Director, Knee Center for the Study of Occupational Regulation, West Virginia University
Senior Research Fellow, Archbridge Institute
Government, Military and Veterans Affairs Committee
February 9, 2023
Chairperson Brewer and all distinguished members of the Government, Military and Veterans Affairs Committee:
Thank you for allowing me to testify regarding licensing reform in Nebraska. I am an associate professor of economics and director of the Knee Center for the Study of Occupational Regulation at West Virginia University. I am also a senior research fellow with the Archbridge Institute.
The main takeaways of my comments are the following:
1. Nebraska has a shortage of workers and should not create arbitrary barriers for potential new residents.
2. Research shows that rigid occupational licensing restricts mobility by 7 percent.
3. Arizona has had more than 6,000 new professionals enter the state after universally recognizing out-of-state licenses.
Nebraska is in a strong economic position, and policymakers should be commended for setting the state up for prosperity. The unemployment rate in the state is nearly a full percentage point lower than the national average.(1) Unfortunately, employers in Nebraska are having a hard time finding the workers they need to fill current job openings.
The president of the Nebraska Chamber of Commerce recently noted that the state has as many as 80,000 unfilled jobs.(2) If employers in the state are unable to fill jobs, the economic momentum that Nebraska has achieved will be at risk. Employers need access to workers to continue to produce goods and services and to maintain prosperity.
Occupational licensing is the most stringent form of professional regulation. It forbids Nebraska residents from working in a profession before meeting entry requirements including achieving minimum levels of education, passing exams, and paying fees to the state. Estimates suggest that 18 percent of workers in Nebraska are licensed.(3) By erecting barriers to entering professions in the state, occupational licensing imposes a multitude of costs upon consumers and eliminates more than 15,000 jobs in the state each year.(4)
Turning to mobility, economic research estimates that stringent occupational licensing reduces geographic mobility by as much as 7 percent.(5) There is a simple intuitive explanation for this finding: not allowing Americans to transfer their licenses and practice the craft that they have already been trained to do dissuades Americans from moving. The needless burden of new exams or additional education before being permitted to practice is too great.
Nebraska will not be going out on a limb if it recognizes the licenses from other states. Arizona passed this reform in 2019.(6) Iowa and Missouri passed similar legislation in 2020.(7) In 2022, Kansas and Mississippi also passed similar legislation.(8) Governor DeWine in Ohio signed this reform earlier this month.(9) It has been estimated that more than 6,000 skilled workers moved to Arizona after passage of the reform three years ago.(10) Recent research also finds that universal recognition boosts tax receipts for states that pass the reform by $1.7 million per county in border counties.(11) Nebraska can benefit in the same way and not be left behind these other states.
With Nebraska employers needing skilled workers, it seems silly to force new residents to complete arbitrary hurdles to begin working. Research shows that preventing occupational licenses from easily transferring reduces mobility. Nebraska can look to other states, such as the bordering states of Iowa, Kansas, and Missouri, for guidance on how to help fill this gap with commonsense occupational licensing reform.
1 “Unemployment Rates for States,” Bureau of Labor Statistics, last modified January 24, 2023, https://www.bls.gov/web/laus/laumstrk.htm.
2 Laura Sambol, “New effort by Nebraska business leaders to address the national worker shortage,” WOWT News, November 18, 2022.
3 Morris M. Kleiner and Evgeny S. Vorotnikov, At What Cost? State and National Estimates of the
Economic Costs of Occupational Licensing (Arlington, VA: Institute for Justice, November 2018).
4 Kleiner and Vorotnikov, At What Cost?
5 Janna E. Johnson and Morris M. Kleiner, “Is Occupational Licensing a Barrier to Interstate Migration?,” American Economic Journal: Economic Policy 12, no. 3 (2020): 347–73.
6 Office of the Governor of Arizona, Arizona – First in the Nation: Universal Licensing Recognition, n.d., https://azgovernor.gov/sites/default/files/universallicensingrecognition1_0.pdf.
7 Office of the Governor of Iowa, “Gov. Reynolds Signs Comprehensive Licensure Legislation,” press release, June 25, 2020, https://governor.iowa.gov/press-release/gov-reynolds-signs-comprehensive-licensure-legislation; Cameron Gerber, “Parson Expands License Reciprocity in Missouri,” Missouri Times, July 6, 2020.
8 Sarah Ulmer, “Governor Signs Bill for Universal Recognition of Occupational Licenses,” Y’all Politics, March 25, 2021; Rebekah Chung, “Gov. Kelly Signs Military Spouse Occupational Licensing Bill,” KSNT, April 21, 2021.
9 Bradley Vasoli, “Ohio Enacts Universal Occupational License Recognition,” The Ohio Star, January 4, 2023.
10 “Breaking Down Barriers to Work with Universal Recognition: Frequently Asked Questions,” Goldwater Institute, updated March 2022, https://goldwaterinstitute.org/universalrecognition/.
11 Darwyyn Deyo and Alicia Plemmons, “Have license, will travel: Measuring the effects of universal licensing recognition on mobility,” Economics Letters 219 (2022).