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Breaking Barriers: The State Occupational Licensing Index Reveals Opportunities for Occupational Licensing Reform in the US

A new report by the Archbridge Institute finds that occupational licensing creates unnecessary barriers that exacerbate skilled worker shortages and hinder opportunity and prosperity.

A new report by the Archbridge Institute authored by Edward Timmons and Noah Trudeau compares state licensing regimes in the United States. Occupational licensing affects over 20% of workers in the US and varies greatly between states, creating barriers to making a living and moving across state lines. The report aims to encourage reform to eliminate these barriers and promote mobility and prosperity.

The 2023 State Occupational Licensing Index (SOLI) provides a comprehensive measure of occupational licensing across states and occupations in the US. Current indexes from organizations like the Institute for Justice, Cato Institute, Teague, and the National Conference of State Legislatures provide significant contributions but have limitations. The SOLI hopes to fill this gap by providing an additional state-level index that can be useful for researchers and the public policy community.

The index measures the burden of occupational licensing requirements in the US from three sources: the Knee Center Database, License to Work publication, and the National Council of State Legislatures National Occupational Licensing Database. While there are some overlaps, there are also key differences in the occupation lists used by each source. Some licensed occupations may only require licensing for the contractor or supervisor, rather than every worker, and this differs from occupations like electricians, where each individual worker requires a license.

All 50 states in the US were ranked for occupational licensing freedom, with Arkansas being ranked as the state with the least amount of barriers and the most efficient licensing system. Looking specifically at the American Southwest, Texas ranks second overall with high scores for barriers and licenses. Arizona and Colorado rank in the bottom half of the list with lower scores for both categories. New Mexico ranks in the middle with average scores for both categories, while Utah, Nevada, California, and Oklahoma are scattered throughout the list with varying scores.

Overall RankStateBarriers ScoreBarriers TotalLicenses ScoreLicenses Total
24New Mexico5.691845.08151

Occupational licensing may be doing more harm than good. A study by Morris Kleiner from the University of Minnesota, published by the Brookings Institution in 2015, found that some occupations could benefit from lesser forms of regulation or even no regulation at all. Certification, for example, allows anyone to work in a field, but those who voluntarily submit to third-party exams and standards can advertise their credentials.

Requiring permission to work through licensing creates barriers that exacerbate the skilled worker shortage in the country. According to Timmons and Trudeau, licensing erects these barriers and makes the shortages worse than they should be. This study is just one of many that highlight the negative effects that occupational licensing has on opportunity, prosperity, human well-being, and our fundamental freedom to make our own choices.

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