Occupational Licensing Hurts Just About Everyone, Says White House

Don

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A new report is out from the White House Council of Economic Advisers, Treasury, and the Department of Labor. Since the 1950s, licensed occupations have increased five-fold. The report notes that this "creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job."

The story continues: (bolding mine)
Libertarians have been objecting to occupational licensing on these grounds for decades, of course; the free-market friendly Institute for Justice has even been systematically suing to bring about their demise. But it's rare to see federal agencies recommend against more economic regulation, so let's all just savor this small victory a moment. The scathing report paints occupational licensing as a regulatory scheme that serves almost no one any good—raising consumer costs while failing to deliver improved quality; reducing employment opportunities, especially among the most economically vulnerable; and hampering state-to-state mobility and market innovation.

"By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars," the report authors write.

"Consumers are likely most familiar with licensing requirements for professionals like dentists, lawyers, and physicians," they point out, "but today licensing requirements extend to a very broad set of workers," including auctioneers, scrap metal recyclers, barbers, manicurists, eyebrow threaders, and tour guides. This means that an ever-growing share of jobs "are only accessible to those with the time and means to complete what are often lengthy"—not to mention expensive—licensing requirements, while the penalties for working without a license can include job loss, fines, and even incarceration.

Yet stringent occupational licensing seldom delivers improved services or safety to consumers. In 10 out of the 12 empirical studies reviewed by the report authors, stricter licensing was not associated with quality improvements.

Imagine the impact on our economy of several million additional jobs and one hundred billion dollars in additional discretionary spending.

And a few additional bullet points from the article:
  • Occupational licensing laws raise consumer prices.
  • Nearly one third of U.S. workforce is subject to occupational licensing.
  • Requirements vary widely by state.
  • They hit some populations especially hard, including immigrants, people with criminal convictions, military spouses, and people who default on student loans.
  • Entrenched interests benefit most.

Do you agree with the White House Council of Economic Advisers? Are we an over-licensed society?

Extra Credit: What about replacing many of these licenses with certifications, and allowing other groups to offer certifications in competition with government agencies?
 
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jimmymc

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Yeah! All you need to know to be a plumber is— 'shit runs downhill and payday is on Friday'.
 

Cathy C

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Not at all. I'm in a licensed industry--title insurance. I can assure you that without licensing and continuing education requirements, as well as mandatory conduct requirements, the abuses against the general public would be rampant. Since the title company is part of a law office where we do traffic defense, truck drivers also would be abusive of the laws (I'm big so I can do what I want). In our area, it's sand trucks, and they have no regard at all for other drivers, other cars, motorcycles, bicycles, speed limits, construction zones, truck weights, etc. Without the stringent rules mandated by licensing, there would be even more problems on the road than there are now.

And for medical​? Oh, hell yes! Keep on licensing...
 

bombergirl69

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totally disagree. Licensed professional here too (psychologist) and a damn good thing. That's insane to give up licensure.
 

Myrealana

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There are definitely too many licenses and too many barriers to entry in many professions where the public is not in danger of harm. Hair braiders that need thousands of hours of cosmetology school? Crazy.

Doctors, dentists, lawyers -- yes, there's a public interest in licensing some professions, but in many cases, it goes overboard, and it varies wildly state to state. A highly successful interior decorator in one state may not be allowed to operate in the neighboring state simply due to licensing requirements. Many of these license requirements were instigated by lobbyists for professional organizations to create barriers to entry, restricting supply and driving up prices without increasing quality.
 

Roger J Carlson

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Sorry Don, that went into joke mode too fast.

Seriously, a lot of trades could be de-licensed, especially if there's a legitimate trade group(s) who could issue certifications. But licensing professionals is still a good idea.

I'd also point out that while "stricter licensing was not associated with quality improvements", that does not imply that removing all licensing will not reduce quality. In other words, just because there is little difference between licensing and stricter licensing, does mean there's no difference between no licensing and licensing.

(And I also want to say that I've written 'licensing' so often in the last few minutes, that it now looks misspelled.)
 
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chompers

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I am licensed and I think it's a good thing. And in order to get licensed, we have to have so many hours of experience under someone who is licensed, so yes, I do think it is in sync with the job. Last year they added that we also have to have our fingerprints in the system as well. That was a pain in the rear, but ultimately I do agree with that decision too.

What I do would have an impact on many people (architectural) if the job was not done correctly, so I do think having the license is necessary. And I think that's probably why so many of these other occupations require licensing, because they affect the health and welfare of others. Some of these I think could have probably gotten by with only a certification, but what with America being lawsuit-happy, I can see why it's upped to requiring a license (as in the case of the eyebrow threading). But come on, I would certainly hope a doctor would need a license to practice. I wouldn't want some person treating me that didn't have a more rigorous background.
 

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I agree that some trades could be de-liscensed. But that report should cover the costs of unregulated industries too.

Essentially licensing means an industry protects the public by self-regulating. So you should only remove licensing if a) they are not effective at self-regulation and people are being screwed over by members of that industry anyway, b) the risk to the public is small or you just don't care about people getting screwed over in that area, or c) the state is going to pick up those costs and they are generally higher when carried by a third party.

The advantage of licensing is generally evident in that people do it voluntarily at least historically because it is necessary to win the public trust and stay in business. The mandating of licensing by the state often comes as a secondary step after exposees about unlicensed con artists make it a popular thing for a politician to do.
 
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chompers

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There are definitely too many licenses and too many barriers to entry in many professions where the public is not in danger of harm. Hair braiders that need thousands of hours of cosmetology school? Crazy.

Doctors, dentists, lawyers -- yes, there's a public interest in licensing some professions, but in many cases, it goes overboard, and it varies wildly state to state. A highly successful interior decorator in one state may not be allowed to operate in the neighboring state simply due to licensing requirements. Many of these license requirements were instigated by lobbyists for professional organizations to create barriers to entry, restricting supply and driving up prices without increasing quality.
Actually, an interior decorator does not need licensing. It's an interior designer who needs the licensing. They deal with codes and construction of interiors. An interior decorator is dealing with only aesthetics and there are no structural elements involved. The problem here is people get these two terms mixed up. And it gets further muddled up because, yes, not all states require licensing of interior designers (probably because they also think it's decorating).
 
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tiakall

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Mortgage loan officers are now required to be licensed after the whole collapse at the end of the 2000s. If anyone tried to back off from that, I'm sure they'd get bit by all the folks who blame the banks for everything. :rolleyes: There probably are fields where it's unnecessary/unduly burdensome (I'm not sure why you would need to be licensed to be an auctioneer, for example) but take those as a case by case basis rather than "all licenses are bad".

I don't particularly understand the complaint that licensing is expensive and lengthy, because most things that require you to be licensed already require you to take years of schooling and/or have the funds to start a business. If you can't afford the licensing fee, you probably can't afford the business.
 

Monkey

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When I got licensed to sell people alcohol, it was quick, easy, and fairly inexpensive, but I *did* learn some things, especially about the legal aspects. Day-to-day, I probably would have done the same things whether or not I'd seen that test, but there were special case scenarios where it would have made a huge difference.

My knee-jerk reaction is to say, yes, too many licenses are required... but then I have a hard time saying which ones shouldn't be.
 

Don

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On a related topic, now that customer review sites are becoming so common, do you rely solely on licensing of tradespeople or do you take advantage of sites like Angie's List, HomeAdvisor, Porch, and the like? If you need a lawyer, do you turn to the phonebook, ask friends for recommendations, or use a similar review site? What about doctors? Do you use TripAdvisor when planning trips, or figure that whatever motels the local health board has passed are good enough? What about restaurants in cities you're visiting?

Just curious as to whether people are more likely to rely on the minimum standards required by various licensing schemes or look for more stringent qualifications such as personal reviews and recommendations.

I'll admit I use all of the above to optimize the value of my dollar.
 

clintl

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I agree with most of the comments above - there are probably licensed occupations that don't need to be (Roger's example of barbers is a good one). But there are many, many occupations that should require a license.
 

Don

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I agree with most of the comments above - there are probably licensed occupations that don't need to be (Roger's example of barbers is a good one). But there are many, many occupations that should require a license.

From the CEA report:
Estimates suggest that over 1,100 occupations are regulated in at least one State, but fewer than 60 are regulated in all 50 States, showing substantial differences in which occupations States choose to regulate. For example, funeral attendants are licensed in nine States and florists are licensed in only one State.
General questions, not just for Clint. Do you lean more toward the 60 figure, or the 1,100? If licensing is primarily about health and safety, how do you explain the huge difference between those two numbers?
 

Albedo

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I think I said this last time. If barbers aren't licensed, I want some way of knowing they're aware of proper sterilisation precautions, at least. I met a guy once who'd contracted hep B in a barbershop.
 

shadowwalker

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I'd also point out that while "stricter licensing was not associated with quality improvements", that does not imply that removing all licensing will not reduce quality. In other words, just because there is little difference between licensing and stricter licensing, does mean there's no difference between no licensing and licensing.

I'm glad you pointed this out. There's a weeding out process in the licensing that at least keeps services to a minimum level of quality.

While I agree that we over-license, that doesn't mean we should throw the baby out with the bath. Each job/industry should be looked at to determine why a license was required, if those reasons still exist (ala "Horseless carriages cannot be driven on Sunday mornings"), and if those reasons are, well, reasonable (or just another lawnmower warning). But that would require time and money, so probably not gonna happen.
 

Sophia

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^^florist licenses are ridic, but.

You won't be saying that when you unwrap your delivery of orchids and no one spotted the Triffid in there.
 

clintl

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From the CEA report:

General questions, not just for Clint. Do you lean more toward the 60 figure, or the 1,100? If licensing is primarily about health and safety, how do you explain the huge difference between those two numbers?

I'd have to look at the list to determine which ones need licensing and which don't. As a guess, though, I'd say it's more than 60 that should be licensed, but closer to 60 than 1100.
 

Albedo

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You won't be saying that when you unwrap your delivery of orchids and no one spotted the Triffid in there.
Now I've got it in my head to write a story about a rogue florist who feeds floral licensing inspectors to her stock of carnivorous plants. The Demon Florist of Flo's Fresh Flowers.
 

Lyv

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I didn't know florists even needed licenses. It looks like Louisiana stands alone if requiring one. According to this, my mother-in-law, who arranges flowers at her local Winn Dixie as a part-time, post-retirement job, would need a license if she lived in Louisiana and not Florida. She did take a course to get the job, but there is no license. There was a 2010 lawsuit but I can't find an update and a license is still required in LA, for:


Looks like all the street vendors would have to be licensed as well.

My RN licensing requirements were not unreasonable, and the continuing education requirement is a good idea. I'd never go to an unlicensed hair stylist, especially if any chemicals were involved.
 

kaitie

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I mostly agree. I think professional fields like doctors should certainly have a license. I also think that the laws have been abused to make money. I wish I had the article I read on this ages ago. It talked about how much money the government was making from various licensing laws and how the people having to get them were almost entirely now in jobs that it doesn't make a lick of sense to have a licensing degree for. Florists because they work with dirt (seriously!?), undertakers, hair stylists. There's really no need for a license in the vast majority of cases. The laws are arbitrary and money makers and that's it. It has nothing to do with protecting consumers. I'm fairly certain this was on NPR, so I'll go searching for it later.

I remember a few years ago I was looking into braiding hair at the Renaissance Festival. I'm actually pretty darn good at it. Spent years working on different braids, building a portfolio, etc. Did you know that you can't use hair gel on a person unless you have a license? Hair gel. My friends and I put hair gel on ourselves when we were seven. But you couldn't use any products on a customer unless you were licensed.

As for choices made when choosing a professional, I have never once ever looked up a license except when I was looking into daycare. And in that case I decided to stay home rather than pay someone because I don't think the home daycares are actually regulated well enough for the license to mean much. Unless they had regular inspections and such of each of them, I don't feel comfortable with it.

Plumbers, hair stylists, florists, I've never looked up licensing. Honestly, I don't care. As long as the person in question knows what they're doing and isn't going to cheat me, I'm happy. I find that out by reading reviews or asking people I know for suggestions. A plumber doesn't need a license to be good at his job, in my book. I talked recently to a plumber about fixing a leak in our ceiling. The guy I chose is a family business that has been around for something like fifty years. I'm sure he's licensed. After talking to him (and him suggesting ways in which I could save money), I guarantee I'd trust him a hell of a lot more than Roto-Rooter, who I'm sure is also licensed, but has nothing but negative reviews about how shitty their workers are and how they overcharge and so on.

This is actually something I feel really strongly about, and I do feel that we need to de-license most industries and go back to a core of industries that are healthcare related or in other ways can drastically impact a person's well-being if the person in charge is not properly qualified.