Utah can be a national leader on licensing reform

When you start cleaning out a closet, it looks worse than before you started. The tightly closed door holds back the mess of coats, shoes, puzzles, and assorted vacuum parts from spilling out. When you throw in the next pair of shoes, you say a little prayer that they won’t start an avalanche. And in the back of your mind, you know that, eventually, you’ll have to do the hard work to clean it out. 

Since the first days of January, Utah’s agencies have started doing that hard work of cleaning out the accumulated regulatory junk. Governor Spencer Cox ordered a review of the state’s occupational licensing laws to be done by state agencies and completed by the end of the month. Occupational licensing rules determine what training and qualifications someone needs to work in a licensed occupation, for example, setting the educational or training requirements for cosmetologists and real estate agents. In many occupations, these requirements make sense. The review will recommend changes that “limit unnecessary government regulation,” and ultimately allow more Utahns to make an honest living. 

Just like our closets and junk drawers, rules and regulations need seasonal cleanings to keep them working for the interests of every Utahn. That’s why our new research recommends that the legislature make regular reviews a permanent part of Utah’s regulatory process. If implemented, Utah can cement its place as a national leader in making licensing laws work for the good of consumers. 

Licensing requirements can become awkward and unwieldy without occasional review. At a national level, licensing has become incredibly common where it was once historically rare. In 1950, only about five percent of workers required a license to work in the U.S.. Today in Utah, more than 16 percent of Utahns require a license to work, only a bit better than the national average of 20 percent. That costs the state an estimated 19,000 in jobs each year and about $1.9 billion in higher costs for consumers and lost economic activity, according to a study by leading researchers Morris Kleiner and Evgeny Vorotnikov. 

In most cases, those costs stem from regulating with too heavy a hand. For example, our new study finds that Utah regulates some occupations much more stringently than our neighbors. Associate real estate brokers in Utah require 120 hours of educational training—that’s four times more than in New Mexico and 30 hours more than required in Idaho.

Luckily, Utah has a history of making smart choices on licensing reform. In 2019, Utah’s work on occupational licensing reform was recognized by the Institute for Justice. The Institute is a public interest law firm that ranks states by how difficult it is to begin working in 102 low-income occupations. In 2019, Utah jumped 37 spots to be the second least burdensome state in the country. 

Utah has already made significant progress at removing unnecessary licensing rules. The next step should be implementing a system of regular review that can keep the growth of licensing rules in check. 

We propose a review process requiring that regulators consider the benefits of licensing to consumers—not practitioners. Licensing is supposed to protect consumers from potential risks, but often it ends up protecting industry members rather than having any real benefit for consumers. Preventing that means carefully comparing current rules to alternatives. As the growth of licensing from 1950 to today shows, licensing has too often been the default when other policies could serve consumers just as well. 

As Jason Sorens, a leading political scientist, explains in a policy brief published by the University of Utah’s Marriner Eccles Institute, there are a variety of policy options for protecting consumers. Requiring insurance in case of accidents or letting practitioners set themselves apart through voluntary certifications may better protect consumers than licensing. Mechanics, for example, are often certified through the National Institute for Automotive Service Excellence despite no formal requirement for such designations. 

Reforms like those begun by Governor Cox will help ensure the first rungs of the ladder are reachable for all Utahns. The state already has made progress that other states can learn from. We now have a huge opportunity to become the first state to implement a periodic review that keeps regulation working for consumers. It’s the first step on a promising path towards more opportunity and prosperity for all Utahns. 

Josh Smith is a Research Manager for the Center for Growth and Opportunity at Utah State University. Edward Timmons is professor of economics and director of the Knee Center for the Study of Occupational Regulation at Saint Francis University in Loretto, PA.

CGO scholars and fellows frequently comment on a variety of topics for the popular press. The views expressed therein are those of the authors and do not necessarily reflect the views of the Center for Growth and Opportunity or the views of Utah State University.