How Virginia’s occupational licensing reform has expanded worker freedom

What do estheticians, barbers, auctioneers, athlete agents, and “temporary wrestlers” all have in common?

None present a threat to public health or safety, yet in the commonwealth of Virginia, anyone who wishes to enter these professions must first earn an occupational license. In fact, this sort of superfluous licensing exists nationwide.

Occupational licensing requirements, which require citizens to gain regulatory approval before working certain jobs, weaken the American economy tremendously. These restrictions cost millions of jobs and hundreds of billions in inflated consumer costs, according to a 2015 analysis from the Brookings Institution. And research has found that, in most cases, they fail to meaningfully protect consumers. While it makes more sense for regulators to vet certain high-skill, high-risk positions — heart surgeons, for example — many licenses do nothing but protect industry incumbents from new entrants and interstate competition.

Occupational licensing standards have persisted largely due to political pressure from self-interested tradespeople, who wish to control the supply of new entrants — i.e., new competition — into their fields. And since full overhauls of licensing codes seem unlikely, many states have settled on incremental measures. The best of these is universal license recognition (ULR), which allows individuals with out-of-state licenses — and, in some states, relevant work experience — access to an expedited relicensing process.

In March 2023, Virginia became the 20th state to enact universal recognition. Since that law took effect in July of that year, 276 workers have earned licenses under its provisions (as of mid February), according to data provided by the Virginia Department of Professional and Occupational Regulation (DPOR). Of these, tradespeople (e.g., electricians and plumbers), real estate professionals, estheticians and other beauty professionals have accounted for most of the new licensees, the DPOR said.

Youngkin signs universal license recognition law at Richmond barber shop

After the Virginia General Assembly approved universal recognition in February 2023, Gov. Glenn Younkin praised it as a means of “resolving worker shortages.” DPOR director Kishore Thota said state officials continue to view it that way:  

“One industry that has been particularly hurt by labor shortages is the waterworks and wastewater works operators,” Thota wrote in a recent email exchange. “Over 10% of the licenses issued under ULR have been waterworks operators and wastewater works operators. ULR will continue to provide an easier pathway for qualified operators to come and work in Virginia,” he continued.

“These professions experience a particularly difficult time transferring licenses from state to state […] as each state uses different license types and regulatory authorities to oversee water and wastewater treatment.”

Occupational licensing reform offers states the simplest solution for worker shortages: to stop preventing already-qualified, already-available workers from working.

One such worker, real estate professional Alex Pentivolpi, secured his Virginia license under the ULR statute in November. Alex’s wife serves in the military, and per her orders, the family has lived around the U.S. and abroad.

Having first earned his real estate license in Hawaii, Alex moved to Texas, which lacks ULR. Accordingly, Alex said, the state required him to re-complete practically the entire licensing process — six 40-hour weeks of intensive training and rigorous testing, for which he paid handsomely.

To get his Virginia license, however, all he had to do was submit relevant paperwork and take the state’s exam. ULR has particular importance for a peripatetic family, like Alex’s. “I’m not going to be here too long … as a new person living in the area, I’ve got to get a clientele base,” Alex said. “Gotta hustle compared to people that have lived here a lot longer,” he added with a chuckle.

The DPOR director’s analysis aligns with a 2023 study from West Virginia University’s Kihwan Bae and Edward Timmon. Bae and Timmon wrote that the benefits of ULR have accrued primarily in fields with “low portability licenses” — that is, licenses whose approval processes tend to vary among states, making the relicensing process onerous for anybody who has moved across state lines. Sure enough, the WVU researchers offer electricians and real-estate brokers — major beneficiaries of Virginia’s reform — as examples of trades with low portability licenses.

When it comes to occupational licensing, portability is an essential factor for workers. People move for a plethora of reasons which often have nothing to do with professional opportunity. Census data shows the number one reason people moved in 2021-2022 was housing, accounting for over 41% of movers. The next most cited reason for moving was family (26%). Only 16% of movers cited employment. 

For many, however, the opportunity cost of relocation is paid in lost employment, as Bae and Timmon detail. And once relocated, many professionals face burdensome — if not functionally insurmountable— obstacles to continuing to work in their chosen field, causing many simply to remain without work, or start over on their careers.

This problem is largely fixable. Bae and Timmon report that ULR reform simultaneously raises workforce-participation rates and lowers unemployment rates. Specifically, the researchers found that reform entices married individuals to rejoin the workforce. Put differently, with ULR, a spouse can escape an unwanted early retirement or reliance on government benefits. 

Bae and Timmon also “observe[d] some decline in the unemployment of married individuals and a significant reduction in the unemployment of non-married individuals.” 

In general, they wrote that ULR reform likely “reduce[s] the unemployment spell of job seekers with out-of-state licenses,” relieving the economic and psychological tolls joblessness imposes.

Moreover, by resolving these tensions, ULR reform promotes interstate mobility. “By license portability, the migration rate into states with universal recognition increased by 1.31 percentage points or 82.4% among individuals with low portability licenses a year after the policy change,” Bae and Timmon wrote. Migration effects were particularly stark in neighboring states, they add. 

All this suggests that licensing reform — by removing a looming, arbitrary professional disincentive — frees individuals to live where they choose, bettering their lives and, through their work, the lives of their new neighbors. In a creatively destructive capitalist economy, freedom from regulatory barriers, particularly those that amount to uncut cronyism, gives workers critical flexibility not just to survive but to flourish.

Indeed, rigid occupational licensing has long benefitted special interests at the worker’s expense. In 1776, in his masterwork “The Wealth of Nations,” Scottish economist Adam Smith decried such regimes as violations of liberty for workers and employers alike. Smith further railed against laws that restricted workers’ freedom to move about England. He endorsed a free system under which “a poor workman, when thrown out of employment either in one trade or in one place, may seek for it in another trade or in another place, without the fear either of a prosecution or of a removal.” 

While some, this author included, would favor foundational reforms, ULR offers non-doctrinaire state officials a relatively politically palatable — and, from a consumer’s perspective, eminently safe — first step. Such reform may be incremental, but it is not insignificant. Although far from offsetting the millions of jobs lost to occupational licensing regimes noted by the Brookings report, Bae and Timmon write that a “back-of-the-envelope calculation based on our estimate suggests that universal recognition is expected to add at least 67,000 new jobs to the United States.”

That’s tens of thousands of Americans empowered to live and work how and where they see fit, creating economic and social value for the communities in which they choose to live. It means increased competition, lower consumer prices, and less protectionist cronyism. States like Virginia have already enjoyed significant benefits from reform, benefits that can only compound going forward.