Study Finds That Occupational Licensing Expansion In Iowa Widened Gap Between Rich And Poor

(Photo by Rick Diamond/Getty Images for Smirnoff Ice)

Marlo Safi Contributor
Font Size:

A recent report found that in Iowa, occupational licensing requirements are associated with decreased economic mobility and increased income inequality. 

The Archbridge Institute — a non-partisan public policy think tank in Washington, D.C. — released a report Feb. 20th on the negative impact of Iowa’s occupational licensing requirements, finding that the rapid growth of occupational licensing in Iowa created a widening gap between the rich and poor. 

Occupational licensing requirements necessitate that aspiring workers must obtain a government permission slip to work in certain fields, which often include skill sets that an aspiring worker has already mastered, such as those needed to work at a nail salon. 

Iowa added licensing requirements for 42 low-and moderate-income occupations between 1993 and 2012, 11 more than the national average of 31, according to the report. The researchers found that relative to the national average, the rapid growth of occupational licensing in Iowa is associated with 4.7% reduction in economic mobility and 10.9% increase in income inequality. 

Low-income households are affected the most by occupational license requirements, the report found. “When states require hundreds of dollars in fees or expensive and time-consuming education in order to get a license, of course those entrance requirements are more difficult to absorb by households with less income (and also typically, less time),” Ben Wilterdink, director of programs at the Archbridge Institute, tells Daily Caller. “Lower-income individuals may decide that the educational requirements, tuition expenses, and licensing fees are simply not worth it.”

The report also shows how the Obama administration found that occupational licensing didn’t enhance the services offered by those with licenses. Yet, some politicians continue to advocate for them, most notably, Democratic Connecticut Rep. Jillian Gilchrest announced last year she was “beyond pleased” that Connecticut would begin necessitating occupational licenses for nail technicians (beginning January 2021), eyelash technicians, and estheticians (beginning July 2020). 

Wilterdink says that politicians continue to advocate for these restrictions based on pressure from two main groups of people. “The first group are people who are genuinely concerned about protecting public safety and see licensing restrictions as a way to accomplish that goal, despite evidence to the contrary,” he said.

“The second group often includes the current service-providers that see licensing as a way to make it harder for others to join their occupation and are essentially using the force of government to shield themselves from competition.” (RELATED: Want To Help Immigrants? Reform Occupational Licensing Restrictions)

Workers in the fields that Gilchrest moved to include in the new requirements are especially at a disadvantage. “In some cases, like with hair braiding, people pick up these skills as children or young adults and are unable to legally provide those services to customers who want them because of these restrictions,” he said. 

The report also found that the public cares very little about the licensing status of service providers, especially in the era of the internet and easily accessible customer reviews. Wilterdink said that consumers care far more about a provider’s ratings and reputation than their licensing status. “Furthermore, the researchers found that more stringent licensing requirements did not improve customer satisfaction (as measured by ratings) but did decrease competition and increase prices,” he said.

Occupational licensing has grown from affecting about 5 percent of workers in the 1950s to more than 1 in 5 (22.3%) in 2016, the report says. More than 24% of workers in Iowa are licensed and the licensing costs the state more than 48,000 jobs and $287 million per year.

The report includes policy reform recommendations like the Occupational Licensing Consumer Choice Act, which would “provide consumers with the right to choose a worker who best serves their needs irrespective of whether that person holds an occupational license from the state,” the report says. The Act would protect workers from licensing regulations that don’t address evidence-based health and safety issues.