Occupational Licensing

Occupational Licensing Reform Becomes a Cause Both Republicans and Democrats Can Love

Nobody should need permission to make a living-especially when requiring that permission just lines the pockets of a favored few.

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The White House recently announced $7.5 million in grants to organizations working to reduce licensing requirements and make those that remain portable across state lines.

"Today nearly one-quarter of all U.S. workers need a government license to do their jobs," a White House press release publicizing the grants noted. "The prevalence of occupational licensing has risen from less than 5 percent in the early 1950s with the majority of the growth coming from an increase in the number of professions that require a license rather than composition in the workforce."

The proliferation of licensing rules tends to "artificially create higher costs for consumers and prohibit skilled American workers like florists or hairdressers from entering jobs in which they could otherwise excel," the release continued.

The announcement by a Democratic president came just a month after Arizona's Republican Governor Doug Ducey signed several bills "to begin the elimination of burdensome licensure of scores of odd jobs—regulations that are often designed to kill competition or keep out the little guy, including the elimination of licenses for talent agents."

Then, at the end of June, a bipartisan group of federal lawmakers introduced the Strengthening Career and Technical Education for the 21st Century Act. The bill contains language allowing states to use some of the federal money earmarked for technical education for the "identification, consolidation, or elimination of licenses or certifications which pose an unnecessary barrier to entry for aspiring workers and provide limited consumer protection."

That one-quarter of Americans require government permission to do their jobs has become such a problem for economic liberty and opportunity in this country that its recognition crosses party lines at a time when Republicans and Democrats agree on little else. More importantly, efforts to actually correct the situation also transcend partisanship. Having purchased political support by imposing licensing laws that protect existing practitioners in a host of industries from competition, politicians seem to be realizing that they went way overboard and are killing the host on which they feed.

And not a moment too soon.

Just days after the White House announcement, the influential Brookings Institution released a new paper arguing that widespread occupational licensing causes even greater damage than was previously recognized by such critics as President Obama and Governor Ducey. By protecting them from competition, licensing boosts wages and job security for licensed workers relative to their unlicensed counterparts, and it reduces worker mobility because credentials are generally no good across state lines.

"Lower wages and higher unemployment rates for unlicensed workers, as well as reduced migration rates for those with licenses, all suggest that the social costs of licensing are larger than many have previously believed," author Ryan Nunn, an economist, concluded.

The Brookings paper was just the latest entry in a growing body of research that views occupational licensing not primarily as a means of protecting consumers from unqualified contractors or massage therapists, but as an exercise in rent-seeking that erects barriers to entry into a host of fields and thereby favors existing practitioners.

"[T]he higher the rate of licensure of low-income occupations, the lower the rate of low-income entrepreneurship," reported economist Stephen Slivinski in a 2015 Goldwater Institute study that was subsequently cited by the White House. Legal entry-level economic opportunities are choked off by expensive and burdensome licensing requirements—a huge problem since "Entrepreneurship among low-income households has been shown in numerous studies to be an effective means of alleviating poverty and encouraging income mobility."

Slivinski recommended that existing restrictions be sunsetted and replaced by private certifications that would act as seals of approval without preventing entry. Start-up entrepreneurs could seek certification or not, depending on their means and inclination.

This loss of opportunity would be bad enough if it were the enormously high price we pay for consumer safety. But researchers find that licensing laws have little if anything to do with protecting the public.

There was "evidence from several professions and trades that indicates that restrictive licensing may lower received service quality," at least as early as a 1981 study.

And that's true even in some highly skilled professions where credentials are supposed to matter the most.

"[I]ncreasing the restrictiveness of optometrists' licensing examinations had a positive and statistically significant impact on the price of the eye examination and eyeglasses but had a statistically insignificant impact on the quality of the eye examination," wrote Deborah Haas-Wilson, a professor of economics at Smith College.

"By and large, optician licensing appears to be reducing consumer welfare by raising the earnings of opticians without enhancing the quality of services delivered to consumers," Edward J. Timmins of Saint Francis University and Anna Mills of the Mercatus Center found when they addressed the topic last year.

Likewise, "more stringent occupational licensing of dentists does not lead to improved measured dental outcomes of patients, but is associated with higher prices of certain services, likely because there are fewer dentists," reported the University of Minnesota's Morris M. Kleiner.

So, if licensing doesn't seem to improve the quality of at least some forms of health care, what benefit does it provide the public when applied to barbers, geologists, manicurists, or plumbers?

Not a lot, is the obvious answer—so obvious, that the government officials who choked off opportunity and raised prices by imposing occupational licensing are starting to undo their mistakes.

The rollback of licensing requirements for a few professions in Arizona, similar moves in Kentucky, Iowa and elsewhere, bipartisan federal legislation, and the White House grants are evidence that the tide may be turning. May be, because licensing advocates still have enough clout to defeat reform efforts in North Carolina and put up fights around the country.

But it's clear that the advocates of restrictive licensing have lost credibility, and that growing ranks of Americans recognize it's long past time for reform.

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  1. You have to bear in mind that much of the regulation came about because of charlatans and scam artists in an unregulated field. Is there too much regulation? Probably so. But don’t go back to the 50s lack of regulation. There were no “good old days.”

    1. There is a difference between mandatory licensing and voluntary certification by a trusted third party. No on the former, yes on the latter.

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    2. Utilitarianism is for the cowardly, the stupid, and the evil. Freedom is worth charlatans and scam artists.

    3. Bullshit. Much of the regulation happened because people already in the industries desired to keep out competition who could do the same job for less. There are still plenty of charlatans and scam artists out there, despite all of the rules, but interestingly industries that do not require occupational licensing do not have an epidemic of fraud. There also was no epidemic of fraud in the 1950s. Your whole post is nothing but drivel.

    4. “You have to bear in mind…”

      “I think we can all agree that…”

      No.

    5. [citation needed]

    6. How can you even have a scam barber or hair braider?

      I don’t doubt there are scam talent agents. But what in the world makes you think there’s any state licensing which can distinguish the real ones from the phonies? Isn’t the entire industry pretty much a scam by definition?

      You are just a boot licker.

      1. Oh yeah? Say that again when your grandma is maimed for life by an unlicensed florist.

    7. If this was a problem (I won’t opine as I wasn’t alive in the 1950s) then strengthening tort law to make it easier for consumers to go after fraudsters should be sufficient. Indeed, a lot of these license regimes come with required administrative processes that specifically make it MORE confusing for consumers to take fraudsters to court.

      A license doesn’t guarantee that you’re doing business with an honest business person. License-holders regularly defraud and scam the public, while at the same time defrauding the government that protects their “right” to do business at the same time.

      1. License-holders regularly defraud and scam the public

        You better believe it. The ADA or state licensing board (I can’t remember which) used to regular publish newsletters with license actions on dentists. There were usually a few dozen a month. A lot of them were for drug abuse and supplying people with prescriptions for drugs that weren’t needed for dentistry but quite a few were for insurance scams or defrauding patients and a few were for abusing patients.

    8. You have to bear in mind that much of the regulation came about because of charlatans and scam artists blacks, Southern Europeans, poor, and Jews in an unregulated field. Is there too much regulation? Probably so. But don’t go back to the 50s 1800s-1920s lack of regulation. There were no “good old days.”

      FTFY

      Licensure laws started popping up in the late 19th century and early 20th century to address the number non-WASP practitioners in “respectable” fields and the schools that produced them.

  2. Further evidence that the Republican Party isn’t actually any more libertarian than the Democrats, in spite of whatever is left of their thin veneer of small government rhetoric.

    These days, it seems like the R’s only trot out the libertarianism when it’s time to defend homophobic bakers and people that hate contraception. They’re rapidly abandoning free trade, are nowhere to be found on entitlement reform, and repealed their measly victories on the budget and sequester last year. Now it appears they’re running away from criminal justice reform as fast as possible, and the Democrats are taking up the cause of occupational licensing. The only freedoms the R’s care about are religion and guns.

    1. Didn’t the article say there’s bipartisan support now for occup’n deregul’n?

  3. Something very weird about federal grants to eliminate state licensing laws.

    The bill contains language allowing states to use some of the federal money earmarked for technical education for the “identification, consolidation, or elimination of licenses or certifications which pose an unnecessary barrier to entry for aspiring workers and provide limited consumer protection.”

    It’s dysfunctional crap like this that convinces me government is simply incompetent.

    At this point, I have seen so much similar incompetence that I begin to wonder if every new instance is actual proof or just confirmation bias. How many times do you have to slip on ice before you begin to think ice is actually slippery and it’s not just your personal opinion?

    1. But… But Scarecrow & WoodChipper Repair!!!!

      Donna yew UNNERSTAND!?!?!? It costs us a BUNCH of $$$money to not spend money! Yew canna be gonna go ask State Bureaucrats to NOT spend money so as to NOT put unlicensed interior decorators and unlicensed butt-pickers and unlicensed zit-poppers in jail!!! WITHOUT going and PAYING them to NOT spend that money! You heartless NAZI you!!!!

      (I want my payola for NOT sneaking all my turds into the chairs and beds and dinnerplates of these assholes, truth be told).

  4. Semi OT:

    That first thread up top perfectly encapsulates what I like about H&R. You have some statist make a comment about how without regulations we’d all be at the mercy of scam artists – just like in the 1950’s DERP* – that on any other website would have gotten about a 20:1 ratio of “likes” to “dislikes” from other statist shitheels nodding along in agreement in their mom’s basement, but here? Fucker gets utterly destroyed.

    *Because defrauding your customers is a totally viable long term business strategy in Derp World.

  5. I would fully support 1500 hours of training in Constitutional Law for any aspiring politician.

  6. As somebody who deals with frustrating state-level financial licensing regimes that absolutely do not work in the Internet age, I will applaud any effort to “passport” licenses across state lines. (If you’re wondering why the most cutting-edge financial products are being offered overseas while specifically blocking American customers, spend 10 minutes talking to an American financial services compliance attorney.)

  7. This would help my parents. My father lost his job and found a new one in Alabama. My mother, a dental hygienist, is licensed in Georgia but Alabama does not have reciprocity with Georgia on dental hygienist licenses. So my father lives in Alabama and my mother lives in Georgia and they take turns going to each other’s house on the weekend. When Alabama recognizes Georgia dental hygienist licenses, she can get a job in Alabama and they can live together again.

    1. Couldn’t she invest the travel time & expense in getting a license in the other state?

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  9. On the more “occupational licensing” side, both Montgomery County, MD & DC are now licensing *beekeepers*, with mandatory training and annual licensing fees. I do not know if these municipalities are accepting each other’s licenses as valid without additional requirements.

  10. The only true purpose of government occupational licensing is to reduce “competition” in the occupation under discussion. It has next to zero benefit so far as “consumer protection” is concerned. It is however often used to restrict the “supply” of available workers, providers, whatever so that prices charged can be higher than what otherwise would be the case.

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