Last week, the Obama Administration released a report on the effects of occupational licensing, and calling for reforms that would better protect the rights of entrepreneurs and workers to earn a living without unreasonable government interference. This is a gratifying development: licensing laws often bar the nation’s hardest-working people from earning a living, not to protect the public, but simply to protect the private interests of already-existing businesses that don’t want competition. As the report says, licensing laws cost millions of jobs and raise the cost of living by billions of dollars: “The stakes involved are high, and to help our economy grow to its full potential we need to create a 21st century regulatory system—one that protects public health and welfare while promoting economic growth, innovation, competition, and job creation.” This week I’ll be parsing the report and discussing some of its recommendations.
What practical effect will the report have? It suggests a number of “best practices” for states to follow when regulating businesses, but it has no specific suggestion for legislative changes, and that’s partly because most restrictions on economic freedom are at the state, rather than the federal level. Although federal courts could certainly do a lot more to protect the constitutional right to earn a living, this report’s recommendations—though many are valid—fall a little short.
But there are some things Congress could do today to protect economic freedom more effectively. In my latest article in the Harvard Journal of Law & Public Policy, I suggest three ways it could prevent the abuse of licensing laws:
- Federal civil rights legislation that would more explicitly protect the right to earn a living. Such legislation would declare (again) that economic liberty is a fundamental human right which the states may not justly abridge. I recommend wording along these lines: “All adult persons, except as a punishment for crime whereof the party shall have been duly convicted, shall be free, in every state and territory in the United States, to make and enforce contracts; to earn, purchase, sell, hold, and convey real and personal property; and to pursue lawful occupations, subject only to such restrictions as substantially protect the public health and safety…”
- Conditions on federal grants to the states. The federal government spends scads of money every year subsidizing job-training and education programs. It would not be too much to ask that in exchange for those grants, the states refrain from imposing licensing restrictions that do not protect public safety. Framed along the lines of the Religious Land Use and Institutionalized Persons Act, a protection for economic liberty could say something like “No government shall impose or implement a licensing requirement on a trade or occupation in a manner that imposes a substantial burden on the economic liberty of a person, unless the government demonstrates that imposition of the requirement on that person (a) furthers the protection of public health or safety; and (b) is the least restrictive means of furthering that protection….”
- Antitrust reform. A few months ago, the Supreme Court decided the North Carolina Dental case, declaring that state regulatory agencies can sometimes be sued under the antitrust laws, if they are barring economic competition simply to serve the private interests of politically influential, established businesses. This was a welcome development, but it’s also troublingly narrow. Congress could easily amend the antitrust laws to allow entrepreneurs to use these laws to defend themselves against abuse by state and local governments. Specifically, it could declare that Parker antitrust immunity will be limited to cases in which (a) the state genuinely supervises the regulators by making them responsible to voters in a meaningful way, (b) the legislature expressly commands the agency to impose an anti-competitive restriction, and (c) where the restriction on competition is narrowly tailored to advance a substantial government interest, as determined by an independent judge acting without deference to the legislature.
For more details, consult my article.
The right to earn a living is a basic human right, and one that is fundamentally important to the promotion and protection of the American Dream. Unfortunately, entrepreneurs are typically shut out of the lawmaking process and have little hope of defending that right in state legislatures against the private interests that frequently use their power to outlaw their own competition. The point of the Fourteenth Amendment was to protect civil rights against the intrusions of state governments—and there’s no reason Washington could not act now to give real meaning to that promise.