We Need To Talk About Occupational License Reform

"Licensure reforms to reduce protectionist conflicts of interest and eliminate burdensome red tape are a big step forward in removing barriers to work and unleashing Montana’s economic potential."

Governor Gianforte’s Red Tape Relief Initiative has identified occupational licensing as a major barrier to economic dynamism in Montana. Nineteen percent of Montanans require a license for their job, ensuring the issue impacts everyone from hairdressers to accountants. Yet the boards that administer and enforce occupational licenses all too often become havens for gatekeeping – insulating professions from competition and erecting barriers in the way of new professionals getting licensed to work. Reforming occupational licensing to eliminate protectionist conflicts of interest and burdensome red tape is a clear path to help to grow our state’s workforce and further unleash Montana’s economic potential.

Under the direction of the Governor’s Red Tape Relief Initiative, Montana’s Department of Labor and Industry has spent months proposing and fine-tuning reforms to the nearly 70 industries covered under Title 37 licensing laws. The resulting legislation, HB 152 carried by Rep. Bill Mercer (R-Billings), is a massive 237-page bill that will streamline licensing and provide consistency and clarity for governing boards. Here are the reform highlights: 

• Relax licensure requirements for military spouses.
• Move decision making power on licensure approval from boards to the department. This helps eliminate protectionist conflicts of interest by boards governing the profession.
• Streamline approval of applicants who have active licenses in good standing from another state. 
• Allow provisional universal licensure recognition, where someone licensed in another state in good standing can work in Montana without being fully licensed for up to 21 days per year in order to provide “education, continuity of treatment, treatment to underserved populations, or highly specialized treatment care to clients or patients.”

While the research is clear that reforming occupational licensing will help to reduce barriers to accessing good-paying jobs, some industry incumbents are pushing back. 

Concerns about HB 152 focus mostly on concerns of “quality” and “safety,” but a mounting body of research has shown that occupational licensing does little to improve quality or protect public safety. A recent report from the National Council of State Legislatures (NSCL) stated that researchers found little evidence that licenses improve the quality of services to consumers. Another report from the Institute of Justice found that licensing requirements bear little relationship to public safety. 

A few Montana architects have been vocal in their opposition to the HB 152 proposals, claiming that architect licensure reforms are a “huge public safety issue” and will “open the door to unlimited competition.” This comment reveals the motivation behind much of the opposition we see to licensure reforms by industry incumbents: shutting down competition to benefit their own business. 

Protectionist licensing benefits incumbents in the protected industries by limiting consumer options and artificially increasing costs. The consumer is harmed, innovative entrepreneurship is trampled on and economic growth is crushed under these conditions. It’s not surprising that research shows that in 2018 alone, Montana lost out on roughly 9,000 jobs and $50.1 million in economic value due to the impacts of occupational licensing. 

All things considered, occupational licensing too often creates artificial barriers to competition and hampers economic dynamism without proof that quality and safety are substantially improved. Licensure reforms to reduce protectionist conflicts of interest and eliminate burdensome red tape are a big step forward in removing barriers to work and unleashing Montana’s economic potential.