Joe Biden kicked off his 2020 presidential campaign in Pittsburgh last week with a speech that contained a serious but overlooked policy proposal to expand economic opportunities for all Americans — one that can draw broad bipartisan support.
“The major moral obligation of our time is to restore, rebuild and respect the backbone of America: the middle class,” Biden said. “As we rebuild it, we need this rebuilding to be all-inclusive, opening the doors of opportunity for all Americans….”
Few Americans would disagree with that idea. One serious obstacle to a broader expansion of economic opportunity, Biden pointed out, comes from anti-competitive occupational licensing laws.
After advocating the abolition of non-compete clauses for lower-wage workers, saying they exist only “to suppress wages,” Biden said we should “do the same thing with occupational licenses.”
“Why should someone who braids hair have to get 600 hours of training? It makes no sense. It’s designed to keep the competition down. Look, folks, you can’t just transfer your licenses across one state to another. They’re making it harder and harder in a whole range of professions, all to keep competition down. Why should we get rid of these unnecessary hoops out there? Because we have to restore America’s ability and individual Americans to be able to fight for their own dignity.”
Biden is right on this — as was President Obama before him.
Anti-competitive occupational licensing regulations reduce economic opportunities and diminish human dignity by forbidding ambitious Americans from working in many fields unless they first obtain permission from the government.
The result is a particularly regressive form of wealth redistribution — from lower-income to higher-income workers.
“Not only does licensing redistribute earnings from unlicensed to licensed workers; it also shifts the burden of unemployment away from licensed workers,” as the Brookings Institution put it a few years ago.
Occupational licensing also limits mobility, as Biden noted and as a study for the Federal Reserve Bank of Minneapolis found. If you get a license in one state, but that license isn’t recognized by other states, you’re stuck. Licensing reduces competition in part by restricting worker mobility.
This is not a fringe issue. A dramatic increase in occupational licensure has occurred since the middle of the last century. In the 1950s, only about 5 percent of occupations in the United States required a license, but by 2006 almost 30 percent did, a 2008 National Bureau of Economic Research study found.
Because these requirements have been shown to reduce competition and limit economic opportunities for millions of Americans, they have drawn condemnation from across the ideological spectrum.
The libertarian Institute for Justice has produced compelling reports showing the negative effects of occupational licensure, the latest being available here. The Obama administration undertook its own review of occupational licensing laws and in 2015 released a report that called for widespread reform.
“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines,” the Obama administration review concluded.
The Obama administration considered occupational licensing barriers so economically harmful to people on the lower rungs of the economic ladder that it began offering federal grants to encourage state-level reductions in licensing laws.
Matthew Yglesias of Vox noticed at the time that the administration’s push against occupational licensing laws, which are government regulations, after all, was out of synch with liberal orthodoxy. Reducing these regulations might be even more unfashionable now, as “socialism” has grown in popularity among the far left.
Yet Biden wasn’t afraid to connect these state laws to his broader fight for economic opportunity and human dignity. For Biden to point out the harmful and demeaning effects of some government regulations in his campaign kick-off speech is both noteworthy and praiseworthy.
This is an economic problem that both the left and the right can agree to fix — if leaders of both sides are willing to address it.