RALEIGH, North Carolina — The state of North Carolina may be hindering its future economic performance by imposing strict occupational licensing requirements. In order to enter many professions in the state, individuals must possess specific education credentials, undergo a certain amount of training, or pass licensure exams. While it is common for states to license certain professions like physicians and civil engineers, North Carolina stands out by requiring licenses for occupations such as eyelash technicians, apprentice manicurists, and drama movement therapists.
In recent rankings of state licensing laws, North Carolina ranked poorly. A report by the Institute for Justice found that the state requires licensure for 66 out of 102 occupations typically filled by younger workers or those without university degrees. This ranks North Carolina as the 17th most-regulated state in the country. Another report by the Archbridge Institute placed North Carolina as the eighth-worst state in terms of occupational licensing regulations. This report included a broader range of occupations and found that North Carolina regulates more of these occupations compared to neighboring states.
Despite the strict licensing laws in North Carolina, there is no evidence to suggest that these regulations lead to increased safety, health, or consumer satisfaction. On the contrary, there is plenty of evidence indicating that these regulations limit job opportunities for workers and drive up prices for consumers.
A recent study conducted by scholars Patrick McLaughlin and Christos Makridis explored the effects of occupational regulation in detail. The study found that states are increasing regulation over time, particularly for lower-wage jobs. These new restrictions are often proposed and supported by individuals already working in the field, who benefit from reduced competition and new income streams through training programs for potential licensees. The study also revealed that a 10% increase in occupational regulation led to a 4.4% decrease in employment and a 3.3% increase in hourly wages, with the negative effects mainly concentrated in low-wage jobs and among those with professional licenses.
Other studies have also highlighted the negative consequences of occupational licensing. Economists Peter Orazem and Soumyadip Roy found that higher levels of licensing are associated with higher unemployment and greater income inequality. Similarly, researchers Morris Kleiner and Wenchen Wang discovered that licensing for public-sector jobs reduced employment and raised wages, resulting in a welfare loss.
The stringency of occupational licensing also affects the location choices of employers and workers. Research by Alicia Plemmons found that as licensing costs and education requirements increase, firms are less likely to set up shop in high-cost states.
While North Carolina has implemented various pro-growth policies, including tax and regulatory reforms, the state lags behind in the area of occupational licensing. It is crucial for state legislators to reassess and improve the licensing laws to benefit both consumers and future workers. By reducing unnecessary barriers to entry, North Carolina can create more opportunities for its residents and foster a more dynamic economy.