M.D. Harmon: License to…Work

People pondering the business-friendliness of Maine’s tax and regulatory policies should be paying attention to another pair of reports this week that didn’t have much good to say about the state’s ability to attract outside investment.

The state-by-state reports, published Tuesday on the web site of the Institute for Justice (which calls itself “the nation’s only libertarian, non-profit, public-interest law firm,” online at www.ij.org), dealt with the impact of government regulations on a state’s friendliness to entrepreneurs wanting to begin or expand commercial activity.

Unfortunately, as shown by other surveys, including recent ones on Maine’s overall business climate and its inability to compete with other states in attracting retirees, we have a lot of ground to make up.

And unless someone in Augusta does something soon to change conditions on the ground, voters in November will have a chance to measure the fiscal impact of legislative Republicans over the past two years — and may find them less effective than they could have been.

The IJ’s news release begins, “Two independently produced reports released March 8 by two of the nation’s leading advocates for entrepreneurs shine a spotlight on the intersection of government and work among lower-income workers and entrepreneurs. Taken together, the reports — released by the Institute for Justice as well as the Ewing Marion Kauffman Foundation together with Thumbtack.com — raise important questions for lawmakers nationwide on government reforms that could create private-sector economic growth and opportunity.”

The IJ’s report, “License to Work: A National Study of Burdens from Occupational Licensing,” found that “more and more Americans now need the government’s permission before they can pursue the occupation of their choice.”

The study focused on 102 low-and moderate-income occupations found in all 50 states and the District of Columbia, because these occupations often offer younger people and those at the bottom of the economic ladder their best opportunities to join the workforce and become either full-time employees or entry-level entrepreneurs.

But state and local rules can make that harder than it needs to be, the study’s authors said. As they reported, “The 102 occupations studied in License to Work are licensed in at least one state. On average, these government-mandated licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than one year to earn. At least one exam is required for 79 of the occupations.”

“These licensing laws force people to spend a lot of time and effort earning a license instead of earning a living,” said Dr. Dick Carpenter, director of strategic research at the Institute for Justice and report co-author. “They make it harder for people to find jobs and to build new businesses that create jobs.”

In the 1950s, the study reported, only one in every 20 workers needed a license to practice an occupation, but today it is one in three. The problem is that, when members of an occupational group persuade the government to license it, they raise barriers to entry which may not necessarily have any rationale for protecting the public.

Instead, they amount to what economists call “rent-seeking,” raising their own incomes via government influence by making it harder for others to become competitors, such as New York City’s “taxi medallion” system where a limited number of licenses keep fares high and legal competition scarce. Other cities where people can set up taxi services without artificial government limits have lower fares and more available services, studies have shown.

As the report says, “First, most of the 102 occupations are practiced somewhere without government permission and apparently without widespread harm: Only 15 are licensed in 40 states or more, and on average, the 102 occupations are licensed in just 22 states — fewer than half. This includes a number of occupations with no self-evident rationale for licensure, such as shampooer, florist, home entertainment installer and funeral attendant.”

In addition, “Licensure burdens often vary considerably across states, calling into question the need for severe burdens. For instance, although 10 states require four months or more of training for manicurists, Alaska demands only about three days and Iowa about nine days. Such disparities are prevalent throughout the occupations studied.

“Finally, the difficulty of entering an occupation often has little to do with the health or safety risk it poses. Of the 102 occupations studied, the most difficult to enter is interior designer, a harmless occupation licensed in only three states and D.C.

“By contrast, EMTs hold lives in their hands, yet 66 other occupations face greater average licensure burdens, including barbers, cosmetologists, manicurists and a host of contractor designations. States consider an average of 33 days of training and two exams enough preparation for EMTs, but demand 10 times the training — 372 days, on average — for cosmetologists.”

“The data cast serious doubt on the need for such high barriers, or any barriers, to many occupations,” said Lisa Knepper, IJ director of strategic research and report co-author.

“Unnecessary and needlessly high licensing hurdles don’t protect public health and safety — they protect those who already have licenses from competition, keeping newcomers out and prices high.”

Maine stands just about in the middle of the states the report rated for regulatory burdens on occupational entry, 30th out of 50.

As the report states, “Maine licenses 39 of the 102 low- and middle-income occupations studied. Residents seeking to enter these occupations can anticipate, on average, paying $206 in fees, losing 226 days to training requirements and taking one exam, making Maine’s the 30th most burdensome licensing laws.

“A few occupations face significantly more burdensome entry requirements in Maine than in other states. For example, log scalers, who grade or estimate the value of logs, face no employment restrictions in any state save Maine and Idaho; each requires two exams, and Maine requires two years of experience. Similarly, Maine is one of only three states to license dietetic technicians. Its requirements are also the most onerous, requiring applicants to obtain 835 days — more than two years — of education and experience prior to licensure.

“Occupations like these, where other states appear to get by with no licensing or far lower burdens, are possible targets for reform. Other possibilities include occupations that appear overly burdensome to enter compared to others with a greater connection to health and safety. For instance, Maine makes it more difficult to become a makeup artist, skin care specialist or massage therapist than an emergency medical technician. EMTs need only 33 days of training compared to more than 100 for the other occupations.”

The report concludes, “Policymakers should ensure that licensing burdens are truly necessary to protect public health and safety — and eliminate or reduce those that are not.”

Thus, if an occupation is unlicensed in other states; if its licensure burdens are high compared to other states; and if those burdens are high compared to other occupations with greater safety risks, those rules are ripe for reform.”

As the IJ’s Carpenter concluded, “Finding a job or creating new jobs should not require a permission slip from the government. As millions of Americans struggle to find productive work, one of the quickest ways legislators can help is to simply get out of the way: reduce or remove needless licensure burdens.”

To finish up, the other survey listed on the IJ’s report, the Kaufman Foundation’s/Thumbtack.com survey (www.thumbtack.com/survey), said that “small businesses care almost twice as much about licensing regulations as they do about tax rates when rating the business friendliness of their state or local government. Moreover, among those small businesses subject to special regulatory requirements — such as occupational licenses — the ease of compliance with these regulations was by far the best predictor of their view of the small business friendliness of their respective states.”

Where does Maine stand? Check www.thumbtack.com/me/ for the full report, but the state summary puts it succinctly: “After a two-month survey of over 6,000 small business owners nationwide, Thumbtack.com has released new data showing that small businesses rank Maine among the top 10 most difficult states nationwide for starting a new business.”

And it added, “Among other dismal rankings, Maine achieved the nation’s No. 1 worst ranking nationwide for the cost of hiring a new employee — it costs more to higher a new employee in Maine than in any other state in the entire country. The state also has the nation’s second-least healthy small businesses nationwide.”

Maine’s overall “friendliness” rating was a stunning “D-plus,” hardly a ranking that will encourage people to look here first to start a business.

Our political leaders may have begun the process of changing these stunning ratings, but it is clear we have a long way to go.

M.D. Harmon, a retired journalist and military officer, is a free-lance writer. He can be contacted at: mdharmoncol@yahoo.com.