Occupational Licensing

This opinion in the WSJ argues that one barrier to upward mobility is overly restrictive occupational licensing requirements imposed by state and local governments. The writer thinks that governments should eliminate requirements when its cost to benefit ratio is greater than one.  

SUMMARY: Cost-benefit analysis and 'lookbacks' could lift the unnecessary burdens of occupational licensing. "A widely overlooked part of Paul Ryan's antipoverty plan draws attention to the problem of occupational licensing, and it rightly calls on states and local governments "to begin to dismantle these barriers to upward mobility." But how? The answer, we think, lies in the adoption of a rigorous cost-benefit test. That test would impose new discipline on what state and local governments do-and it would eliminate unjustified barriers to job creation and economic growth."

CLASSROOM APPLICATION: Students can examine the effect of state and local regulations on entry, competition, prices, and economic efficiency of industries. Students can examine occupational licensing for example.

QUESTIONS: 
1. What are "regulatory lookbacks"?

2.When considering whether to implement new regulations, is it important for legislators and regulators to examine the economic consequences of doing so? What are the relevant economic consequences? Why is cost-benefit analysis an appropriate methodology for evaluating government regulations?

3. Who suffers the most from occupational licensing requirements?

Reviewed By: James Dearden, Lehigh University

4. Who benefits the most from occupational licensing requirements?