Ohio House State and Local Government Committee 5/5/2021

Ohio Should Open the Door to Skilled Workers

Dr. Edward Timmons
Senior Affiliated Scholar, Mercatus Center at George Mason University
Director, Knee Center for the Study of Occupational Regulation, Saint Francis University
Ohio House State and Local Government Committee

May 5, 2021

Chair Wiggam, Vice Chair John, Ranking Member Kelly, and all distinguished members of the House State and Local Government Committee:

Thank you for inviting me to testify regarding licensing reform in Ohio. I am a professor of economics and director of the Knee Center for the Study of Occupational Regulation at Saint Francis University in Loretto, PA. I am also a senior affiliated scholar with the Mercatus Center at George Mason University. I have been involved with or led three federally funded grant projects exploring the issue.

The main takeaways of my comments are the following:
1. Ohio has a shortage of skilled professionals and tradespeople 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 already had more than 3,000 new professionals enter the state after universally recognizing out-of-state licenses.

The State of the Ohio Labor Market

Policymakers in Ohio should be commended for setting the state up for prosperity. Ohio has a very strong labor market—the unemployment rate was more than a full percentage points below the national average in March of 2021. [1] Unfortunately, employers in Ohio are having a hard time finding the workers they need to fill current job openings.

The president of the Ohio Home Builders Association [2] has recently noted a persistent shortage of skilled workers in the state. The 2020 Ohio Manufacturing Report also highlights this need—57% of respondents note that a skilled worker shortage is restricting business growth in the state. [3]

Occupational Licensing in Ohio
Occupational licensing is the most stringent form of professional regulation. It forbids Ohio 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 Ohio are licensed. [4] By erecting barriers to entering professions in the state, occupational licensing imposes a multitude of costs upon consumers and eliminates more than 67,000 jobs in the state each year. [5]

Turning to mobility, economic research estimates that stringent occupational licensing reduces geographic mobility by as much as 7 percent. [6] 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.

Universal Recognition
Ohio will not be going out on a limb if it recognizes the licenses from other states. Arizona passed this reform in 2019. [7] Iowa and bordering state Missouri passed similar legislation in 2020. [8] This year, Kansas and Mississippi also passed similar legislation. [9] It is too early to estimate for the latter states, but Arizona has already seen the effects from passing this legislation. It has been estimated that more than 3,000 skilled workers moved to Arizona in 2020 after passage of the reform. [10]

With the difficulty of finding available workers in state, 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. Ohio can look to other states, such as Iowa and Missouri, for guidance on how to help alleviate persistent labor market vacancies with commonsense occupational licensing reform.

1 “Unemployment Rates for States,” Bureau of Labor Statistics, last modified April 16, 2021,
https://www.bls.gov/web/laus/laumstrk.htm.
2 https://www.prnewswire.com/news-releases/as-worker-shortage-in-building-industry-persists-ohio-certifies- training-in-trade-skills-for-residential-construction-states-secondary-schools-newly-eligible-to-apply-for-special- grants-301244492.html

3 https://businessjournaldaily.com/magnet-seeks-responses-for-2021-ohio-manufacturing-survey/
4 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).
5 Kleiner and Vorotnikov, At What Cost?
6 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.
7 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.
8 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.
9 https://yallpolitics.com/2021/03/25/governor-signs-bill-for-universal-recognition-of-occupational-licenses/ https://www.ksnt.com/capitol-bureau/gov-kelly-signs-military-spouse-occupational-licensing-bill/
10 https://goldwaterinstitute.org/universalrecognition/