Ronald Reagan famously remarked, “I believe the best social program is a job.”
Indeed, gainful employment brings countless benefits both to the employed and to society: the dignity of work, financial security and independence, opportunity for advancement, productive effort that contributes to the community and economy, and much more.
So why do state governments, including North Carolina, place unnecessary and often arbitrary burdens on people wanting to earn a living?
The regulation known as occupational licensing makes it illegal for an aspiring worker to start work in a profession before meeting minimum entry requirements set by law. These requirements typically include attaining specified levels of education and training, passing exams and paying a fee to the government.
To evaluate the impacts of North Carolina’s occupational licensing laws on its labor market and economy and offer recommendations for how to remove these barriers to entry for workers, the John Locke Foundation commissioned a study earlier this year.
Authored by researchers at the Knee Regulatory Research Center at West Virginia University, the report found that North Carolina makes it illegal to work without first obtaining a license for 186 occupations, ranking 11th-highest nationally and tied for most in the South Atlantic region.
Making it more difficult to earn a living poses a drag on the economy and job growth. As the report informs us, “Estimates from the Institute for Justice suggest that occupational licensing costs (North Carolina) more than 42,500 jobs and $112 million annually.”
The burdens of occupational licensing fall disproportionately on low-income workers, who can least afford to pay for the mandatory education and the fees that such regulations require. The result is people being compelled to choose less desirable (but easier to attain) professions or dropping out of the workforce entirely.
“Mandatory education programs, hands-on training under licensed professionals, and licensing exam requirements create hurdles for aspiring professionals,” the report says. “The additional time and cost of meeting these entry requirements reduce the number of professionals by an average of 17 to 27 percent.”
With fewer workers available to perform certain jobs, consumers have fewer options and, in turn, are forced to pay more. According to the report, “Estimates suggest that occupational licensing raises the prices of services by anywhere from 3 to 16 percent.”
But rigorous occupational licensing requirements protect consumers from unqualified service providers, increasing quality and safety, right?
That’s the typical justification for occupational licensing regimes, after all, but the report points out that their supposed impact on quality is not really the case. The report’s authors found “the vast majority of the 22 studies that have tried to estimate the effect of licensing on quality did not find an effect.”
With so many costs and few — if any — detectible benefits for the public, why do occupational licensing regulations continue to be so popular?
The main benefits of licensing accrue to the professionals already practicing these professions, who can most easily afford the licensing requirements. Creating barriers to entry to a profession protects those professionals from competition, allowing them to charge higher prices and command higher salaries at the expense of consumers. The report finds that “the licensing wage premium is around 17 percent.”
To address the costly burdens — especially on the poor — of occupational licensing, North Carolina legislators have options. Foremost among them is a “Right to Earn a Living Act.”
Under this act, occupational licensing becomes the regulation of last resort and must be justified to continue to exist. As the report describes such justification, under a Right to Earn a Living Act, licensing laws “must be legitimate, demonstrably necessary, and narrowly tailored to a specific risk.”
The burden would fall on the licensing boards to prove their requirements are “narrowly tailored to accomplish a compelling government interest.”
Furthermore, the state should create a “licensing budget” that establishes goals for reducing the number of occupations requiring licensure. A commission should also be formed that would regularly review the necessity of existing licensing requirements and closely scrutinize any new licensing requirements being proposed.
Additionally, legislators could adopt “universal recognition” to allow for workers already licensed in other states to work in North Carolina without also fulfilling our state’s requirements. Eliminating duplicative education and fees will make North Carolina more hospitable to workers. Currently, 26 states — including Virginia, Georgia and Florida — have universal recognition.
If the best social program is a job, as Reagan believed, then North Carolina should take strides in making it easier to get a job and earn a living.
Brian Balfour is VP of Research at the Locke Foundation in Raleigh.