By Dick Carpenter, Ph.D.
This spring brought a bit of bad and good economic news for Michigan.
First the bad news: In May, Chief Executive magazine released results from a poll of CEOs in which respondents named the 10 worst states for doing business. States were rated on taxes, regulatory structures and other costs of doing business, and Michigan ranked among the worst.
The good news is, however, initial efforts are underway that could help make Michigan a better place to get and create jobs. In April, Gov. Rick Snyder’s Office of Regulatory Reinvention recommended, after months of study, the elimination of 18 occupational licenses and nine licensure boards. Licenses on the chopping block included community planner, immigration clerical assistant, insurance solicitor, proprietary school solicitor and vehicle protection product warrantor.
The Office of Regulatory Reinvention also indicated further review is ongoing, and other similar recommendations may be forthcoming. According to a new report my co-authors and I released recently, this is an idea whose time has more than come.
An "occupational license" is essentially a government permission slip for work.
Licensure schemes erect barriers to entry into occupations, make the road to entrepreneurship more burdensome, and allow those with licenses to face fewer competitors and command higher prices. Since the 1950s, licensure has grown pervasive. At that time, the number of U.S. workers needing a license to work was one in 20. Now it’s almost one in three.
But such numbers tell only part of the story. Another part is how burdensome these licenses are to aspiring workers. To measure the extent of these burdens, my colleagues and I gathered the licensure requirements for 102 low- and moderate-income occupations across all 50 states and the District of Columbia. The five most common requirements were fees paid to the state, education and experience, exams, minimum grade level and minimum age.
Of the 102 occupations we studied, Michigan licenses 42. Applicants for those occupations can anticipate, on average, paying $198 in fees, losing 256 days to education and experience mandates and passing one exam.
For some of these occupations, Michigan’s requirements far exceed those of other states.
For example, security alarm installers must obtain four years of training, and fire alarm installers must obtain three years of training. Fourteen states that require licenses for security alarm installers and 18 for fire alarm installers have no such requirement, and 17 states don’t even license these occupations. The Office of Regulatory Reinvention also took note of the burden these requirements create and recommended the elimination of the security alarm installer license.
Similarly, Michigan is one of only 34 states that license milk samplers, one of 17 states that license animal control officers and one of 16 states that license cathodic (metal) protection testers. That other states do not license these occupations suggests there are other means, such as market forces or other types of rules, to protect public health and safety without erecting burdensome barriers to entry.
Our data revealed other oddities that undermine purported health-and-safety justifications for many licenses. For instance, do barbers and cosmetologists really need almost 18 times as much training as emergency medical technicians?
Such facial absurdities were not lost on state officials in Michigan. Shelly Edgerton, deputy director of the state’s Department of Licensing and Regulatory Affairs noted of the 18 licenses recommended for cutting: "These regulations provide little or no significant protection to the public."
And the 2012 legislative session saw an effort separate from the Office of Regulatory Reinvention's report to eliminate the barber license altogether. As often happens upon the infrequent attempts to eliminate licenses, barber licensure proponents defended their scheme with hyperbole that is all too fitting. The director of a barbering school warned: "I'm not saying we are as important as doctors, but we are the closest you can get. We are turning this into the Wild, Wild West…. I’d like to see them get a haircut in a barber shop five years from now. It will be like rolling the dice."
What Michigan needs is businesses willing to "roll the dice" on setting up shop within its borders. If state leaders are willing to follow through on the Office of Regulatory Reinvention's recommendations for a regulatory haircut — and other such trimming — Michigan could shed its ignominious reputation among America’s CEOs and perhaps make it into the 10 best states for doing business.
Dick Carpenter, Ph.D., is a director of strategic research for the Institute for Justice. For more information, visit: www.ij.org/LicenseToWork.