Occupational Licenses Draw Scrutiny

States' restrictions have been challenged as excessive and often unrelated to job performance

By Steve Bates September 13, 2017
Occupational Licenses Draw Scrutiny

To be licensed as an emergency medical technician, you must put in on average 33 days of training, depending on the state where you live. But to work as a cosmetologist—cutting hair and buffing nails—you must devote on average of 372 days to learning your craft, according to the Arlington, Va.-based Institute for Justice, a public interest law firm.

Depending on the state, a fire-alarm installer can get work with no training or can be required to complete 900 days of training, pay a fee and pass an exam. Working as a security guard requires as little as 10 days or as much as three years of education and training.

Occupational licensing is increasing dramatically in states and now affects about 30 percent of the U.S. workforce. But some workers, state officials, courts, members of Congress and Trump administration officials are taking a closer look at how licensing requirements impact the workforce and are advocating for reforms.

Traditionally, occupational licensing has been the purview of the states with a few exceptions, such as for pilots and stockbrokers. Proponents of tough licensing requirements say they are designed to protect the public: No one wants to be operated on by a brain surgeon who didn't finish medical school.

Usually, a state decides to license a particular occupation when workers in that field ask the legislature to do so. Once licensing requirements are established, a licensing board typically dominated by practitioners of the occupation enforces the system. Licenses granted in one state rarely are recognized by other states.

Critics say state licensing boards have little accountability and have an incentive to limit competition from new entrants into the field. Reform advocates point to situations such as those faced by hair braiders, who in many states are required to hold a cosmetology license. The license can require as many as 2,000 hours of training, even though some cosmetology schools don't teach braiding.

Impact on Minorities, Low-Income Workers

According to a report by the Institute for Justice, many low- and moderate-income professions require more than a year of education and training, and the training often bears little relationship to the knowledge required to do the job.

The report concludes: "The barriers imposed by licensure schemes on those wishing to enter the 102 lower-income occupations we studied are not only widespread but often severe, arbitrary and irrational." The report states that the barriers have a disproportionate impact on minorities and people with low incomes and education levels.

In addition, advocates for reform say excessive licensing requirements suppress job creation, innovation and entrepreneurship.

Occupational licensing reform is a rare topic on which those on the political left and political right find common ground. A July 2015 report from the Obama administration urged changes in state licensing practices, as has President Donald Trump's secretary of labor, Alexander Acosta. And the Federal Trade Commission (FTC) has launched a task force designed to curb excessive licensing.

When a state creates a licensing requirement, "The individuals already in the profession are almost universally grandfathered in. The only one who pays is the consumer," said Morris Kleiner, a professor at the Humphrey School of Public Affairs in Minneapolis. "It's a perfect storm."

For most of the past four decades, removing a state licensing requirement has been a rare feat, according to the U.S. Bureau of Labor Statistics. In a May 2015 report, it said it found only eight such instances and that in four cases, subsequent efforts were made to reinstate the licensing standards.

"It's very hard to pull back [a licensing requirement] because of the interests that grow up around it to protect it," said Walter Olson, senior fellow at the Cato Institute's Center for Constitutional Studies in Washington, D.C. Protective interests include the existing businesses in the industry, which gain customers by suppressing competition, and the training companies that make money from courses and materials that are needed to pass exams or meet other qualifications to enter the profession.  

In 2015, the power of state licensing boards was brought into question by a U.S. Supreme Court decision, North Carolina State Board of Dental Examiners v. FTC, which held that the boards might be subject to liability under antitrust laws, which could make them vulnerable.

A bill introduced in Congress in 2017 is intended to prompt states to secure immunity from antitrust litigation for their boards by choosing to:

*Establish a mechanism for "meaningful active supervision" of licensing boards by state officials, or

*Establish a mechanism for formal review of licensing board actions in state courts.

A second bill pending in Congress addresses occupational licensing in the District of Columbia and on military installations.

"It's too early to tell whether the bills can be effective," said Jason Wiens, policy director at the Kansas City, Mo.-based Kauffmann Foundation, which supports education and entrepreneurship. "But it's a positive sign that more people recognize that we should really rethink how we regulate occupations in the United States."

'Stirring of Interest'

There are signs of change. "You see some stirring of interest at the state level, and I expect we will see more," Olson said.

Dick M. Carpenter II, Ph.D., director of strategic research at the Institute for Justice, pointed out that Michigan has eliminated several licensing requirements for occupations. Arizona is reviewing some licensing requirements to determine whether it has standards that are stricter than national averages. And Kentucky is trying to prevent licensing boards from disqualifying certain applicants without a hearing.

"We're much more optimistic [about reform] than we were five or ten years ago," he said. Stated Wiens: "There is some momentum, but it's slow going, particularly because of the politics of the issue."

Advocates of reforms note that there are alternatives to licensing. Certification, such as that offered by the Society for Human Resource Management, is a voluntary system in which a person meets qualifications established by a legislative body or private organization. Registration requires a worker to notify the government of his or her name, address, and other personal information.

Kleiner suggests that state and local governments perform a cost-benefit analysis before approving new occupational licensing requirements. He urges the federal government take a leading role in establishing best practices. He says licensing standards should allow people to move across state lines with minimal retraining or residency requirements. And he urges states to reclassify some occupations so that they are subject only to certification—or to no regulation at all.

Lobbyists often claim that licensing is essential to screen out frauds and those who are incompetent, but Kleiner sees "little evidence to support this claim."

Spokespeople for North America's Building Trades Unions and the Association for Talent Development declined to comment for this article.


Steve Bates is a freelance writer in the Washington, D.C., area.

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