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Delaware’s Regulations, A Barrier to Business

From: Kathleen Rutherford, Executive Director, A Better Delaware

Delaware businesses and workers are subject to some of the most stringent regulations in the nation, leading to slower economic growth, less competition, and higher costs. The result is that companies able to afford regulatory compliance are often large corporations — a barrier to entry for Delaware’s small businesses.

According to a Feb. 2022 study by the Mercatus Center at George Mason University, Delaware has 95,976 regulatory restrictions on the books, ranking 30th in the United States overall.

When considered proportionally to the state’s workforce, however, Delaware ranks first in the nation for most regulations per capita. According to a 2019 study from the Mercatus Center, Delaware far exceeds other states with 11 words of regulatory language per Delaware worker.

In fact, the Center found that it would take 374 hours to read the entire Delaware Administrative Code.

Given those statistics, it’s no wonder that the CATO Institute cited Delaware’s expanding regulatory code as one reason the state has fallen from the top of economic freedom indexes.

“Delaware has lost tremendous ground during the past 20 years,” a CATO Institute analysis says. “It now ranks in or near the bottom third on all three dimensions of freedom, earning its 44th place by all-around poor performance.”

One area of particular concern is the over-regulation of occupational licensing, wherein trained professionals are required to get permission slips from the state to begin working.

A 2015 report published by the Obama administration warned that the current licensing regime in the United States creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job.

“There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines,” the Treasury Department report says. “Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as state certification, may offer a better balance between consumer protections and flexibility for workers.”

The report further found that more than 25 percent of workers in the United States require a license to do their jobs, with most workers licensed by the states. That’s a five-fold increase since the 1950s.

Delaware is no exception. According to a 2018 Institute for Justice study on the economic costs of occupational licensing, 15.15% of workers in Delaware are required to be licensed by the state and 8.73% are required to have additional certification.

While licensing requirements do, in some cases, offer health and safety protections to consumers and employees, many regulations simply hold small businesses down and prevent upward mobility for trained workers.

So, what can Delaware do to expand economic freedom and unleash workers from burdensome and unnecessary regulations?

One might look to a proposal in Tennessee, where a whopping 30% of workers require licenses to enter the profession of their choice, collectively costing them $279 million annually in new licenses and $38 million in license renewals.

There, the Beacon Center of Tennessee proposed a four-step plan to reduce the regulations’ drag on the state’s economy:

  1. Occupational licensing should be curtailed or eliminated on low-income professions.
  2. Tennessee should eliminate occupational licensing for professions with no measurable and realistic threat to consumer safety.
  3. Policymakers should strictly control the extension of occupational licensing to new professions
  4. Improve public access to data on licensed occupations so researchers can better measure the costs and burdens of licensure and how many Tennesseans

These common-sense steps would work as well in Delaware as they would in Tennessee and would do nothing to eliminate licensure requirements that legitimately protect the health and safety of consumers and workers.