Occupational licensing can make the labor shortage worse

This op-ed originally appeared in the Deseret News.

Jeff McNeil, a general contractor and small business owner, worked as a fully licensed residential general contractor for 34 years. When Jeff wanted to make the switch to doing general contract work for commercial construction, he was denied a commercial contractor’s license due to a lack of experience.

Denying a government permission slip to someone who had been a general contractor for over three decades for lack of experience is clearly odd, but historically, denying qualified individuals the right to perform their jobs has been the unfortunate reality of many occupational licensing laws.

After his inauguration, Gov. Spencer Cox took direct aim at these licensing laws that have been consistently harming consumers and economic progress in Utah. The governor’s first executive order was dedicated to this issue and set the stage for important progress now happening in the 2022 legislative session.

The executive order required state agencies to review all occupational licenses to ensure they are necessary and are not outdated or incomplete. The subsequent review brought together stakeholders to forge a path to better cut the red tape that exists around occupational licensing. And throughout the summer and fall, state officials updated the public with their progress and plans to reform how licensing laws are created and reviewed.

Senate Bill 16, sponsored by Sen. Curtis Bramble, R-Provo, would begin to implement the proposed changes by creating the Office of Professional Licensure Review. This newly proposed office would be a resource to systematically and thoroughly review both newly proposed and existing licenses, to inform legislators about their burden, necessity and impact.

It is currently difficult for elected officials to truly understand whether a license is necessary— or whether the many steps required to obtain it are each necessary. Existing workers in the industry often defend the burdens they had to previously overcome, employing protectionist arguments to subject new competitors to the same process. But that’s not why licensure should exist, and that’s why legislators need more information to better understand the right balance.

Last year offered a cogent example of why these reforms are so critical. Bramble sponsored a bill to make clear that you don’t need a government license to dry or style someone’s hair. The cosmetology industry lost its mind, with petitions and protests demanding that these individuals be subjected to the same heavy licensing burdens as if they were cutting and using chemicals on hair.

Legislators ultimately passed the bill over their complaints, but the circumstance itself suggests the need for broader reform to ensure that policy is set by data, not demands from those who favor the status quo. If licensure is about protecting people from potential harm, then the restrictions placed on workers should be narrowly tailored only to what’s absolutely essential to mitigate that harm.

There is urgency to get this right. A Utah State University study estimated that occupational licensing in the United States is responsible for 2.8 million fewer jobs and costs to consumers exceeding $20 billion annually. As these government permission slips make it challenging for individuals to enter certain occupations, licensing requirements reduce the available workforce for many industries. The devastating effects of this are being particularly felt within Utah in the form of a labor shortage.

Frankly, legislators have struggled for years to identify the best way to move forward in broadly reforming licensure laws to ensure a better balance exists between public safety and the right of individuals to work in their chosen occupation. Freeing up the market sometimes requires navigating a political battlefield mired in mini turf wars by incumbents protecting what they perceive is rightfully theirs.

But the cause is a worthy one, and the Legislature is right to respond to Gov. Cox’s call for reform. Too many workers have been shut out of the market because of regulation, and too many consumers have been deprived of the benefits of more competition. Utah has the opportunity to demonstrate leadership in licensure reform by pushing forward with the passage of SB16 and creating a forward-thinking process to review and reform licensure laws in the years to come.