Barriers to entry: Occupational licensing laws hold Michigan back - MI Capitol Confidential
Speaking of ways to increase healthcare costs.
Monday quiz: can you identify a special interest that gains with more licensing?
About 160 occupations in Michigan now require a license
Getting licensed to represent a client in a Michigan court requires fewer classroom hours than you would need if you just wanted to cut that client’s hair.
Aspiring lawyers in this state need to complete a mere 1,200 hours of classroom education, while barbers must put in a staggering 1,800 hours of coursework.
It's a head-scratching paradox that begs the question: Does a sharp legal argument require less sharpening than a quality haircut?
Occupational licensing creates a hindrance to economic growth, and it's not just barbers who are affected. Many blue collar workers find themselves caught in a system where they are required to invest a substantial amount of time and money, often outweighing the wages they anticipate earning in their chosen profession. This burden can make it impossible to thrive.
Licensing imposes a range of requirements on individuals entering licensed professions, including additional training, education, fees, exams and paperwork. Stringent requirements lead to reduced employment opportunities in licensed occupations, stifling competition and increased the price of goods and services for consumers.
While licensing has a role in the society — nobody wants an unlicensed lawyer or doctor — Michigan has extended the scope of licensing requirements beyond what can be justified by public safety, health or security.
Approximately 160 occupations in Michigan now require a license. But for many of these professions, the risk to the public of an unlicensed worker is minimal. Do individuals really need go through 1,500 hours in college and incur associated fees up to $230 to pursue a career in cosmetology? Such regulation can create roadblocks to entrepreneurship and hinder economic growth.
The rate of at which Michigan adds occupational licensing requirements has increased in the past few decades. In 1950, only 5% of jobs required workers to obtain occupational licensing. Today, that figure is closer to 25%.
By streamlining the licensing process and evaluating the necessity of licensing in various professions, Michigan could promote economic growth, increase job opportunities, and empower entrepreneurs to thrive without excessive barriers to entry.
Will Young is a Michigan Capitol Confidential intern.
Licensing is so ubiquitous, we take it for granted. Given its negative impact, it deserves much closer scrutiny.
Mackinac Center hosted an educational event on licensing earlier this month, and reports on it here.
As an attendee, I found it very informative, and recommend watching.
Nearly 1 million Michiganders are subject to occupational licensing laws
Mackinac Center forum considers occupational licensing and its discontentsLabor shortages in various parts of the economy have led to increased interest in reforming occupational licensing, as the National Conference of State Legislatures observed in March 2022. Michigan is no stranger to the problems of occupational licensing, and experts from the Mackinac Center and elsewhere laid out some of them in an Oct. 6 “Issues and Ideas” forum at The Louie Building in Lansing.
State-imposed regulatory barriers, including education and training requirements, contribute to a worker shortage and increased costs for consumers, said participants in the event, “Occupational Hazard: State Licensing Laws in Michigan,” which is now available on video. Close to one million Michigan residents are subject to these requirements, with an untold number excluded from their chosen line of work.
“When education requirements are too high for the job or unnecessarily restrictive, they end up preventing people from getting into that profession,” said Conor Norris, who studies the labor market at West Virginia University.
Norris is part of the Knee Center for the Study of Occupational Regulation, at the university’s John Chambers School of Business and Economics.
Educational requirements tied to occupational licensing can reduce the supply of workers, Norris said. He put the figure between 17% and 27% for occupations with state-imposed requirements.
Regulatory and legal barriers to work cost America two million jobs each year, Norris said. The barriers include education requirements, training requirements, and moral-character requirements in licensing schemes. The country suffers $7 billion in lost output and $185 billion in misallocated resources, he said.
Businesses that face rising consumer demand will have a hard time satisfying customers when demand increases, experts at the event said. Licensing slows the entry of new workers into a field of work, increasing costs to the consumer.
Some licensing requirements are enacted even when there is little history of consumer fraud, abuse, or mistreatment of workers, said Jaimie Cavanaugh, an attorney with the Institute for Justice.
Cavanaugh cited an industry group called the U.S. Lactation Consultant Association, which lobbied the Georgia Legislature to implement stringent new requirements for lactation consultants. There were no widespread reports of trouble caused by unlicensed consultants, but lawmakers responded in 2018 with a new law anyway.
The special interest group, Cavanaugh told NBC News, pushed the state to require the 800 specialists in Georgia to complete “two years of college-level courses and at least 300 hours of clinical experience.”
The group cited its desire to increase members’ reimbursements from insurance companies as a reason for its campaign. The Institute for Justice filed a lawsuit in 2018 against the state on behalf of a lactation consultant, Mary Jackson, and her nonprofit, Reaching Our Sisters Everywhere. Jackson and IJ won at the state’s highest court on May 31, 2023.
The court issued a unanimous opinion, saying that under the Georgia Constitution, people have the right “to pursue a lawful occupation of their choosing free from unreasonable government interference.”
Michiganders seeking to work in more than 180 occupations face licensing requirements, according to a September 2023 report from the Mackinac Center. The report calls on the state to review its licensing requirements annually and repeal unnecessary ones.
A stream of the event:
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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