Ohio to Honor Occupational Licenses from Other States

By quietly signing a bill on January 2 that recognizes occupational licenses issued by other states and required by law to practice in various trades and professions, Ohio Gov. Mike DeWine reduced the barriers to entry for people already licensed elsewhere to set up shop in Ohio without having to go through the whole onerous licensing process yet again. It’s not a complete fix for a regulatory burden that serves as a barrier to employment and drives up prices for consumers, but it’s a step in the right direction.

The new law was buried in a list of other legislation, camouflaging its importance to those seeking to enter the job market, start a business, or simply move across a state line from one set of rules to another. It doesn’t eliminate licensing requirements—a key reform called for by many economists. But universal recognition of licenses issued in other states lets people jump through the hoops necessary to get permission to work just once rather than multiple times.

“Universal recognition allows a licensed professional to apply for and be quickly granted a license to work based on the training or testing he or she has already completed,” noted the Goldwater Institute, which developed reform legislation with the Institute for Justice. “So long as an applicant has held a valid out-of-state license in good standing for at least one year and does not have any disqualifying criminal history or open complaints, he or she is eligible to receive a similar license under recognition.”

Making licenses portable is enormously important because requirements have proliferated across the country in recent decades. They turn the right to make a living into a privilege doled out by state agencies under the control of existing practitioners who don’t exactly welcome new entrants who challenge them for market share.

“In the 1950s, approximately 5 percent of U.S. workers had an occupational license, meaning they completed additional schooling or training (and paid the necessary fees) and passed an exam to be licensed to practice the profession in a certain state,” Saint Francis University economics professor Edward Timmons pointed out in 2018 for the Harvard Business Review. “Today, the Bureau of Labor Statistics estimates that 23 percent of full-time workers have a license.”

Licensing requirements were sold as a means for raising standards and guaranteeing greater safety. But that’s not what they do.

“This study finds no evidence that licensing raises quality and some evidence that it can reduce it,” Kyle Sweetland and Dick M. Carpenter II wrote in a 2022 Institute for Justice paper on the effects of occupational licensing.

To the contrary, licensing requirements do harm.

“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 White House cautioned in a 2015 report.

Licensing especially hurts low-income Americans and immigrants who want to start businesses or enter trades, but find the costs and time requirements for getting permission to work daunting.

“The higher the rate of licensure of low-income occupations, the lower the rate of low-income entrepreneurship,” reported economist Stephen Slivinski in a 2015 Goldwater Institute study.

Occupational licensing has also become a means to exercise political control, with permission to work denied to practitioners who offend regulators and politicians. That abuse of the power recently hit the headlines with the case of Canadian psychologist Jordan Peterson and a California law that openly seeks to muzzle physicians who stray from official messaging.

As awful as occupational licensing is, radical change is a tough sell for a public misled into believing that guild-style restrictions are safety measures. Universal recognition, by which states honor each other’s licenses, was developed as a compromise measure to reduce the harm done by licensing. Arizona was the first state to adopt the approach, in 2019. Ohio is just the latest to follow suit, becoming the 19th such state so far. But, as a compromise, universal recognition is less of a cure-all than a kludge.

“Universal recognition can differ quite drastically from state to state,” warns the Institute for Justice. “Multiple states have imposed additional rules and requirements that thwart license portability and workforce mobility, undermining the main goals of universal license recognition.”

Some states award licenses just to residents, while others only recognize “substantially equivalent” licenses from other states, dinging applicants from places less burdened by red tape. That makes the various flavors of universal recognition a lesser problem than state-specific licensing, but still a problem. Reducing the barriers to entry for people who want to work, and creating greater competition so that consumers can benefit, requires bigger changes.

“The analysis of the benefits and costs of licensing may find that some occupations would benefit from lesser forms of regulation, such as certification or registration, or even no regulation,” the University of Minnesota’s Morris Kleiner wrote in a 2015 Brookings Institution call for a range of reforms. Under certification, anybody could work in a given field, but those who voluntarily submit to third-party exams and standards could advertise their credentials.

The Institute for Justice agrees, pointing out that, “despite licensing’s prevalence, most occupations we study are unlicensed in at least one state.” If competition, word of mouth, online reviews, and certification work for practitioners and consumers in those states, they’re clearly not really necessary. The organization recommends an array of voluntary and less-intrusive regulatory alternatives to licensing in order to reduce barriers to entry and increase competition.

In the meantime, though, universal recognition of occupational licenses is a big improvement over state-by-state barriers. Ohio is moving in the right direction by recognizing other states’ licenses so that workers need only suffer expensive and time-consuming requirements once instead of going through the process repeatedly. The next step is to get regulators entirely out of the way so that making a living is again recognized as a right instead of a privilege.

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