Introduction
All people in North Carolina have a self-evident, inalienable right to “the enjoyment of the fruits of their own labor.” It’s in North Carolina’s Constitution, Article I, Section 1.
Occupational licensing threatens this fundamental right. It is an entry barrier against people enjoying the fruits of their own labor in many kinds of jobs. It means you cannot even begin to work in a licensed field until you have satisfied all the state’s requirements first. A 2020 report to the General Assembly by that body’s Program Evaluation Division rightly characterized occupational licensing as the state’s “Most Restrictive” occupational regulation, to be used only when the “Risk to Public Welfare” was highest. It’s an extreme regulation supposedly for use only in extreme cases.
Policymakers believe licensing ensures safety and quality of service work. But does it? Research findings on that question are inconclusive at best. The most consistent finding in the academic research literature is that occupational licensing boosts the earnings of people already in the profession – by limiting their competition and allowing them to charge higher prices.
For workers, getting a license costs time and money: school tuition and fees to satisfy educational credits, time spent studying, sitting fees for required qualifying exams, time spent logging job experience, opportunity costs of forgone work, passing a criminal background check, and license and renewal fees. These costs can be very large hurdles for the poor, the less educated, minorities, mothers returning to the workforce, relocated military families, older workers seeking a new career, migrant workers, workers seeking better opportunities by moving across state lines, and even workers with conviction records unrelated to the work they seek to do.
Just how necessary are most occupational licenses? States disagree widely. Of more than 1,100 state-regulated professions, only 60 (a little over 5%) are regulated by all states. But employment within an occupation grows 20% faster in states where it isn’t subject to state licensing than in a state where it is. States grow best under policies that increase economic opportunities for everyone, promoting and encouraging competition, innovation, job growth, investment, and wealth expansion. Occupational licensing does just the opposite.
Key Facts
- North Carolina has 59 occupational licensing boards licensing 22% of the state’s workforce. According to the Economic Development Partnership of North Carolina, the state has “almost 950 regulatory, state-issued and occupational licenses and permits: 319 occupational licenses, 498 business licenses, and 80 business/occupational licenses.” That count doesn’t include local licenses and permits.
- In 2015, the U.S. Supreme Court ruled against the state in North Carolina Board of Dental Examiners v. Federal Trade Commission, making it clear that licensing boards everywhere were not safe from federal antitrust violations.
- Many states reformed their licensing regimes in the wake of the North Carolina Board of Dental Examiners case. Some de-licensed occupations (most notably, Rhode Island eliminated 27 licenses). Arizona, Tennessee, Mississippi, and Nebraska passed the Right to Earn a Living Act or similar reforms. A near-unanimous Florida legislature passed the Occupational Freedom and Opportunity Act, thereby eliminating many licenses and lowering several burdens to getting licenses. A growing number of states now have universal license recognition. Nebraska, Idaho, and Ohio instituted sunset with periodic review of occupational licenses, and New Mexico added occupational licensing consumer choice.
- North Carolina, which unwittingly touched off this revolution, has still not reformed.
- The Right to Earn a Living Act makes occupational licensing the regulation of last resort to be used only if ensuring public safety and health cannot be met by other, less intrusive state regulations.
- North Carolina’s default policy option should be occupational freedom, trusting competitive forces, consumers, information providers, and the courts. If legitimate, serious safety concerns are identified, policymakers have several policy options that preserve occupational freedom without barring entry: inspections, bonding, registration, enforcing the Unfair and Deceptive Trade Practices Act, redress of grievances through courts, and recognizing certification. They can even create specialty licensing allowing medical insurance reimbursement for emerging health care practices that fall outside the scopes of practice of current North Carolina medical licenses, such as those of naturopaths, behavioral analysts, music therapists, etc. (the specialty licenses wouldn’t forbid practice to those who choose not to get one).
- The keys to how much state intervention there should be in a service field are these: Use the policy option that matches the concern, then stop right there and don’t regulate any further.
Recommendations
1. Adopt the approach taken by the Right to Earn a Living Act to protect people’s freedoms to work and to choose.
Make licensing the policy of last resort, and include tests for whether an occupational license is demonstrably necessary, carefully tailored, and designed for legitimate health, safety, and welfare objectives.
2. Adopt the Occupational License Consumer Choice Act.
Protect people’s right to work while promoting fully informing consumers through non-license disclosure agreements, and otherwise encourage workers to seek and display any professional certification, credentials, and outside licensing (and prosecute fraudulent claims of credentials).
3. Implement sunset with periodic review for all licensing boards and their licenses.
Eliminate questionable ones.
4. Strive to become the least burdensome state.
Licensing is the most extreme form of occupational regulation. Why should North Carolinians need licenses for work that other states simply allow? For licensed work, why should North Carolinians be made to fulfill more education credit hours, log more experience, take more exams, and pay more in licensing fees than their peers in other states?
5. Adopt universal license recognition for remaining licenses.
6. Enact specialty licenses for medical insurance reimbursement for emerging health care practices that won’t restrict practitioners who don’t pursue the specialty license.
How North Carolina Compares With the Nation in Licensing Low-Income Professions, Affected Occupations, Amount in Fees, and Required Training and Experience
Source: Lisa Knepper et al., License to Work: A National Study of Burdens from Occupational Licensing, 3rd edition, Institute for Justice, November 29, 2022.
Layers of Policy Alternatives Before Arriving at the Extreme of Occupational Licensing
