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Kentucky’s labor market continues to struggle compared to neighboring states and the national average with an unemployment rate of 4.7% – significantly higher than the national average of 4.3%. In contrast, states like Indiana and Virginia boast unemployment rates of 3.6%; Arkansas and West Virginia stand at 3.8%.
A significant factor holding Kentucky back is its occupational licensing system – one of the nation’s most restrictive – which creates unnecessary barriers to employment. Occupational licensing requires individuals to meet state-mandated requirements, including education, training, exams and fees, before they can legally work in certain professions.
While licensing is universal for some occupations like physicians and lawyers, Kentucky goes further, licensing 177 of the 254 occupations studied in a national report I coauthored for the Archbridge Institute. This makes Kentucky the fourth-most burdensome state, just behind Oregon which licenses 182 occupations. By comparison, Kansas – the least restrictive state – licenses only 122 and Indiana 134.
This excessive licensing stifles Kentucky’s workforce. Research shows that occupational licensing reduces employment by up to 27%.
Kentucky policymakers should consider two common-sense reforms that would open up its labor market.
First, eliminate unnecessary licensing requirements for low-risk occupations. For example, the commonwealth is one of only five states to license orthotic fitters. If 46 other states don’t license this profession, it’s hard to justify Kentucky criminalizing unlicensed work in this field.
Second, adopt universal recognition and allow licensed workers moving to Kentucky to continue their profession without redundant exams or training. Twenty-eight other states have passed universal recognition, including Indiana, Ohio, Virginia and West Virginia. My research shows that employment and labor-force participation increases in states adopting universal recognition.
Concerns about public safety are often raised, but the evidence suggests there’s no need for such worries. The fact that most states regulate professions with less-restrictive methods indicates that Kentucky’s heavy-handed approach is unnecessary. Universal recognition simply cuts red tape for qualified workers, ensuring they can contribute to the economy without delay.
Occupational licensing reform enjoys bipartisan support, with figures as politically diverse as Barack Obama and Donald Trump advocating for change. Studies consistently show the costs of occupational licensing – higher consumer prices and reduced job opportunities – far exceed any of its benefits.
By reducing licensing burdens, Kentucky can strengthen its labor market, make it more competitive regionally and nationally and unleash the full potential of its workforce – all at no cost to taxpayers.
Bluegrass Institute scholar Edward J. Timmons is vice president of policy at the Archbridge Institute.
This piece first appeared at Kentucky Today.
