Indiana Should Open the Door to Skilled Workers
Edward Timmons Director, Knee Center for the Study of Occupational Regulation, West Virginia University Senior Research Fellow, Archbridge Institute
Senate Health and Provider Services Committee
January 25, 2023
Chair Charbonneau and all distinguished members of the Senate Health and Provider Services Committee:
Thank you for allowing me to testify regarding licensing reform in Indiana. I am an associate professor of economics and director of the Knee Center for the Study of Occupational Regulation at West Virginia University. I am also a senior research fellow with the Archbridge Institute.
The main takeaways of my comments are the following:
1. Indiana has a shortage of workers and should not create arbitrary barriers for potential new residents.
2. Research shows that rigid occupational licensing restricts mobility by 7 percent.
3. Arizona has had more than 6,000 new professionals enter the state after universally recognizing out-of-state licenses.
The State of the Indiana Labor Market
Indiana is in a strong economic position, and policymakers should be commended for setting the state up for prosperity. The unemployment rate in the state is a half of a percentage point lower than the national average.(1) Unfortunately, employers in Indiana are having a hard time finding the workers they need to fill current job openings.
A recent report by Conexus Indiana highlights this challenge and notes that advanced manufacturers were unable to fill almost 100,000 open positions.(2) The report also indicates that this persistent shortage of workers costs the state more than $1 billion in tax revenue and nearly $5.8 billion in sales.
Occupational Licensing in Indiana
Occupational licensing is the most stringent form of professional regulation. It forbids Indiana residents from working in a profession before meeting entry requirements including achieving minimum levels of education, passing exams, and paying fees to the state. Estimates suggest that 18 percent of workers in Indiana are licensed.(3) By erecting barriers to entering professions in the state, occupational licensing imposes a multitude of costs upon consumers and eliminates more than 31,000 jobs in the state each year.(4)
Turning to mobility, economic research estimates that stringent occupational licensing reduces geographic mobility by as much as 7 percent.(5) There is a simple intuitive explanation for this finding: not allowing Americans to transfer their licenses and practice the craft that they have already been trained to do dissuades Americans from moving. The needless burden of new exams or additional education before being permitted to practice is too great.
Universal Recognition
Indiana will not be going out on a limb if it recognizes the licenses from other states. Arizona passed this reform in 2019.(6) Iowa and Missouri passed similar legislation in 2020.(7) In 2022, Kansas and Mississippi also passed similar legislation.(8) Governor DeWine in Ohio signed this reform earlier this month.(9) It has been estimated that more than 6,000 skilled workers moved to Arizona after passage of the reform three years ago.(10) Recent research also finds that universal recognition boosts tax receipts for states that pass the reform by $1.7 million per county in border counties.(11) Indiana can benefit in the same way and not be left behind these other states.
With Indiana employers needing skilled workers, it seems silly to force new residents to complete arbitrary hurdles to begin working. Research shows that preventing occupational licenses from easily transferring reduces mobility. Indiana can look to other states, such as Iowa and Ohio, for guidance on how to help fill this gap with commonsense occupational licensing reform.
1 “ Unemployment Rates for States,” Bureau of Labor Statistics, last modified December 16, 2022, https://www.bls.gov/web/laus/laumstrk.htm.
2 Laura Miller, “State of Indiana’s Advanced Manufacturing Workforce,” Conexus Indiana, July 20, 2022.
3 Morris M. Kleiner and Evgeny S. Vorotnikov, At What Cost? State and National Estimates of the Economic Costs of Occupational Licensing (Arlington, VA: Institute for Justice, November 2018).
4 Kleiner and Vorotnikov, At What Cost?
5 Janna E. Johnson and Morris M. Kleiner, “Is Occupational Licensing a Barrier to Interstate Migration?,” American Economic Journal: Economic Policy 12, no. 3 (2020): 347–73.
6 Office of the Governor of Arizona, Arizona – First in the Nation: Universal Licensing Recognition, n.d., https://azgovernor.gov/sites/default/files/universallicensingrecognition1_0.pdf.
7 Office of the Governor of Iowa, “Gov. Reynolds Signs Comprehensive Licensure Legislation,” press release, June 25, 2020, https://governor.iowa.gov/press-release/gov-reynolds-signs-comprehensive-licensure-legislation; Cameron Gerber, “Parson Expands License Reciprocity in Missouri,” Missouri Times, July 6, 2020.
8 Sarah Ulmer, “Governor Signs Bill for Universal Recognition of Occupational Licenses,” Y’all Politics, March 25, 2021; Rebekah Chung, “Gov. Kelly Signs Military Spouse Occupational Licensing Bill,” KSNT, April 21, 2021.
9 Bradley Vasoli, “Ohio Enacts Universal Occupational License Recognition,” The Ohio Star, January 4, 2023.
10 “Breaking Down Barriers to Work with Universal Recognition: Frequently Asked Questions,” Goldwater Institute, updated March 2022, https://goldwaterinstitute.org/universalrecognition/.
11 Darwyyn Deyo and Alicia Plemmons, “Have license, will travel: Measuring the effects of universal licensing recognition on mobility,” Economics Letters 219 (2022).