Economist: North Dakota's regulatory underbrush needs pruning
LORETTO, Pa.—North Dakota has earned a reputation for having a robust and healthy state economy. As of December 2016, the state's unemployment rate was 1.7 percentage points lower than the national average, per the Bureau of Labor Statistics.
A key contributing factor to North Dakota's prosperity is the level of economic freedom that its citizens and businesses enjoy. The latest Economic Freedom of North America report ranks North Dakota among the nation's top 10 states, with a score of 7.4.
Each of the scores reflect the state's level of spending, taxation and the severity of burdensome regulation.
North Dakota generally does an admirable job of limiting red tape. But there is one area where much work remains to be done: occupational licensing.
The Bureau of Labor Statistics found that 21.8 percent of the U.S. workforce are licensed, meaning more than one-fifth of American jobs require state government permission slips. To obtain a "permission slip" to simply do their job, employees commonly encounter out-of-pocket expenses and fees associated with mandatory exams and educational training.
And in North Dakota, which generally scores very high in terms of economic freedom, 26.6 percent of workers are licensed — almost a full five points above the national average.
According to the Institute for Justice, North Dakota requires pipelayers, cement finishers, drywall installers and other contractors to get licenses to work. It's important to note that North Dakota's southern neighbor has no such regulations.
Considering that these workers presumably are performing the same jobs, why do these differences exist?
Proponents and supporters of occupational licensing claim that licensing laws improve safety and protect the public. Unfortunately, existing evidence to support this claim fails to demonstrate that the cost of such laws generally outweighs the intended benefits.
Thus, North Dakotans likely will pay higher prices to their athletic trainer, massage therapist or taxidermist — three occupations that are licensed in North Dakota but are not in several other states.
North Dakotans who are trying to achieve the American dream by starting a new business may find these barriers too steep to overcome. To illustrate, athletic trainers in North Dakota must complete nearly 1,500 hours of training. This is illogical and unjustifiable given that athletic trainers in California—a state that ironically is ranked amongst the 10 worst states with respect to economic freedom—are free to work without a license.
The time has come for policymakers to recognize and evaluate the costs and benefits associated with occupational licensing laws. The Center for the Study of Occupational Regulation at St. Francis University in Loretto, Pa., is launching a comprehensive national database of occupational licensing laws that will provide policymakers with the tools to make well-informed decisions.
Timmons is an associate professor of economics and director of the Center for the Study of Occupational Regulations at St. Francis University.