Occupational Licensing Reform Can Help Ease Workplace Shortages

An op-ed in Governing caught my attention the other day, with this headline: “A False Solution for Our Workforce Challenges.” The gist of the op-ed is that the removal of regulatory barriers to work, especially occupational licensing regulations, would not help businesses overcome workplace shortages.

Notably, the authors are in the employ of trade associations whose raison d’etre includes creating and enforcing occupational licensure. They cite one study (a study that was commissioned by the Alliance for Responsible Professional Licensing), saying that:

“[The study] found that businesses unequivocally value licensing and the trust in qualifications that it conveys, even in today's challenging labor environment. A significant percentage of businesses rely on licensing to make informed hiring choices, and absent licensing they would have less confidence in the competence of professionals. Fully 92 percent of businesses agreed that licensing plays a crucial role in accurately assessing qualifications and making confident hiring decisions; 85 percent said they would have less confidence in the competence of professionals if licensing were downgraded.”

Of course, occupational licensing reform isn’t just about the needs of existing businesses. A big reason that reform is needed is because regulations such as occupational licensing impede entrepreneurship. New businesses don’t pop up as often in highly regulated industries. So a survey of existing businesses would necessarily miss an important tranche of responses: those of would-be entrepreneurs.

Also, if licensing is valuable to businesses for the purposes of screening potential hires, we should note that certification by a private organization (such as the ones that the authors work for) could accomplish the same goal without inhibiting the labor market. A business could choose to hire only board-certified employees. Another business might develop a different way of screening for qualifications. Government intervention is not necessary to achieve the results that the study touts.

More noteworthy is that the authors ignore basic economics. If regulatory restrictions around the right to work in a given field are removed, then more people would be able to work in that field. In economics terms, this would represent an increase the potential supply of workers. One of the best things a government could do if it wants to address workplace shortages is to implement policies that increase the labor supply. Occupational licensing reform is an easy win in that category.