Red Tape Harms the Good Life
Nebraska taxes its residents and businesses more, on average, than the states we compete with for income, employment, business, and population growth. But there is yet another set of government policies that place a hidden tax on employers, workers and consumers that increase the difficulty of making a living in Nebraska.
This hidden tax is the cost of overly-burdensome regulation. The latest, and last, brief in our series focusing on removing barriers to economic growth in Nebraska spotlights how too much bureaucratic red tape is putting new and better jobs out of reach for hardworking Nebraskans.
Nebraska’s regulatory code contains 43 chapters and thousands of pages of regulations that increase the cost of doing business in our state. Not only does increased regulation result in lower job creation and higher prices, it also hits taxpayers.
On average, Nebraska’s state government spends over 40 percent more per person on regulatory policy than its economic competitors in Arizona, Colorado, Florida, Iowa, and Texas. While this is not a large amount of spending when compared to the entire state budget, it does provide some measure of the hidden costs of regulatory compliance.
One way to reduce regulatory overreach is to wipe out-of-date regulations off the books. Requiring sunset provisions to be paired with regulations would automatically cause a regulation to expire if it was not renewed, and creates a natural process for getting older, outdated, and inefficient regulations off the books.
While some level of regulation will always be needed, a major area ripe for regulatory reform should be eliminating or scaling back regulations that unnecessarily limit entry into occupations or industries in a manner that lessens competition. Nebraska’s regulatory system creates these types of barriers for entrepreneurs through the state’s occupational licensing laws.
Almost 200 different jobs in Nebraska require a government license, and many workers cannot afford the expensive and lengthy licensing requirements. In a national study, Nebraska fell in the worst of five categories for the number of occupations requiring a license.
In many cases, Nebraska’s rivals and our neighboring states have more reasonable licensing requirements. For example, cosmetologists or barbers have to take 2,100 hours of training in Nebraska, which can cost up to $20,000, while most states require 1,500 hours or less. A massage therapy license in Nebraska requires 1,000 hours of training, while most states require 500-700.
These inconsistencies place higher costs on Nebraska’s workforce, discouraging low-income workers, small business people, relocating military families and workers, and ex-offenders from pursuing career or business opportunities that require licensing. Because these disincentives to work and invest reduce competition in numerous professional fields, consumers also pay higher prices for these services.
A study by the Heritage Foundation found that reforming Nebraska’s occupational licensing laws could save the average household $942 a year.
Licensing requirements that exceed essential standards of health and safety give an advantage to existing practitioners over new entrepreneurs, but provide no additional benefits to the public. Where a complete repeal of occupational licensing is possible — as with natural hair braiding in the 2016 legislative session — policymakers can still provide alternatives for protecting consumers.
Business inspection, insurance or bonding requirements, registration, or private certification all exist as less onerous tools than unnecessarily barring workers from a profession.
Where policymakers feel public safety demands the maintenance of job licensing, improving the existing licensing requirements to match the country’s most reasonable requirements would help provide a more robust, competitive environment for entrepreneurship.
Throughout the Removing Barriers in Nebraska series, we have discussed how Nebraska compares to the states it must vigorously compete with for population, employment, income, and business growth. Nebraskans overwhelmingly take pride in their home state and would naturally prefer to stay close to family and friends.
Regrettably, because of our state’s deficit of entrepreneurship and new job growth, many Nebraska families still find themselves searching for their own version of the Good Life in other states. Removing the barriers to economic growth through tax, spending, education, and regulatory reform can make the promise of a high quality of life in Nebraska possible for more of our citizens once again.