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Today, in front of a key panel of experts, Democrats of the House Small Business Subcommittee on Economic Growth, Tax and Capital Access advocated for a licensing process that protects public safety, while bolstering entrepreneurship. In recent decades, laws to mandate occupational licenses have changed the scope of the American labor force. In today’s hearing, Democrats stressed that while well-intentioned, many state licensing laws create a barrier for entrepreneurs to carry out a job—especially for low-income and immigrant workers. 

“While the origin of these limits had noble goals of protecting the safety and well-being of residents, we can think of instances where the requirements have proven burdensome and bear little resemblance to the function they were intended,” said Subcommittee Ranking Member Rep. Dwight Evans (D-PA). “Though this issue is primarily one for the states to take up, it is nevertheless important for us to bring it to the forefront because it has an effect and can help guide policymaking at the federal level.” 

In recent decades, the number of licensed workers in the United States has grown exponentially. While just 5 percent of the workforce was licensed in the early 1950s, 29 percent are licensed today. As an issue delegated to the states, licensing laws are determined by a board of professional members or a state legislature, and enforced through a licensing board. However, there is a broad lack of cohesion among states, with fewer than 60 occupations regulated in all 50 states. 

“Overall, occupational licensing and the lack of consistency across state borders with respect to the education and training of licensed practitioners can carry broad implications for the economic well-being of individuals,” said Dr. Morris Kleiner, Ph.D. and Professor, Humphrey School of Public Affairs, University of Minnesota. “Evidence indicates that occupational licensing influences the allocation of labor in critical areas of the economy, such as health care, construction, and education, and has had an important influence on employment, wage determination, employee benefits, and prices.”

While licensing remains an issue for individual states, Democrats conveyed the importance of shedding light on issues with the process from the federal level. In 2015, the Obama Administration released a budget proposal that allocated $15 million to study the impact of occupational licensing. Today, Committee Democrats echoed the importance of dedicating federal resources to study the implications that licensing has on entrepreneurship and workforce growth. 

“As more Americans begin to take risks and start their own businesses, it is vital to bring licensing requirements to their attention,” said Evans. “Balancing the need for market competition with the need for consumer protections will give small firms the certainty they require, ensuring their success.”