New Jersey

Points For Honesty: Pool Contractors Want to be Licensed so They Can Charge Higher Prices

This is how regulatory capture works: Trade association would get majority control of new licensing board.


Hill Street Studios Blend Images/Newscom

New Jersey could create a new category of professional licenses, and no one is even bothering to pretend that it's about anything other than driving up prices and limiting competition.

That's what licensing schemes usually do, of course, but they are usually passed under the guise of protecting consumers' health or safety. Without mandatory government permission slips, the story usually goes, unscrupulous businesses would cheat you out of your money or poison your children.

So give credit to Lawrence Caniglia for refusing to play those semantic games. Caniglia is the executive director of the Northeast Spa and Pool Association, which is pushing a bill in New Jersey to require a state license for anyone who installs, builds or services a pool or spa.

"Frankly, we're looking for a more professional industry—and you can raise the rates you're charging because you're…a (properly) licensed pool builder or service professional," Caniglia told Pool and Spa News, a trade publication.

The New Jersey legislature appears to agree with that reasoning. The bill passed the state Assembly on Thursday with a 53-13 vote and is now awaiting a vote from the state Senate.

The bill does not specify what the requirements for getting a license would be. Instead, it gives the state Department of Commerce the authority to set those rules by forming a new regulatory board: the "Pool and Spa Service Contractors and Pool and Spa Builders and Installers Advisory Committee." The bill specifies that four of the seven members on the board would have to be members of the Northeast Spa and Pool Association—giving the trade association a majority and essentially allowing it to block anyone it doesn't like from getting a license to install or service pools in New Jersey.

This is how regulatory capture happens, folks.

The NESPA has been pretty successful at getting what it wants. Pool and Spa News reports that the trade association has been working for several years to "reach licensing saturation among its territories, which include Connecticut, New Jersey, New York and eastern Pennsylvania." New Jersey is the last state without some sort of licensing requirement for pool contractors.

"We know that trade associations love licensing because it restrains their competitors, puts barries before people can get into the field and it raises their prices," says Lee McGrath, legislative counsel for the Institute for Justice, a libertarian law firm that frequently challenges bad licensing laws. I interviewed McGrath about New Jersey's proposed licensing rules for this week's edition of American Radio Journal (hear our whole conversation here).

New Jersey is already one of the most heavily licensed states in the country, with at least 48 professions requiring a government permission slip, according to IJ's research. As Caniglia helpfully pointed out, licensing drives up the cost of goods and services. In New Jersey, the average family pays an extra $1,200 every year because of the added cost of professional licensing schemes, according to research from the Heritage Foundation.

"It's a blind cost," says McGrath. "That's money being transferred from New Jersey families to licensees. It tends to be money going from working class people, middle income people to those who are wealthy or those who are highly organized in Trenton."

Other states shouldn't do what New Jersey is doing—something that's "always good advice," quips McGrath—and instead should be looking to remove unnecessary licensing laws in favor of other, better ways of ensuring good business practices. If there is real concern about fraud in a certain industry, states should empower attorneys general to go after unscrupulous businesses, rather than adding licensing burdens that will hurt businesses doing things the right way. If there's a knowledge gap—if consumers can't be sure whether they are hiring a good contractor, for example—states could offer voluntary certification programs to help sort the field.

If New Jersey lawmakers want to see how licensing schemes for pool contractors actually work, they can look to Connecticut, where a similar law was passed a few years ago. In September, police in Bristol, Connecticut, arrested someone for the crime of repairing a pool without a state license.

Joseph Verardi was arrested in September for doing repair work on pool tiles without a license, according to Pool and Spa News. Veradi has a home improvement contractor license from the state, but that doesn't permit him to work on a pool.

"This is important for the industry because it supports properly licensed people working on pools, and it sends the message that the state takes these laws seriously," Caniglia told Pool and Spa News at the time.

It certainly does send a message.