State Licensing Laws Affecting Where People Choose to Live

In 1950, only about one in 20 workers needed to be licensed to work legally. Today that has risen to nearly one out of three – and for at least 800 occupations across the nation, citizens must pay fees, pass tests, and attain educational requirements to hold a job.

The evidence from scholars across the policy spectrum strongly suggests that licensing is usually arbitrary and does not improve public health or safety. (See Dr. Morris Kleiner of the University of Minnesota, the Brookings Institution, the Mercatus Center, the White House Council of Economic Advisers and more.)

The libertarian Cato Institute adds to the case, but with unique findings. A new paper, “Occupational Licensing and Interstate Migration,” suggests that strict licensing laws are specially harmful to less-educated workers. Further, the paper says, licensing laws affect where people choose (or are forced) to live. It notes: “We find that noncollege-educated residents appear to migrate toward states with fewer occupational licenses. States with a 10 percent lower relative number of occupational licensees experience a 6.5 percent higher in-migration rate for individuals without a college education.”

Licensing laws are rarely put into place to protect consumers. As legislators create new licensing laws, they rarely assess whether the requirements they impose on potential employees and entrepreneurs will actually protect the consumers these employees and entrepreneurs intend to serve. Laws are too often passed because of “regulatory capture” – where the industry being licensed argues for the new state requirements that will limit their competition.

The evidence of the economic harm of occupational licensing is clear. The next step is for Michigan to use the evidence to continue its pursuit of a freer labor market.