Free Market

Reduce Licensing, Reduce Inflation

When shopping in their communities, families are feeling a strain on their wallets. From buying everyday goods, like paper towels and gasoline, to getting your car fixed, inflation has run rampant in recent months.  

As of March 2022, consumer prices have increased 8.5% compared to last year. Both federal and state governments, despite efforts, have struggled to ease the burden of rising prices of goods and services. 

The inability of the government to curb recent inflation is troubling. However, there may be an obvious, yet often overlooked, solution. This solution could immediately start reversing the effects of inflation while also raising wages for workers. 

Such a solution comes in the form of occupational licensing reform.

Economic protectionism and labor shortages, brought on by occupational licensing, raise prices and keep individuals out of high-paying jobs. Currently, burdensome occupational licensing laws block nearly three million jobs, are a major barrier to entry for higher-paying jobs, contribute to the student debt problem, and cost consumers more than $200 billion per year.

If occupational licensing laws were less restrictive, there would be a greater supply of well-paid workers. They would benefit from increased wages and be able to hold on to more of their hard-earned money. 

To better illustrate this, imagine that the number of nail technicians increased in the state. New members of this profession would force older or established professionals to decrease their prices to retain business. This would then drive new professionals to subsequently drop their prices as well. The result of the competition is that consumers would save money. Additionally, individuals that would make up this new group of nail techs would personally be able to increase their earnings by more easily entering a new profession that provides greater earning power. 

This example can be applied to any number of professions that consumers rely on as it illustrates competition driven by a more free-market economy. As new professionals can more easily enter fields, they compete with older professionals to gain business. This drops prices for consumers but still allows these professionals to increase their incomes.

To create effective occupational licensing reform, states can take a number of approaches. These include joining licensing compacts, reducing education requirements associated with obtaining licensure, creating apprenticeship programs, and practicing licensure reciprocity. 

Licensing compacts refer to an agreement that allows mutual recognition (reciprocity) of a license between member U.S. states (“compact states”). A licensing compact allows a professional who is a legal resident of and possesses a relevant professional license in a compact state (their “home state”) to practice in any of the other compact states (the “remote states”) without obtaining additional licensure in the remote states.

Licensing reciprocity occurs when one state chooses to honor the license of another, lessening the time and effort of completing the requirements of multiple occupational licenses in different states. This makes it easier for workers to move between states and fill labor shortages as they come and go. 

Reducing education requirements associated with licenses and creating apprenticeship programs is beneficial as it also more easily allows individuals to obtain occupational licenses. People no longer have to go into debt or waste valuable time meeting often ridiculous licensing requirements that don’t affect their ability to do their job. Instead, individuals can immediately enter the workforce and begin bettering their community. 

Families deserve relief from skyrocketing prices quickly and in a way that is beneficial to the overall economy. Utah must act now to reduce occupational licensing barriers if it hopes to reign in recent inflation.