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Indiana Takes the Lead on Reforming Occupational Licensure

The Indiana legislature is considering a new bill that would cause license requirements for certain professions to automatically expire every five years unless members of that profession can provide a convincing reason why the requirement should remain in place. This would mark a major reform to the way license requirements are currently handled, where a licensed profession tends to remain that way for perpetuity, with few attempts even to question the wisdom of such policies.

Occupational licenses exist under the guise of protecting consumers under certain, specific circumstances. When the nature of a profession allows its practitioners access to a large amount of specialized knowledge not available to the public, or when a lack of skill can pose a significant risk to the health and safety of their customers, it might be argued that licenses are necessary. However, all too often these licenses serve the alternative purpose of protecting incumbent firms from competition by restricting entry, and keeping prices high.

License requirements make entry into a profession significantly more expensive and time consuming, effectively serving as barriers standing in the way of entrepreneurs struggling to gain a foothold. The lack of competitive pressure faced by incumbents not only results in higher prices, but also less innovation and less consumer choice, all of which hurts the very people licenses are designed to protect.

It should be made clear that we are not simply talking about such essential services as medical and psychiatric care. In fact, most types of doctors are exempted from the review requirements in the Indiana law. Instead, the bill, backed by Governor Mike Pence, is aimed at professions where the need for a license seems questionable, to say the least. The following is a partial list of occupations requiring a state-issued license in Indiana: barber, athletic trainer, auctioneer, dietician, landscape architect, librarian, manicurist, interior designer and hypnotist. Most likely, some of those came as a surprise to you. If not, consider the even more ridiculous instances in other states, where a license is required to be a florist, makeup artist, travel agent or shampooer. That’s right, in some states you need a license to wash and shampoo people’s hair!

There can be no legitimate purpose behind these requirements, and it is clear that special interest lobbies are merely using government as a tool to maintain industry dominance. A shocking, but little reported case from last May found the state of North Carolina suing a blogger for dispensing dietary advice to diabetics without a license, despite the fact that he had type II diabetes himself and was not making a cent from his freely published recommendations. When a man’s first amendment rights are deemed less important than granting special favors to the nutritionist lobby, it’s time to sit up and take notice.

It is truly worrying that in this era of stagnant economic growth and persistently high unemployment, the government is still putting obstacles in the way of those who want to start businesses and create jobs. Governor Pence deserves credit for his efforts to reduce the regulatory burden on entrepreneurs and requiring special interest groups to justify the protections they receive from government. Even if the bill passes, it is unlikely to make much of a difference in the short term; there will be a lot of money behind industry lobbies seeking to protect their licensure status. Still, it is encouraging to see the conversation moving in this direction, and Governor Pence’s bill paves the way for other states to follow suit. Lifting burdensome licensure requirements will help encourage small business, foster innovation and reward consumers with more choices and lower prices.


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