Local Governments and Occupational Licensing Absurdity

The proliferation of state licensing requirements is already bad enough. There's no need for cities to pile their own mandates on.
May 30, 2018
Fortune teller
(Flickr/Bob Doran)
By C. Jarrett Dieterle  |  Contributor
Director of commercial freedom policy at the R Street Institute

Last year, New York City made headlines for cracking down on unlicensed dog sitters. While forcing well-meaning pet sitters to get a kennel license might seem like an only-in-Manhattan problem, the reality is that localities across the country are rife with absurd occupational licensing requirements.

To date, much of the criticism around the issue has focused on state governments' licensing mandates -- such as Louisiana's for florists or Massachusetts' for fortune-tellers -- but municipalities are often just as bad. One of the worst offenders is Detroit.

According to the Mackinac Center's Jarrett Skorup, Detroit requires licenses for at least 60 occupations. While licensing may be appropriate for some professions, such as engineers and doctors, nearly half of the occupations licensed by Detroit are already licensed by the state of Michigan. Detroit's requirements simply layer on more fees and mandates. Further, many of the occupations licensed in Detroit are not licensed in other cities in the Wolverine State, which raises questions about whether those local licenses are really necessary.

Burdensome occupational licensing laws have garnered increased attention in recent years as the mandates have proliferated. One in four Americans now must obtain a government license to work in their chosen occupation, up from one in 20 in the 1950s. Many licenses require workers to undergo expensive educational training and pay high fees, resulting in mandates that disproportionately hurt low-income individuals who lack the resources and time to meet these standards. And licensing advocates' argument that the mandates protect the public from unethical, incompetent practitioners are undercut by many of the licensing boards' records of poor oversight.

Occupational licensing requirements are also notorious for limiting the mobility of those working in licensed occupations. Because states generally have wildly divergent licensing laws, those who are licensed face the daunting prospect of having to renew their license after moving across state lines, which can trigger a whole new set of fees and educational requirements. Given that geographic mobility has long been identified as a key component of economic success in America, limiting people's ability to move in this way is particularly harmful.

Mobility concerns are even more salient in the context of local licensing. For example, if a plumber moves from Ann Arbor to Detroit -- a mere 40 miles down the road -- he would have to obtain a Detroit plumbing license and comply with significant paperwork burdens to continue his trade, despite the fact that Detroit is currently experiencing a shortage of plumbers.

Struggling Rust Belt cities like Detroit have emphasized their desire to attract entrepreneurial talent in an effort to rebuild. But occupational licensing requirements run counter to this goal. These localities should review their licensing laws to determine which ones can be repealed or replaced with less burdensome options such as inspections or bonding.

States can also play a role in cleaning up out-of-control local licensing mandates. Tennessee and Wisconsin recently passed legislation preempting localities from instituting licensing requirements beyond what is already licensed at the state level. The effects of this type of legislation can be significant: It's estimated that if Wisconsin had passed its preemption legislation just a decade earlier, it would now have 100 fewer local licenses.

Given Detroit's penchant for licensure, it's unsurprising that similar preemption legislation has been introduced in the Michigan legislature. The House bill would prevent localities from enacting new occupational licensing requirements beyond those industries that are already licensed. It would also prevent local governments from adding further licensing requirements onto occupations that are already licensed at the state level.

State-level preemption may not fully prevent backward licensing regimes from taking hold given that, as noted, many state governments have their own share of silly licensing laws. But at the very least it would ensure greater consistency among a state's municipalities. To give its reform even more bite, Michigan could also consider getting rid of many existing local licensing requirements.

Some licensing critics have floated the idea of more federal preemption. While full-scale federal preemption may be a bridge too far, policymakers would be wise to consider whether greater federal licensing could be appropriate in certain limited contexts. The federal government already issues pilots' and mariners' licenses, for example, and technology continues to make professional work that crosses state lines more prevalent in industries such as telemedicine. In such situations, federal licensure might be a good solution.

In the end, the best way to combat the scourge of excessive licensing is to repeal more licensing laws, or at least to find ways to reduce their scope and burden. But until that happens, state lawmakers should work to stem the tide of local licensing. Efforts like those in Michigan are a good start.