US: The Government Realizes that Commercial Activity Licenses Hurt Employment and Opportunity

For some time now, we have been sounding the alarm about commercial activity licenses, that is to say, the public requirement that a person must obtain a license to open certain types of businesses or to get certain types of jobs, which is often too expensive, makes one waste too much time, and winds up being too complicated for a person who is just starting a career.*

It turns out that the federal government now agrees.

A new report from the U.S. Department of Labor and U.S. Department of the Treasury in collaboration with the Council of Economic Advisors indicates that around 25 percent of workers (one out of four people in the American workforce) have a job licensed at the state level, a figure that would increase if one accounts for local and federal licenses. At the beginning of the 1950s, this figure was one out of 20.

The result of many people needing a special permit from the government simply to work is that there are around 3 million fewer jobs … in addition to greater costs that suggest “more than $200 billion in higher prices every year.” **

“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across state lines,” according to the report.

Licenses are a positive factor in professions that directly affect our health and our security, as is the case with doctors and pilots. However, do chefs and florists need the same level of public oversight? And should every state have different licensing requirements for similar jobs, especially if it is a job that can be done online and therefore anywhere?

The report lists some common sense reforms that our political leaders should take into account, such as making sure the licenses deal with the protection of health and security of people and that they are not overly broad, that they are regularly reviewed to see if they are worthwhile, that they are discarded if they are considered too expensive or unnecessary, and that they allow for greater worker mobility.

Bearing in mind that commercial activity licenses often harm the people who need a job the most, that is, poor people, this report represents an excellent starting point to achieve reforms that can help make the American dream a reality for the next generations.

*Editor’s note: These are also referred to as occupational licenses.

**Editor’s note: This quoted figure, although accurately translated, could not be independently verified.