Protecting the Public through Contracting Licensure: A Tale of Three Homes

Bill Johnson, an Arkansan, has decided that he wants to build a new house. He has three options to complete construction:
Option #1 Bill can build his own house. Along the way, however, Bill finds that doing everything himself is taking too long and is inefficient. Bill’s neighbor, Jim, built a nice house that Bill has always admired. After consideration, Bill decides to enlist Jim’s help and to hire some great kids from the neighborhood as assistants. However, Bill would be breaking the law by hiring unlicensed contractors to help him.

Option #2 Bill can be his own general contractor. Bill, however, is not free to hire whomever he chooses. Depending upon the project’s cost of materials and labor, Bill must hire subcontractors who hold limited or unlimited Home Improvement Specialty Licenses. Arkansas mandates that workers in 30 separate residential construction tasks must hold separate, specialty licenses. These jobs include cabinets, ceilings, concrete, countertops, drywall, floors, foundations, doors, insulation, masonry, and tile. Note that electrical, mechanical, plumbing, and gas workers are licensed by separate boards.

Option #3 Bill can hire a licensed general contractor. Because his house is being built from the ground up, the general contractor must hold a Residential Builder’s License rather than a Remodeler’s License. Unlike Bill, the general contractor may hire anyone to perform all types of work, regardless of their training, experience, or license status. He is the only laborer on the job site that is required to be licensed. And Arkansas law doesn’t require him to be on site all of the time. Again, electrical, mechanical, plumbing, and gas workers are licensed by separate boards.

Regardless of which option Bill chooses, the house must undergo the same inspection by the city or county.

This is How Arkansas Contractor Licensing Protects the Public?

General contractors—whose state licensure test mostly consists of questions about state law and business management—are afforded the luxury of choice in whom they may hire as subcontractors. The public is not. General contractors have the freedom to hire low cost, inexperienced, unlicensed labor as it suits them.

Bill’s options are:

(a) do the work himself—at whatever cost or quality he can—and hope his house passes inspection or that he can evade, avoid, or flummox the inspectors;

(b) subcontract high cost, licensed labor

(c) pay for the general contractor

(d) break the law by hiring unlicensed labor and hope it goes unnoticed

(e) simply never start the project because it is too expensive to obey the law.

Under almost any circumstances, most Arkansans will hire a general contractor. But if the general contractor can hire unlicensed labor if he wants, shouldn’t Bill, as the consumer, have the same luxury of choice?

Contracting licensure is only one story that highlights the issue of occupational licensure in Arkansas. If Arkansas reduced the number of occupations that require state licensure by one-third, that number would still exceed the number of licensed occupations in Mississippi (68) and Texas (78).

Arkansas has the second-highest average burden—education, experience, and expenditure—imposed on licensed occupations. On average, to obtain a professional license in Arkansas, one needs more than twice as much education and experience than in Texas (689 days to 326 days).

Research by ACRE shows that as a result of this excess burden Arkansans pay higher prices and endure greater unemployment rates and poverty levels; and that these burdens fall unequally on the most disadvantaged of us.

If you have questions or comments, or if you would like more information about this study or about ACRE and its endeavors, please contact ACRE’s director David Mitchell (

DISCLAIMER The views and opinions expressed herein are those of the authors and do not necessarily reflect the views of the University of Central Arkansas nor are they endorsed by the University of Central Arkansas.