News Release: Fed. Trade Commission Says Licensing is a “State-Created Barrier” to Jobs

 FTC Comments to Sen. Brett Lindstrom

NEWS RELEASE from the Platte Institute 

Contact: Adam Weinberg
(402) 452-3737
aweinberg@platteinstitute.org

Federal Trade Commission Writes Nebraska Senators on Licensing
Letter Encourages Framework for Eliminating Excessive Regulation

The independent federal agency responsible for protecting an open marketplace for U.S. consumers says many of the job licensing requirements on the books in Nebraska deserve scrutiny, and impose “state-created barriers” to jobs.

In a March 15 letter, the Federal Trade Commission’s Office of Policy Planning responded to a request for comment on legislation from Nebraska State Sens. Suzanne Geist, Tyson Larson, Brett Lindstrom and John Lowe.  The senators are sponsors of four of about a dozen occupational licensing reform bills introduced in the 2017 legislative session. The complete letter addressed to Sen. Lindstrom (each of the four letters are otherwise identical) is attached.

The FTC letter says the burden of occupational licensing falls hardest on economically disadvantaged citizens, and that special interests often use the policies to limit entry to professions, stifling competition at the expense of workers and consumers. The letter recommends for Nebraska’s lawmakers to create a framework for scrutinizing, reducing, and when possible, eliminating these licensing requirements.

“The Federal Trade Commission is encouraging licensing reform in Nebraska because their research and experience show it’s far too common for these burdensome licensing laws to be written for the benefit of specific business interests, harming competition and entrepreneurship,” said Adam Weinberg, Communications and Outreach Director at the Platte Institute.

A government license is required for nearly 200 different professions in Nebraska. In some cases, Nebraska is one of the only states to license certain careers, or has licensing requirements that are among the country’s most costly and time-consuming.

Here are highlights 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?”
   

While a number of occupational licensing bills, including the repeal of licensing for motor vehicle salespeople, have advanced for debate by the full Legislature in the 2017 legislative session, more comprehensive licensing bills including LB343, which reforms licensing hours for personal care professions, and LB299, which creates a review process for occupational licensing, remain stuck in committee. Groups that benefit financially from occupational licensing have strongly opposed the bills.

One possibility mentioned by senators instead of passing a larger reform bill this year is for senators to conduct a study on the issue in the legislative interim.  

“If Nebraska State Senators are really serious about an interim study on licensing reform, the Federal Trade Commission has certainly given them a head start with the research citations included in this letter,” said Weinberg.

For more research and news items on occupational licensing reform, visit PlatteInstitute.org/Jobs or read about Nebraskans affected by occupational licensing at StrongJobsNebraska.org. To arrange an interview, please contact Adam Weinberg at (402) 452-3737 or at aweinberg@platteinstitute.org. 

The Platte Institute advances policies that remove barriers to growth and opportunity in Nebraska.