This week, the
Mercatus Center at George Mason University published a new study titled “Changes
in Occupational Licensing Burdens across States.” Authors Matthew Mitchell
and Anne Philpot used data from 2012 to 2017 to measure the breadth – the number
of occupations that each state licenses – and the burden – the stringency of
occupational licensing requirements in each state – to determine how
occupational licensing has changed over the last five years. Unfortunately,
Maryland had the greatest increase in the breadth and burden of occupational
licensing over that span.
Maryland’s breadth
and burden of occupational licensing increased 29% from 2012 to 2017 and the
state regulates five more occupations than it did in 2012: animal breeders,
athletic trainers, and three types of gaming occupations. Maryland's
occupational licensing fees increased by an average of 6%, and the days lost to
education and experience requirements by Maryland entrepreneurs increased by
3%.
As I wrote in
a July
2015 blog, Maryland’s occupational licensing regime harms consumers by
restricting competition, which subsequently leads to higher prices.
Importantly, unnecessary occupational licensing harms the poorest residents in
the state, who are unable to afford the fees and training required with such
licensing, therefore stifling upward mobility for poor entrepreneurs.
In the blog, I
stated:
Because consumers ultimately pay higher prices as a
result of the restricted competition, the increase in prices is
disproportionately harmful to the poorest consumers. The higher a person’s
income, the more willing that person is to adapt to price increases. Therefore,
artificial increases in prices through occupational licensing have a large
negative marginal impact on the poorest consumers. For example, pawnshops in
Maryland, which can provide inexpensive goods, additional income, or short-term
loans to poor individuals, are charging higher prices and interest rates than
they would be able to charge if workers were not required to have an occupational
license.
But the poorest individuals also experience the
greatest burden on the other side of the market – as workers. Poor people often
do not have the resources to acquire the mandated training, take the required
tests, or pay for the licensing fees. This pushes them out of a labor market in
which they may be skilled enough to compete. For example, a licensed plumber in
Maryland must complete 3,700 hours in
training. But a poor person with only 1,000 hours of training may be
perfectly capable of fixing a toilet. It is not illegal for him/her to do so,
but it is illegal to accept money for the service.
The Hogan
Administration has done a good job reducing the overall burden of regulations
over the last few years. As FSF President Randolph May and I noted in a January
2016 Perspectives from FSF Scholars, the Regulatory Reform
Commission’s initial
report recognized that Maryland’s occupational licensing regime was
overly burdensome and was not protecting consumers. In a January
2017 Perspectives from FSF Scholars,
we commended the Regulatory Reform Commission for identifying many occupational
licenses that were unnecessary, outdated, or overly burdensome. And Governor
Larry Hogan accepted all
of the recommendations put forth by the Commission.
However, the data
presented in the Mercatus Center study shows that there is more work to be done
in Maryland. Although the 2018 legislative session has ended, occupational
licensing reform should be a goal for the 2019 Maryland General Assembly. If
Maryland wants to continue to produce economic growth and business investment
throughout the state, it should lessen the burden of occupational licenses and
enable more entrepreneurs to enter the labor market.
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