How to reform Idaho licensing to help less-educated workers get jobs | Peter Crabb

Business owners often complain about onerous regulations. But it’s the smallest of small-business owners who get heard the least.

I’m talking about those people in low-wage work that requires a government license.

In his State of the State speech, Gov. Brad Little was “looking out for the little guy” when he said we must “knock down barriers to prosperity by continuing to advance the Licensing Freedom Act,” an executive order that requires a review and overhaul of the state’s professional licensing system.

This is a great place for reform, because the system covers jobs not historically considered “professional,” like cosmetologists or landscape contractors who own businesses.

Economic theory and evidence show that government policies can improve the functioning of markets when the risk to consumers or our resources is high. This is the argument most often put forward for professional or occupational licensing. Laws are passed to “protect” consumers from potential harm by service providers. But as is always true, there is a cost to this government intervention in the market.

Research shows that licensing requirements are contributing to higher unemployment in the most vulnerable sectors of the economy, low-wage occupations. In the 1950s, roughly one in 20 workers in the United States needed a government-issued license for their chosen occupations. Today, more than one in four full-time workers need a license to work in their fields, as reported by the U.S. Department of Labor.

For more than five years, the Institute for Justice has studied regulatory requirements for over 100 lower-income occupations across the country. In its most recent report, the institute found Idaho to be in the “top half of broadly and onerously licensed states — ranking 16th — because it licenses a higher number of occupations than most states.”

The study indicates that occupational licensing creates an employment barrier for minorities and those with less education. Thus, the governor’s efforts to reform this area are likely to benefit the most economically vulnerable segment of our population.

Throughout the U.S., the unemployment rate for workers ages 16 to 19, a group with less education and lower-than-average skills, is nearly four times the national rate of 3.5 percent. Further, there are currently 1.8 million workers over 25 years of age with no more than a high school diploma among the ranks of the unemployed.

The professional licensing systems in Idaho and across the country lower the employment and income opportunities for those most in need. Business regulations will always be with us, but fewer and lower-cost licensing requirements will help those with the smallest voice.

Peter Crabb is a professor of finance and economics at Northwest Nazarene University in Nampa. pcrabb@nnu.edu

This story was originally published January 13, 2020 at 10:54 AM.