Business Licensing Hearing Held

February 28, 2018

On Feb. 27, the House Small Business Committee Subcommittee on Economic Growth, Tax, and Capital Access held a hearing to examine how easing occupational licensing barriers could reduce workforce gaps and regulatory costs for small businesses. The witnesses described how the current occupational licensing structure has created barriers to employment, hindered economic opportunity, and limited geographic mobility.

While the intent of occupational licenses are to protect public health and safety or to protect consumers from bad actors, the scope and complexity of occupational licensing has grown considerably in recent years. According to some, occupational licensing laws are some of the most burdensome of regulations facing the labor force. Occupational licensing requires a business or an individual to request permission from the government to practice certain occupations. To receive licensure, individuals may be required to complete hundreds of hours of training and pay costly fees. Such regulations also extend to the requirements licensees must meet to sustain accreditation. While the requirements serve a functional purpose, they are also a barrier for entrepreneurs to enter an occupation. In fact, occupational licensure often disproportionately affects professions in the public health and safety fields, but regulations also apply to florists, interior decorators, barbers, and landscapers, among other professions.

Subcommittee Chairman Dave Brat (R-Va.) stated that the percentage of the workforce that requires an occupational license has increased from less than 5 percent in the 1950s to almost 33 percent today. Although some occupations can be dangerous and need specialized education, research shows that the amount of training required for a license almost never matches the risk of the occupation. Further, today, nearly one in four Americans are required to hold an occupational license to perform their jobs.

Complicating matters is the fact that occupational licensing laws are exercised at the state and local level, with each jurisdiction setting the requirements for licensure and the professions covered. The varying requirements have been shown to limit geographic mobility, especially in the cases of small businesses and military spouses.

“While there are 1,100 occupations in the United States that are licensed in at least one state, only 60 require a license in all 50 states,” Brat said. “This inconsistency hurts workers’ mobility and, most importantly, small business.”

Oftentimes, requirements for training fees and examinations can keep qualified individuals from starting a busy profession, and a lack of uniformity among the states and their licensing rules impact many entrepreneurs when they attempt to move to another market where they see an opportunity for business growth. States occupational licensing laws should not be hindering growth in these viable markets for business expansion or creation.

Click here to watch full hearing video, and here to read full witness testimony.