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Goldwater report: Arizona has among most burdensome licensing

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All kinds of professions – barbers, electricians, taxicab drivers – need government-issued licenses to work in Arizona.

But obtaining those licenses isn’t necessarily easy. Some licenses cost as much as $209, and some require as long as a year of training, according to a new report from the Goldwater Institute.

Arizona has among the most burdensome licensing requirements in the United States, the report said. The result: Fewer low-income workers launch their own businesses here.

The Goldwater Institute, a conservative Phoenix-based think tank, released “Bootstraps Tangled in Red Tape” on Tuesday. The report indicated Arizona’s low-income entrepreneurship rate is at 36 percent, which is below the national average of 38 percent.

In the report, low-income entrepreneurs in Arizona were defined as those earning less than $36,657 a year, a calculation based on U.S. Census data.

These types of workers are important because they spur economic growth and create jobs in industries such as contracting and landscaping, the report said.

“Arizona licenses more than 60 percent of these occupations that tend to be concentrated in low-income entrepreneurship circles,” said Stephen Slivinski, senior research analyst at the W.P. Carey Center for the Study of Economic Liberty. “The problem is Arizona has a lower than average rate of low-income entrepreneurship. Occupational licensing is a large part of this puzzle.”

Slivinski compiled the report using data from the Kauffman Foundation, a Missouri-based nonprofit organization, and the Institute of Justice. The foundation analyzed more than 51 occupations, including tree trimmers, construction workers, cosmetologists and truck drivers. Researchers looked at the demographics of low-income entrepreneurs and how licensing burdens affected them.

In the U.S., 29 percent of jobs require a government-issued occupational license. Four decades ago, only 10 percent of jobs required them, the report said. The additional requirements stifle new business creation, according to the Kauffman Foundation.

Morris Kleiner, a professor at the University of Minnesota’s Humphrey School of Public Affairs, joined a panel discussion about the report on Tuesday. He said occupational licensing reduces the number of jobs in the U.S. because it limits the amount of people who can work in those occupations.

“In the case of occupational licensing, what you have is a reverse Robin Hood effect,” he said. “Consumers have to pay more if they want these services — you either get these services from the licensed individual or not at all.”

Access, quality and demand for a particular service drive a lot of these issues in occupational regulation, Kleiner said.

“Certainly, this has become a much more important issue as licensing has grown dramatically in the U.S.,” he said.

Slivinski said occupational licensing is a burden to low-income entrepreneurs.

“Most occupational licensing laws require a great deal of either on-the-job experience or more specifically, educational experience with certain types of degrees, or a certain number of hours as an apprentice,” he said.

Slivinski said states facing this problem should consider transferring to a private licensing agency, which would offer certification similar to a “good housekeeping seal of approval” if the entrepreneur could demonstrate knowledge in a field.

“You would have more opportunities for low-income folks to work their way out of poverty and pull themselves out of poverty by their bootstraps through self-employment,” he said.