Utah Is Beginning to Free Its Workforce from Overregulation

T his country is experiencing one of its tightest labor markets in decades, and employers across the board — from nonprofits to start-ups to large corporations to government agencies — are feeling the squeeze. But there is good news: States can make themselves part of the solution by easing burdensome occupational-licensing requirements.

Occupational licensing is a key state-level policy that can affect worker availability. Roughly 25 percent of the American workforce is subject to state-level licensing laws. These laws regulate what licensed professionals are allowed to do and what training is required to do it. They affect student-debt levels, employment, what activities a professional can perform, staffing requirements, compensation levels, and the cost of services for a large portion of the economy. They are the hidden force shaping the modern service economy.

Licensing laws are often driven by a positive desire to professionalize and increase the quality of services. But these rules are largely advanced by practitioners, licensing boards, and affiliated trade associations — not consumers.

For practitioners, there is a clear benefit to increasing licensing requirements, which restrict supply and increase earnings by 13–14 percent. Yet there is minimal evidence that stricter licensing requirements lead to changes in quality or safety for consumers. Education providers also have vested interest in licensing statutes that dictate the courses and degrees required to practice a particular profession. So naturally, when licensing is being debated in state legislatures, it is most often the practitioners and education providers, rather than the consumers, who show up.

Without proper balance, well-intentioned efforts to protect the public can have the opposite effect. For example, we believe the unseen economic force of occupational licensing may be contributing to the nation’s mental-health crisis. To enter many major mental-health occupations (e.g., clinical social workers and psychologists), one must complete an undergraduate and then a graduate degree, pass an exam (or two or three!), and do two years of supervised practice — a process that takes eight to ten years in total. At a time of limited access to mental-health services, maintaining unnecessarily stringent licensure requirements is akin to holding all food-service providers to the standard of a three-star Michelin restaurant amidst a famine.

Beyond the mental-health crisis, overly burdensome licensure requirements contribute to labor shortages in other critical professions and drive an estimated $6 billion in lost economic output. Weighty licensure barriers limit opportunities to enter a profession and, with fewer providers, result in higher costs, both of which affect the low-income and underserved most acutely. Furthermore, as professions change, adapt, and advance, licensure requirements can become out of date. For instance, ten years ago, most states had a requirement for face-to-face physician visits. Now, the telehealth boom has made such requirements obsolete.

For all these reasons, we believe state governments must systematically examine and update their licensing regimes to ensure that their laws are truly targeted at preventing public harm and ensuring access for consumers broadly, rather than perpetuating an occupation’s narrow view of the public good.

Last summer, Utah created a first-in-the-nation model to do just this: our new Office of Professional Licensure Review. First up for review will be Utah’s licensing requirements for mental-health professionals. And in the coming years, this new office will review every other regulated occupation in the state through the same data-driven lens.

Each industry, and each occupation, is different. Some will face professional shortages. Others will have rapidly changing technology and practice standards to grapple with. And still others may need stricter licensing requirements to mitigate the risks that improperly practicing them could pose to consumers. But in each case, a consistent, rigorous review of licensing laws can protect the public while removing unnecessary barriers to work.

By regulating mental-health care and other professions through licensing, state government has the power to protect the health, safety, and financial welfare of the public. But the government must also take care not to harm the public by unnecessarily decreasing access and increasing costs through overly stringent licensing requirements.

Innovations such as Utah’s new Office of Professional Licensure Review serve to balance each of these aims, and thus can contribute to a more robust, responsive, and inclusive economy.

Spencer Cox is the 18th governor of Utah. Margaret Busse is the executive director of the Utah Department of Commerce.