Federal Trade Commission Says Red Tape in Nebraska Hurts the Economically Disadvantaged Most

Federal Trade Commission Says Red Tape in Nebraska Hurts the Economically Disadvantaged Most

Download file FTC Comments to Sen. Brett Lindstrom

Only days after special interests celebrated the delay of LB343, a bill that would align Nebraska's job licensing requirements in several professions with most other states, an independent federal agency is saying Nebraska's legislators have unfinished business when it comes to cutting red tape. 

The Federal Trade Commission's Office of Policy Planning has submitted a letter to Nebraska State Senators Suzanne Geist, John Lowe, Brett Lindstrom, and Tyson Larson on occupational licensing reform in Nebraska. Each senator requested the agency's comments on their respective occupational licensing reform bills.

The Federal Trade Commission has a mandate to protect consumers through maintaining an open marketplace in the United States and enforcing laws against anticompetitive trade practices. 

The FTC's Office of Policy Planning says the burden of occupational licensing falls hardest on economically disadvantaged citizens, that special interests often use the policies to protect their turf and limit entry to professions, and that Nebraska's lawmakers should create a framework for scrutinizing, reducing, and when possible, eliminating these licensing requirements.

Here are highlight’s of the FTC’s letter:

FTC’s mission to protect consumers through promoting competition:

“Competition is a core organizing principle of America’s economy. It gives consumers the benefits of lower prices, higher quality goods and services, increased access to goods and services, and greater innovation. The FTC works to promote competition through the enforcement of antitrust laws, which prohibit certain transactions and business practices that harm competition and consumers.”

Many occupations that are licensed by states don’t need to be:

The FTC writes, “many occupations often are subject to licensing requirements that are unmoored from legitimate health, safety, or similar public policy objectives,” and that “Even modest licensing requirements can and do deter people from entering fields they might otherwise wish to pursue. In effect, excessive licensing acts as a state-created barrier for people seeking work.”

Claims that more occupational licensing requirements provide better consumer protection can sometimes be untrue:

“Further, the purported consumer protection benefits of licensing may not justify the costs. Reductions in competition caused by licensing can also cause quality, choice, and access to decline. Although well-meaning licensing rules may be designed to provide consumers with minimum quality assurances, these rules do not always increase service quality, especially if training or educational requirements do not directly relate to the services a given professional provides.”

Who is harmed by occupational licensing burdens:

“Recent studies strongly suggest that the burdens of excessive occupational licensing fall disproportionately on the most economically disadvantaged citizens. Another group particularly impacted by excessive occupational licensing are the spouses of U.S. military personnel. Because member of the military move to new states frequently, their spouses must repeatedly meet new and often different licensing requirements as they move from state to state.”

Special interests knowingly take advantage of occupational licensing to harm competition:

“After all, licensing restricts the number of potential competitors they may face, which may enable them to charge higher prices. For this reason, policymakers should be skeptical of claims that licensing is necessary to protect the public from some perceived ill, especially when looking beyond the small subject of occupations where licensing has a clearly identified and appropriately grounded public policy rationale.”

The FTC staff supports job licensing reform in Nebraska:

“FTC staff supports the Nebraska legislature’s [sic] ongoing efforts to review and, where possible, streamline the state’s many licensure requirements. This reform initiative has the potential to deliver significant benefits to Nebraskans, including Nebraskans looking for new or better work within the state, as well as Nebraska consumers generally…FTC staff urges legislators and regulators to consider removing excessive, unnecessary licensing restrictions wherever possible.”

What Nebraska’s lawmakers should do going forward:

“We respectfully recommend that state legislators, regulators, and other policy decision makers consider the following framework when evaluating changes to occupational licensing law.

  • What legitimate policy justifications, if any, were articulated when the original license requirements were imposed?
  • Are there currently any specific, legitimate, and substantiated policy objectives that justify continuing these license requirements?
  • If current, legitimate policy objectives are identified, does the furtherance of those current objectives likely outweigh the expected harms from licensing? Such harms may include reduced economic opportunities, restricted employment, increases in consumer prices, and reductions in quality or access.
  • If state licensing appears justified, are there any less restrictive alternatives to the current licensing system that still address the legitimate policy objectives, while reducing burdens on the public? Are the licensing requirements narrowly tailored to achieve the specific public policy purpose, or is there a less intrusive way to achieve the public policy objective?”

If Nebraska State Senators are really serious about an interim study on licensing reform, the FTC has certainly helped give them a head start. A copy of their letter, complete with research citations, is linked here.

How many more independent experts need to weigh in on the issue of reforming red tape in Nebraska before more of our policymakers will stop putting the special interests over Nebraska’s workers, small businesses, and consumers?

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