John Locke Update / Research Brief

The post-COVID economy will need extensive occupational licensing reform

posted on in COVID-19 Series, Law & Regulation, Rights & Regulation
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In the best of times, occupational licensing was a notorious public-choice problem. It’s an extreme government regulation that ought to have been reserved for only the most extreme risks. Too often in North Carolina, however, policymakers have reached for that policy sledgehammer when a crescent wrench or even a level would have sufficed.

I’ll cease with the construction (or destruction) analogies. Occupational licensing is the only government regulation of work that goes so far as to outlaw you from even beginning to start work in your chosen field of labor if it falls under some occupational license’s scope of practice. You can’t earn a living without getting a license first.

A February 24 report from the General Assembly’s Program Evaluation Division (PED) acknowledged that occupational licensing is the state’s “Most Restrictive” occupational regulation, for use only when the risk to public welfare is highest.

The PED report showed that the licensing process is difficult to navigate, licensing doesn’t adequately account for experience or credentials, licenses take too long to get, and families stuck in licensing limbo lose income while the government loses tax revenue. An economy struggling to recover from COVID-19 and shutdown orders definitely doesn’t need any of that unless there simply isn’t any better way.

There are other things the government can do without being that extreme. They include: expand fraud protections, require inspections, require bonding, require registrations, and encourage and protect certification and credentialing. First and foremost, however, it is to trust private decisionmakers, private competitors, private review services and other information providers, and the backing of the courts.

The point is, there are plenty of less-restrictive regulatory options to choose from, depending on the occupation and challenges it presents, nearly all of which are best resolved with occupational freedom.

Extreme times are no time for extreme regulations

These are no longer the best of times. How bad things get will depend on how long before (and what remains after) Gov. Roy Cooper decides to lift his reactionary and ill-considered shutdown orders. But people are going to be desperate to get back to work. State budget coffers are going to gasping for people to get back to work. Destroyed businesses and uncertain futures will be making it hard enough for people to see a way forward.

The last thing they’ll need is government holding onto the business-as-usual old ways of cronyism like occupational licensing that everyone — Left, Right, and Center — already knew was bad for workers, consumers, economic growth, and anyone but already licensed insiders.

In the post-COVID economy, unnecessary licensing will be intolerable impediments to getting people back to work, providing for their families as quickly as possible and as best they can. Other states have already prevailed against the public-choice tides and passed significant reforms. North Carolina policymakers can learn from them and improve on their efforts in this harsher environment.

How should policymakers approach occupational regulation after the coronavirus? Here are several reforms to adopt and why:

The Right to Earn a Living Act

Enacted in Tennessee and Arizona and similar to laws adopted in Mississippi and Nebraska, the Right to Earn a Living Act includes tests for whether an occupational license is demonstrably necessary, carefully tailored, and designed for legitimate health, safety, and welfare objectives. Importantly, it includes a standard of applying the least restriction necessary to achieve a legitimate state objective in regulating an occupation.

The Occupational License Consumer Choice Act

This concept was introduced to New Mexico in 2018 by Gov. Susanna Martinez in an occupational licensing reform executive order. Under the provisions of an Occupational License Consumer Choice Act, service professionals in a field licensed within the state could retain their right to earn a living even without an occupational license.

Here’s how: by providing consumers with a non-license disclosure agreement before agreeing to do work. Consumers could then knowingly choose someone whose professional credentials in a state-licensed profession would include other things, including another state’s license, but not a state license. The non-license disclosure agreements would serve the state’s interest in having fully informed consumers, and it would otherwise encourage workers to seek and display any professional certification, other licenses, experience, and credentials.

Sunset with periodic review

Sunset with periodic review has worked for other kinds of state regulations. It makes sense to subject all licensing boards and their licenses to periodic review, with the goal being to eliminate any that are questionable.

Least-burdensome-state standard

One of the standards to apply to occupational licenses under review should be whether other states are more permissive and impose fewer or lighter burdens than North Carolina.

If any other state can allow its citizens to do a task without forcing them into the extreme of licensing, then North Carolina should extend to its citizens that freedom, too. If other states’ licensing requirements don’t require as many education/experience hours, as many exams, as much in licensing fees, etc., North Carolina shouldn’t either. In fact, it should be to North Carolina’s shame if we are more restrictive and less trusting of our own people than other states are of theirs.

Universal license recognition

For those licenses that remain — the ones the above reforms will have helped policymakers ensure are necessary, legitimate, without a lesser alternative, and still relevant — adopt universal license recognition for them, as was done recently by Arizona. With some exceptions, that reform covers most licensed professions in the state and lets occupational licenses be granted to licensed individuals in good standing moving from another state, regardless of reciprocity agreements.

Perhaps to a pre-COVID outlook, those reforms would seem far-reaching. The risk now, however, is in not doing enough to get North Carolinians back to work for their families.

For more information and good ideas adopted in other states, see:

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As Director of Regulatory Studies at the John Locke Foundation, Jon gets into the weeds in all kinds of policy areas, including electricity, occupational licensing, hydraulic… ...

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