Economic Opportunity

Occupational licensing reforms remove roadblocks

New Mexico’s occupational licensing reform shows how making changes at the state level removes barriers to opportunity, especially for low- and moderate-income Americans.

October 8, 2018

After a 2016 Obama White House report recommended changes to state occupational licensing laws, reform efforts have gained bipartisan momentum in states across the nation. That report two years ago noted burdensome licensing laws raise consumer costs and reduce employment and wages, particularly for the Americans who can least afford these outcomes, and the Trump Administration has continued to emphasize the importance of licensing reform since then.

In New Mexico, Gov. Susana Martinez signed an executive order in July to review all of her state’s licensing fees and requirements. She followed up on that action on Oct. 3 with a new sweeping executive order that, if fully implemented, will make New Mexico the freest state in the union in terms of occupational licensing.

Like the Obama White House report, Gov. Martinez noted restrictive occupational licensing laws are a barrier for low- and moderate income Americans seeking to climb the economic ladder. Gov. Martinez argued, “ By removing these roadblocks,” her executive order would clear “the way for New Mexicans to provide a better life for themselves and their families.”

The most significant part of the order relates to the “consumer choice” provision, which provides an alternative to occupational licensure. As outlined in the executive order, an individual may practice their profession without a license as long as he or she does two things: 1) informs each prospective customer that they are not licensed by the State of New Mexico, and (2) has the customer sign a written contract acknowledging the disclosure.

The executive order also makes it easier for professionals who still prefer to get a license to operate by:

  • Reducing licensing fees to 75 percent or less of the national average;
  • Reducing New Mexico education and experience requirements to the lowest allowed by current law;
  • Seeking to limit the barriers faced by ex-offenders wishing to acquire licenses;
  • Accepting licenses from any other state; and
  • Accepting experience as a substitute for occupational licensing for those moving from states that do not require licensure for the same services.

Occupational licensing reform has become imperative in New Mexico. An Institute for Justice study tracking 102 low- to middle-income occupations found New Mexico to have the ninth most burdensome licensing laws in the country and the 11th most broad and onerous licensing. An Archbridge Institute study found upward mobility in New Mexico has been reduced more than 4.6 percent as a result of the 41 new occupational licenses enacted since 1993.

Gov. Martinez’s order is significant not only for New Mexicans seeking to earn a living, but also every consumer seeking critical products and services. While occupational licensing advocates argue occupational licenses improve public safety and quality of service, the reality is these rules pose a significant barrier to employment, entrepreneurship, and access to services for consumers, all of which disproportionately affect lower income families. Nationally it’s estimated that more than one in four workers need a license to do their job, and this may result in 2.85 million fewer jobs and $203 billion in higher annual costs to consumers. Research also has clearly demonstrated that the public gains no safety benefits from licensure.

Like the Obama administration did, the Trump administration is encouraging state leaders to prioritize occupational licensing reform as a way to reduce poverty and improve job growth. The new licensing reforms in New Mexico provide governors and state lawmakers across the country additional momentum to prioritize licensing reform for their citizens.