Inflation is a leading concern for voters as they prepare to head to the polls this fall. And families are right to worry; prices rise faster than incomes as the costs of everyday life suddenly exceed household budgets, and a high-inflation environment puts pressure on the entire economy . But this Labor Day, states can fight back against inflation and open doors for workers with occupational licensing reform.
Most discussions about inflation focus on the cost of goods. However, the cost of labor is one of the biggest drivers of overall costs. A new study found occupational licensing affects more than 20% of workers in the United States . Existing requirements prohibit skilled individuals from joining the workforce, and when governments artificially limit the supply of workers, the price of work rises, taking the price of goods with it. Overall, inflation quickly follows.
Inflation due to supply disruptions is short-term and relatively easy to solve; prices eventually rise high enough to cool demand, or the supply disruption ends. For example, it became nearly impossible to purchase a car during the pandemic as supply disappeared. But as prices rose, people stopped buying. Since then, car companies have ramped up production to meet the needs of the consumer, and prices have stabilized.
Inflation from high costs of goods and labor, however, is more difficult to fix. Once costs increase, employers and skilled laborers must raise their rates to make a profit and compete. The best way to fight service inflation is to increase the supply of service providers by reforming occupational license requirements.
Think of construction as an example. The cost of construction has increased by double digits in some of America’s metropolitan markets, not because of the raw materials but because of the increased cost of labor.
So how can we best increase the supply of service providers? Remove unnecessary regulations that currently serve as a barrier to entry. We can identify the actual skills that are needed and align them with the roles, rather than requiring individuals to have unnecessary degrees. Or we can invest better in our skilled labor by providing more apprenticeship programs.
Some states, such as Utah, have started to implement competency-based licensure programs that enable individuals to “demonstrate competency throughout their training and education, rather than having to fulfill the minimum number of hours and take a cumulative examination to receive a license.” This benefits anyone apprenticing and learning the skills in his or her trade. For example, a plumber working for his father may have five years of experience but not a master's license, but this policy lets him demonstrate his skills in a more effective way.
A number of occupations still require a four-year college degree, even though an apprenticeship and competency exam could prove to be a better evaluation of skills.
We researched several different standard occupations and compared the licensing requirements across a number of states, and we found that requirements varied greatly from state to state, with some states requiring college degrees and others preferring exams and alternative pathways.
Take interior design as an example: In Utah , an interior designer must pass an exam and show a minimum number of coursework hours, whereas in Georgia the occupation requires a four-year degree. For the same role, why would the requirements be different across different states? We found these types of discrepancies across several professions.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
States can also offer role- or skill-specific apprenticeships that can provide qualified candidates with the necessary on-the-job skills they need to be successful. They can partner with local companies, trade associations, and community colleges or technical schools to ensure that individuals are receiving the right training. Vocational training can be introduced as electives during high school or for high school graduates entering the workforce.
The public sector has a unique opportunity to lean into occupational licensing reform and get ahead of our current inflationary problem. States can compete to bring in skilled labor by changing unnecessary occupational licensing requirements and increasing universal licensing to attract and retain the best talent. Tackling inflation is no easy task, but by confronting it head-on and providing the support and apprenticeship programs that are needed, states can change the future for their people and local economies.
Stacey Guber is a visiting fellow at the Cicero Institute .
Local News
Comments / 0