The Policy Shop: Too much government licensing hurts jobseekers

This edition of The Policy Shop is by Director of Policy Research Joseph Tabor.

If you are going to fly a plane filled with passengers, you should prove you are capable and be licensed. If you are going to cut open a person and prevent more heart attacks, again, you should prove your skills and get a license.

But do you really need government’s permission before taking a job to install burglar alarms, apply makeup or teach a small child to count?

Licensing hurts the poor. Full-time employment is one of the clearest paths out of poverty. In Chicago in particular, the difference is stark: a person with full-time, year-round employment is vastly less likely to live in poverty.

Yet when compared to the rest of the Midwest, Illinois licenses more professions and imposes a higher burden than other states. Of 102 professions ranked as low-income using data from the U.S. Bureau of Labor Statistics, Illinois licenses 41 of them, the Institute for Justice found.

Research shows licensing hurts job seekers: changing an occupation from unlicensed to entirely licensed is associated with a 29% reduction in employment. An increase in state licenses is also associated with a decrease in intergenerational mobility and an increase in income inequality. Growth in state licensing is associated with a 1.6% to 6.25% reduction in absolute intergenerational mobility and increases in income inequality ranging from 3.9% to 15.4%, both at the county level.

Barriers. Time is money, and Illinois charges both before allowing people to take up certain occupations.

Want to become a manicurist or pedicurist and earn over $31,000 per year? How about making over $33,000 as a hairdresser or cosmetologist? A barber will earn just under $35,000 per year. Each of these salaries is capable of lifting a family of four above the federal poverty line.

But Illinois makes you pay before giving you permission to start any of these professions.

A manicurist wannabe must pay $215, pass an exam, and spend 82 days gaining education and experience. A cosmetologist pays $230, passes an exam and must spend more than a year gaining education and experience before getting a license. A barber needs a high school diploma, must pass the exam, also needs more than a year of education and experience, but only pays a $156 fee.

Do any of these professions really need a state license when one bad haircut and poor online review will offer more customer protection that some state review of the person’s abilities?

Safety first. So more than a year of education and experience to cut hair or apply makeup may sound like a lot, but it’s worse to become a burglar alarm or fire alarm installer.

Security alarm installers in Illinois must pay a $317 fee, be at least 21, take an exam and spend three years satisfying experience and education requirements. Most Midwestern states do not even require a license to install security alarms.

With crime climbing in Chicago, burdensome barriers to improving security in homes and businesses is something the state should reduce.

Teaching small children their colors, to count and getting them ready for school comes with an expectation of four years of education and experience. The public preschool teacher’s license is $685. There’s no minimum age.

But there is a shortage of preschool teachers: Illinois can’t find enough people to work in early childhood education and parents have had increasing difficulty finding child care.

Population impact. Illinois has faced years of continual population decline and new data from the U.S. Census Bureau shows the state has lost population for 10 years running, mostly driven by people moving to other states.

There are many reasons people want to move out of the state, but the consistently most-popular reason is the state’s high taxes. In surveys of those Illinoisans who actually made a move, job-related issues dominate the reasons they moved, according to the U.S. Census Bureau.

The difficulty in being able to easily practice a profession may be another reason people do not move into Illinois. States that license more professions and that impose higher burdens on license seekers see less immigration from other states.

If a state has 10% more occupational licenses than another state, the individuals without a college education residing in the state with fewer licenses will be 6.5% less likely to move to the state with more licenses. That’s according to research from the Cato Institute using data from the Institute for Justice.

Also, licenses that only are good in a single state discourage license holders from moving. Members of professions with state-specific exam requirements are 36% less likely to move to another state than members of other professions, according to a report from the American Economic Journal.

Illinois could attract more people from other states by lessening the burden to obtain licenses and by making it easier to transfer licenses from other states. In a study of the migration of lawyers, license reciprocity between states increased migration between those states.

Interstate compacts such as the Nurse Licensure Compact or universal license recognition such as has been enacted in Arizona, would encourage professionals from out of state to consider a move to Illinois. It could help stem the chronic outflow of residents suffered during the past decade.

Reducing barriers. State lawmakers return to Springfield in a few weeks. It is a fresh start and a chance to review the state’s licensing processes, especially on the 102 low-income professions that can help people escape poverty.

Applying a little logic and facing the realities of a very connected information age would go far in bringing Illinois in line with other states and getting more people into jobs that lift their self-esteem and their families.