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Cedar Rapids, Iowa 52401
President Joe Biden earlier this month issued a lengthy executive order intended to promote competition in the U.S. economy.
The sweeping document covers a range of economic and regulatory issues, including one now highlighted by three presidents in a row — burdensome professional licensing requirements. On that, the Biden administration could take some pointers from Iowa Republicans.
A significant portion of American jobs require workers — as much as a quarter of the workforce by some counts — to have special approval from the government. For many years, the trend was to expand licensing requirements to more and more industries.
Ostensibly, the occupational licensing system is set up to ensure competency and accountability among workers who might jeopardize consumers’ health and safety. But in reality, it’s part of a crony scheme that drives up the cost of services and limits employment opportunities, especially for people who already have limited opportunities. There’s a strong case for doctors being licensed, but what about florists and hair braiders?
Biden’s new executive order calls to ban or limit “unnecessary, cumbersome occupational licensing requirements that impede economic mobility,” according to a White House fact sheet.
It’s a laudable effort but the president and his vast federal bureaucracy have limited influence over professional licensing requirements, which are mostly imposed through a patchwork of state laws. To push the issue forward, he’ll need buy-in from state legislatures and governors. Iowa offers a model for a bipartisan solution.
The economic incentives behind licensing requirements are easy to understand. People who already are established in the industry sometimes erect barriers to stifle their would-be competitors, artificially making their services more scarce and therefore more expensive. Many of those same industry insiders make money or benefit from underpaid labor by providing the training and education license-seekers are required to undertake.
Scaling back professional licensing is a libertarian policy project that in recent years has been embraced by conservatives and progressives alike. At the presidential level, there has been bipartisan consensus on the issue for about a decade.
President Barack Obama in 2015 tried to push the issue onto states’ policy agendas. His administration issued a report detailing the costs of occupational licensing and charting a path to reform. It noted that the number of licensed workers had grown by five times since the 1950s, mostly caused by bringing new professions into licensing systems.
Federal guidance from the Obama era singled out Iowa at the time as having the highest share of licensed workers in the nation at 33 percent and for having extreme training requirements, such as 16 months of education for cosmetologists.
President Donald Trump followed up on Obama’s recommendations encouraging states to take up licensing reform, including with a 2020 executive order laying out principles for smart licensing. It encouraged regulations that are “the least restrictive to competition sufficient to protect consumers from significant and demonstrable harm.”
Iowa answered Obama’s and Trump’s call to trim and streamline the licensing system. In 2020, the Iowa Legislature passed and Gov. Kim Reynolds signed a package to modernize what until then was seen as one of the most onerous regulatory schemes in the nation.
Iowa’s law directly addressed one of the key problems highlighted by the Obama report — the fact that licensing makes it more difficult to cross state lines to work, a burden that weighs particularly heavy on immigrants and military families.
The legislation allows Iowa residents with out-of-state professional licenses to practice in Iowa without jumping through extra regulatory hoops, a policy known as universal licensing or licensing reciprocity, one of the first of its kind in the nation.
Iowa’s 2020 law also took into account the Trump administration’s recommendations, in particular by lowering barriers for people with criminal convictions. To that end, the law limited the instances where a criminal conviction can be grounds for revoking or denying a license.
Additionally, Iowa’s law allows work experience to substitute for educational requirements in some cases, and waives licensing fees for low-income applicants.
It was a good bill, expanding Iowans’ freedoms and leveling the playing field for newcomers to regulated industries. Encouragingly, it borrowed pieces from a Republican and a Democratic presidents’ playbooks.
And now Biden, third in the line of professional licensing reformers in the White House, is raising the issue again. He would be wise to encourage other states to follow Iowa’s lead.
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