Remarks on Occupational Licensing, The ALLOW Act

July 12, 2016

As the policy scholars in this building know better than most, the American labor force – one of the economy’s core building blocks – faces many structural challenges today.

Millions of Americans are out of work, and for a longer period of time – six months on average – than in recent economic recoveries. Millions more are underemployed, working in part-time jobs even though what they want – and need – is full-time work. And the share of Americans participating in the labor market is hovering near its lowest point since 1977.

Meanwhile, there’s a growing sense that today’s economic challenges are somehow different – more intractable – than those that we have overcome in the past. Americans aren’t just losing jobs, they’re losing faith – in the future and in the basic fairness of the American economy.

A recent survey asked more than 1,500 unemployed Americans whether they agree or disagree with this statement: “The way the economic system is set up in the United States only benefits the rich.” A full 83 percent of respondents agreed.

Sadly, they’re not entirely wrong.  

The principle at the heart of the American economic system is equality of opportunity. In practice, this means eliminating all forms of legal privilege and political favoritism, so that the economy rewards hard work, initiative, good judgment, and personal responsibility – virtues and habits that take time and diligence to cultivate but are within the reach of all citizens. 

This has always been the source of our economy’s moral legitimacy and material success. When opportunity is open to all who are willing to work for it, and when the legal barriers to success are kept to a minimum, the system is – and is seen to be – both fair and dynamic.

But over the past several decades, the economic value of diligence and drive has faded, as the legal obstacles to work have multiplied.

As a result, economic success today increasingly depends on acquiring the right combination of credentials and licenses – bureaucratic status symbols that tend to require time and money that only the most privileged Americans can afford.

This obsession with credentials has transformed the way we think about education and work – the two most important pathways to self-improvement. And it is just one of the reasons why so many of our fellow citizens today believe the economy is designed only to benefit the rich.

Nowhere has this trend been more egregious than in the proliferation of occupational licensing requirements by state governments.

Occupational licensing laws require individuals to meet qualifications – like passing an exam, obtaining a professional certification, or completing a training course – in order to work in certain jobs.

Ostensibly, the purpose of licensing requirements is to protect public health and safety. And in certain cases, this makes perfect sense.

Imagine someone who has never taken a medical exam trying to perform surgery, or someone who has never received any formal training trying to install the electrical system in your home.

Life would be much more difficult – and certainly more dangerous – if there were no way to differentiate between a quack and a licensed physician, or an amateur handyman and a professional electrician.

There’s also the matter of upholding ethical standards. Imagine how many fraudulent lawyers there would be... okay, imagine how many more fraudulent lawyers there would be without the threat of disbarment looming over the legal profession.

State governments have a legitimate interest in protecting the welfare of their citizens. And if occupational malpractice poses substantial public risks, I think many Americans would agree that the state should limit employment in that area only to those who have demonstrated proficiency and complied with basic ethical standards.

But there are only so many jobs that fit this description.

What about truck drivers, athletic trainers, hair stylists, florists, preschool teachers, or pest exterminators?

It’s hard to see why people who want to work in these jobs should be required to pass exams, complete extensive training, and obtain government permission before they can legally be hired. And yet that’s exactly what has happened in states across the country.

In 1950, fewer than 5 percent of American workers were subject to licensing requirements. Today, that figure stands at around 30 percent. And in many cases, would-be workers have to pay large sums of money or wait long periods of time – or both – just to obtain the government’s permission to work.

The specific requirements vary across states and occupations. They range from the sensible to – more often – the absurd. But the upshot is always the same: by making it more difficult to enter an occupation, licensing requirements block younger and less fortunate workers from better and higher-paying jobs.

By increasing the number of artificial barriers standing between an individual and his or her gainful employment, licensing requirements undermine the moral legitimacy of the economy and sap the energy and dynamism from the American workforce.

That’s why Senator Sasse and I have teamed up to introduce the ALLOW Act – which stands for Alternatives to Licensing that Lower Obstacles to Work.

I will let the esteemed panelists that we have here today dig into the details of the legislation, but essentially the ALLOW Act leverages Congress’s Article I authority over federal enclaves – including the District of Columbia, military bases, and certain National Parks – to advance several models for licensing reform that state governments can follow.

The best part about this bill is that we don’t need to wait for Congress to act – though we certainly hope it does! The point is, states can follow any one of these models right away. And at a time when the American worker is losing confidence in the future and the fairness of our economy, governors and state legislators should waste no time in implementing their own versions of these reforms.

The American worker’s dynamism and talent for personal reinvention has long been the envy of the rest of the world.

When Alexis de Tocqueville visited the United States, he marveled at the ease with which Americans switched from one profession to another, adapting to the needs and opportunities of the moment.

Only in America was it possible to meet – as Tocqueville did – individuals who had been “successively attorneys, farmers, traders, evangelical ministers, [and] doctors.” Only in America was the enterprising spirit so common, the “prejudices of profession” so rare.

We now risk losing this essential character of the American economy.  The spirit of enterprise is still alive and well in this country. But too often misguided government policies stifle it before it can grow and fulfill its potential. Sadly, this is especially true for the most disadvantaged among us.

Rethinking our approach to occupational licensing laws – so that our economy has room for the full range of human talents, aspirations, and imaginations to flourish – is a modest but important step in making sure that our economy is set up to benefit the hard work of all Americans.

It’s now my privilege to hand the podium over to my friend – and the coauthor of this licensing reform bill – Senator Sasse of Nebraska.