Occupational Licensing in Arkansas

By Alexandria Tatem

A recent policy brief by the Mercatus Center highlighted Arkansas’s excessive occupational licensing policy. When the state government imposes licensing requirements on an occupation, it means a worker must get permission from the state before practicing that profession. The worker typically has to have a minimum level of education and experience, pass exams, and pay fees to get the license.

What does this mean for consumers? People often believe that licensing increases the quality of available services and protect consumers from unsafe business practices; however, research suggests that these laws make it more difficult for people to start working in those professions. A lack of competition in the market will lead to increased prices. When a business can raise prices, they can increase wages. The professionals are then earning artificially high wages. Because there is less competition, firms can raise prices without ensuring higher quality.

Nationally, occupational licensing has grown to encompass over 20% of the workforce. It was just 5% in the 1950s. This growth is due to the introduction of regulations to require licenses for more occupations. Many of these regulations occur at the state level, and often, licensing requirements for the same job vary across states. Variations include the minimum level of education or experience, exams, and fees. To be a fire alarm installer in Arkansas, one must complete 1,095 days of education and experience before obtaining a license. His peer in Oklahoma can start working three years sooner.

When a 2012 study by the Institute for Justice focused on the variations in licensing requirements among states, the researchers ranked Arkansas as the state with the second most burdensome licensing regulations in the United States. On average, Arkansas requires 689 days of experience or training, $200 in fees, and one exam for a licensed occupation. Arkansas’s average training requirement is two times higher than the national average. Consider that the main argument for licensure is public safety. The fact that Arkansas requires an emergency medical technician (EMT) to have 28 days of training to become licensed, but a makeup artist must train for 140 days suggests that there’s more going on than public safety. If the occupations were licensed to ensure public safety, we would expect to find more consistent regulations among similar jobs and across states. We do not.

Arkansas regulates over 300 occupations from plant nursery workers to dispensing opticians. While some of the occupations requiring licenses are services that work directly with consumers in potentially risky situations, the state also regulates several rarely licensed occupations. Our research at ACRE linked licensing regulations with unemployment. A recent op-ed points out that if lawmakers reduce the heavy licensing requirements, more workers would be able to receive jobs that they would already qualify for in another state, thus reducing unemployment in Arkansas.

Arkansas has attempted to reform the heavy licensing burdens, but most of those efforts have failed. Earlier this year, Arkansas State Representative Richard Womack introduced a bill that challenged the assertion that occupational licensing regulations serve to protect consumers from unsafe practices, but he was opposed by trade organizations. His bill never made it out of committee. Arkansas has the ability to reform these highly regulated occupations. In 2015, Arkansas passed the “Natural Hair Braiding Act” in response to a lawsuit by the Institute for Justice. It exempted hair braiders from the extensive requirements of cosmetology and created a certification that would allow braiders to practice without the burdensome regulations. A growing number of states are reforming their licensing laws and lowering barriers to entry in many occupations, and Arkansas could follow suit by continuing to pass legislation like the Natural Hair Braiding Act.

Alexandria Tatem is a student worker at ACRE. She is a senior Finance major and Honors Interdisciplinary Studies minor. She and ACRE Scholar Dr. Thomas Snyder recently had an op-ed on occupational licensing in Arkansas published in the Arkansas Democrat-Gazette.