs that may be more widely available in Arizona, helping to make individuals better off.
Already, these worker friendly policies have attracted over 100,000 workers from other states. Arizona is helping itself out on top of thousands of Americans by reducing the licensing burden to work there.
Smart Policy That Can Also Fight Poverty
Reducing the burden of license requirements provides better access to well paying jobs for everyone, especially low income individuals who are affected more drastically. With a lower cost to finding a good job and more opportunity available, many people could more easily find their way out poverty without the government spending any money.
Many high regulation states like California should take note of the benefits that Arizona’s policies bring. The deregulatory framework could give other states a basis to provide better access to jobs for their own residents.