Invisible borders
Licensing burden hurts state
What is so magical about state borders? For job seekers, business owners, and customers, crossing the border into Arkansas means something very important: You are now subject to much more restrictive occupational licensing laws. These laws generally have no effect on quality and safety, but they often mean higher prices for consumers and fewer employment opportunities for workers.
In License to Work: A National Study of Burdens from Occupational Licensing, a new study published by the Institute for Justice, Arkansas ranks as the third most burdensome occupational licensing regime in the United States. We license a lot of occupations. We also impose high barriers to get those licenses. An entrepreneur subjected to state licensure cannot practice his or her trade without permission from the state. These standards usually include a specified amount of education, experience, and exams.
These laws are usually justified as necessary to ensure quality and safety. Academic research suggests otherwise. A large body of work shows that these laws create barriers to competition. These rules eliminate jobs, raise prices, and limit consumer choice.
Want to be a dispensing optician? Do not come to Arkansas to fit eyeglasses and contacts. Here you need 1,095 days of experience to be a licensed optician. Instead, go to Oklahoma, Missouri, Louisiana, Texas, or Mississippi. They require no license. A study by Edward Timmons and Anna Mills published by the Mercatus Center shows that strict licensing for opticians raises prices and does not help consumers.
Want to make money as a commercial door repair contractor? Definitely do not try that in Arkansas. We require more experience than any state in the nation: It will take you five years. Our border states require little or no experience.
Want to earn a living installing mobile homes? You will pay the largest startup fee in the nation in Arkansas. Cross the border instead. You cannot even work as an earth driller in Arkansas without having more burdens placed on you than any neighboring state. Just cross a border and get a job there. You’ll thank me.
Average income in Arkansas ranks 47th. The Bureau of Economic Analysis said we earned $36,368 per person last year, only beating Mississippi, Idaho, and West Virginia. Most of our neighbors earn much more. For example, the average Texan makes $17,000 more and the average Tennessean earns $6,900 more per year than the typical Arkansan.
These big differences cannot be easily explained by geography or culture. Income per person can only increase in two ways: an increase in the number of people working or an increase in the amount that each worker makes. Many people in Arkansas do not make anything. According to the Bureau of Labor Statistics, 41 percent of our adults do not work. Only a few states are worse.
We think we have a low unemployment rate, but we really have a low labor-force participation rate. People who do not try to get a job are not considered “unemployed” when calculating the unemployment rate. Our state can take measures to encourage more people to enter the labor force. One easy step is to lower the occupational licensing requirements.
My own empirical research at the Arkansas Center for Research in Economics, “The Effects of Arkansas’ Occupational Licensure Regulations,” illustrates the harm of occupational licensing. More licensing rules mean more unemployment, higher prices, and more poverty.
Many states are starting to realize the costs of occupational licensing. Earlier this year Mississippi created an occupational licensing compliance board. Last year Oklahoma set up a task force to examine and reform its licensing regulations. There’s a bill in Nebraska that focuses on streamlining occupational licenses in the state.
Our state government currently offers economic incentives for firms to establish their businesses in Arkansas. We even exempt Texarkana’s residents from paying our state income taxes to encourage businesses and people to stay on our side of the border. We can do something much cheaper and more effective: Make our licensing burdens lower than all of our border states, or at least make them no higher!
Our neighbors do not suffer from bad quality or safety with their lower licensing burdens. We suffer from fewer people working and a lower standard of life with our burdensome regulations.