As the vaccine rollout continues, policymakers at the federal and state levels have turned to the economic recovery. Thanks to its newly-elected governor, Utah appears to be in a good place.
The state has fared better economically than others, with an unemployment rate of 2.9% in March, compared to the national average of 6%. Nonetheless, over 46,600 Utah residents are still out of work. Unemployment in the state is still above the pre-crisis low of 2.4%. Fortunately, Gov. Spencer Cox started on the right foot by commissioning a review of the state’s occupational licensing regulations — laws that have hampered employment and growth in the state for far too long.
Occupational licensing laws, as one might guess, regulate who can work in particular types of jobs. Around a quarter of the U.S. workforce needs a license to work. That means paying fees, undertaking exams and often spending over 1,000 hours on education. Licensing laws are usually justified as customer safety measures or as a means to ensure high-quality service. But for many occupations, there’s no evidence that they lead to any improvements by those metrics.
In the end, all these regulations do is reduce competition for current license holders, which in turn allows them to raise their prices — that’s bad for free markets and for consumers. And it hurts prospective workers, too. According to economists Morris Kleiner and Evgeny Vorotnikov, occupational licensing laws cost the United States almost 1.8 million jobs, along with $184 billion in lost economic growth thanks to misallocation of workers and other resources. In Utah, they estimated licensing costs around 20,000 jobs.
In 2017, the public interest law firm Institute for Justice published the second edition of their report “License to Work,” analyzing the licensing laws of every American state. The report found that Utah had more restrictive and more expansive occupational regulations than most other states. Fortunately, Utah has undertaken some reforms already since that report was written.
In late 2017, Gov. Gary Herbert signed a bill reducing the burden of regulations on numerous types of contractors, such as drywall and HVAC installers as painters and landscapers. However, Cox’s commission will still have plenty to do. As an example, Utah’s one of 10 states to license upholsterers. Similarly, Utah requires cosmetologists to take 1,600 clock hours of education and training courses, while states like Massachusetts and New York (states not exactly known for being deregulatory Meccas) only require 1,000 hours. There’s little evidence that the severity of cosmetology regulations improve consumer service or safety.
Cox could also take some notes from Gov. Doug Ducey of Arizona, among others, in making lasting reforms. Bills to change regulations of specific occupations are good, but Ducey has been a pioneer of a so-called Right to Earn a Living Act, requiring any new potential occupational regulation to have a demonstrated consumer harm attached to it before it can become law, and creating avenues for legal challenges for existing regulations that do not meet that standard.
Local governments could also follow suit by reducing their regulatory burden as well. As Stephen Silvinski and Anastasia Boden (of the Goldwater Institute and Pacific Legal Foundation, respectively) proposed in “Getting Back to Work: A Recovery Playbook for America’s Cities,” municipalities could adopt their own versions of a Right to Earn a Living Act. Similarly, as Olivia Coleman and Nolan Gray found in a paper for the Center for Growth and Opportunity at Utah State University, cities could loosen permitting rules for home-based businesses, particularly for businesses that do not have a notable impact on the surrounding communities.
There are a lot of policy options governments could take to improve the chances at economic recovery, but the easiest one is to simply get out of the way.
Alex Muresianu
Alex Muresianu is an opportunity fellow at Young Voices. He predominantly focuses on tax and regulatory policy, and his writing has been published in National Review, the Kansas City Star, and the Orange County Register. He lives in Eastern Massachusetts, and he can be found on Twitter @ahardtospell.”