License Overload?

4/1/2018

STATE LEGISLATURES MAGAZINE | April 2018

People in different work uniforms

 

Lawmakers are questioning whether we’ve gone too far with occupational and professional licensing.

ByAlbert Downs and Iris Hentze

Nurses and athletic trainers need one, so do barbers and cosmetologists. Even home inspectors need one. An occupational or professional license can require hours of instruction, intense testing and, in some cases, high fees. It’s all worth it, many say, if it protects public health and safety and ensures a minimum level of quality in products and services.

The number of jobs requiring a license has grown steadily, from about 5 percent of all occupations in the 1950s to more than 25 percent of the American workforce today. The share of licensed workers, however, varies by state, ranging from a low of 12 percent in South Carolina to a high of 33 percent in Iowa.

Licensing is a state responsibility, and each has developed its own regulations, usually with decision-making authority falling to quasi-governmental boards made up of people overseeing occupations most of them are employed in. Education and training standards vary widely, along with the fees and the limitations on who may apply for a license. (Some states bar those with immigrant status or a criminal history, for example.)

Michigan requires three years of education and training to become a licensed security guard, for example, while most other states require 11 days or fewer. And while all 50 states license cosmetologists and emergency medical technicians, the education requirements vary greatly. Iowa, Nebraska and South Dakota require cosmetologists to study at least 233 days; Massachusetts and New York double that time. But the length of training time required of entry-level EMTs averages just 33 days nationwide.

Proponents say licensing is the best tool lawmakers have to protect workers and the public. Populating boards with the people who have the expertise necessary to address the profession’s specific issues is key. “Doing so increases the effectiveness of the administrative system that is designed to provide consumers with an assurance of the qualifications of licensees along with a means of enforcement for the benefit of the public,” says Dale Atkinson, executive director of the Federation of Associations of Regulatory Boards. Supporters also point out that the increase in licensing has enjoyed bipartisan, nationwide support.

Critics Cite Studies

Critics, who also come from across the ideological and partisan spectrum, cite studies that show no evidence licensing improves safety. One such study was conducted by labor economist and licensing expert Morris Kleiner. He studied the effects of occupational regulations on one of the fastest growing segments of the U.S. labor market—the online, on-demand economy that includes ride-sharing networks.

In 2017, Kleiner compared data on the safety and quality of trips driven by licensed Uber drivers with those driven by new, unlicensed drivers in Houston, New York and New Jersey. He “found that occupational licensing frequently had no effect on safety and quality.” Even when there was a positive effect, Kleiner says “the magnitude of the effect was small.”

Percent of Workforce Licsensed by the State

Other studies back Kleiner’s conclusion. According to a 2015 review done by the Department of the Treasury Office of Economic Policy, the Council of Economic Advisers and the Department of Labor, 85 percent of the research on licensing concluded there was little evidence it improved the quality or safety of products and services.

Findings like these have prompted lawmakers to re-examine the design and impact of their licensing requirements. They are concerned that the differences and disparities among states can restrict workers’ job opportunities. They wonder if the fees and time required to earn licenses are fair. They question whether our 50-state patchwork is the best way to achieve states’ policy goals. And they are beginning to look for alternatives that can ensure minimum levels of safety and quality.

Questioning the Status Quo

Lawmakers in Oklahoma and Utah last year began reconsidering who they license and why. Oklahoma legislators created a task force to do a yearlong review and deliver recommendations to the Legislature. Utah lawmakers expanded the oversight power of the Legislature to include all licenses and commissioned a study of the state’s licensing requirements.

Utah Senator Todd Weiler (R), who chairs the Occupational and Professional Licensure Review Committee, says the Legislature hopes to streamline the regulation of professions and “lower the barriers to entry for new workers, and for workers crossing state lines for professions like nursing and teaching.” The Legislature especially wants to ensure that spouses of active-duty military personnel can work in their chosen professions as families are transferred from base to base, he says.

Mississippi and Tennessee, which also completed reviews, both enacted legislation to increase oversight of licensing boards and establish clearer standards for creating new boards and licensing requirements. The focus was on preserving regulations that have been shown to benefit health or safety. Delaware and Michigan are now doing reviews, and several other legislatures are considering policy changes.

Wide Policy Impact

Licensing can affect other policy goals as well. Rules that prevent former prisoners from earning certain licenses, for example, can have a “significant and sometimes detrimental impact,” says Illinois Representative Marcus C. Evans Jr. (D). “A goal of criminal justice reform is to reduce recidivism. If individuals with criminal backgrounds have the opportunity to earn licenses for various occupations, this gives them the opportunity to market themselves for good-paying jobs and an end to a life of crime.”

Evans succeeded in passing 2016 legislation ensuring that former offenders can earn an occupational license unless their crimes directly relate to that occupation. Less successful was a bill he introduced last year that would have required all applications for employment, certification, registration and licensure to clearly state that the applicant was not obligated to disclose arrest or conviction records.

Other legislatures have mandated regular reviews of their licensing laws through so-called “sunrise” and “sunset” procedures. Texas law, for example, details a two-year review process for any legislation proposing a new occupational license and for any bill that would significantly alter existing licensing policy. Since 1977, when the sunset law went into effect, 85 regulatory bodies have been consolidated or eliminated. Proponents say the law has saved taxpayers $1 billion while increasing accountability and improving government resources.

Connecticut lawmakers now require approval by the attorney general and the standing Legislative Regulation Review Committee before any proposal to create, amend or repeal a regulation can be adopted. The proposal must also be filed on the state’s electronic regulation system, where it is available to the public.

“It is important that policymakers remove barriers to employment while still maintaining health and safety protection,” says Connecticut Senate Majority Leader Bob Duff (D). “Streamlining occupational licensing will open up new career paths and also bring down the cost of services for consumers.”

The Need for Watchdogs

States can require occupational licensing, but without some supervision, not everyone will play by the rules. But who should provide the oversight and who should pay for it are up for debate.

Many argue that members of the private sector should be involved in crafting the regulations that will affect them. Inclusion of industry insiders “provides much needed expertise and consumer perspectives and allows for informed decisions,” according to the Federation of Associations of Regulatory Boards.

Others say that interest groups too often gain outsized influence over government decisions and shape policy to benefit their own interests, a phenomenon the late George Stigler, the Nobel Prize-winning economist from the University of Chicago, called “regulatory capture.”

Court Weighs In

The U.S. Supreme Court addressed the issue in 2015, in North Carolina State Board of Dental Examiners v. FTC. The Federal Trade Commission alleged that North Carolina’s dental board violated federal antitrust laws by using its authority to limit competition for its own self-interest, rather than for a legitimate public health or safety concern. In its ruling against the board, the court cited legal scholar Rebecca Haw Allensworth, who in turn had referenced Stigler’s theory.

“It can’t surprise when licensing boards comprised of competitors exclude competition and regulate in ways that raise their profit,” Allensworth wrote in “Cartels by Another Name.”

“The courts continue to raise the issue of ‘active supervision’ being a requirement for state-agency-like licensing boards to receive immunity from federal antitrust laws,” says North Carolina Senator Andy Wells (R), chairman of the Joint Committee on Administrative Procedure Oversight. “The current system is problematic. … When occupational licensing exceeds its intended purpose of protecting the public and instead serves to prohibit competition, it can have a stifling effect on job and economic growth.”

Concerned that private sector influence might stifle legislative intent, Tennessee lawmakers enacted the Right to Earn a Living Act. The 2016 law requires the state’s boards to submit proposed regulations to the legislature for approval.

In Arizona, legislators not only passed a version of the Right to Earn a Living Act, they also eliminated license requirements for several occupations, three being fruit packers, cremationists and yoga instructors.

“The problem is that the government has placed fees, imposed ever-changing rules for licensing and enacted burdensome requirements, which have kept people from engaging in their industry,” says Arizona Senate Majority Leader Kimberly Yee (R).

Reforming the system was challenging, she said, as lawmakers debated the best ways to balance consumer health and safety with economic concerns. “We must develop a mind-set that establishes a standard of review for licensure,” she says. “We need what is necessary for consumer protection, but we also need to be reasonable when determining regulations on various occupations.”

Another concern among legislators is the sometimes high cost of getting licensed for a low-paying job.

To cut the debt some cosmetology students amass, Ohio Senator Charleta Tavares (D) introduced a bill last fall to replace some of the required training hours with paid apprenticeship hours. “The average salary of a beginning cosmetologist, a hair stylist, is somewhere between $19,000 and $25,000,” Taveras told the Statehouse News Bureau. Students face “several thousand dollars of debt that they are carrying—that they are going to have to pay back—at the same time they are trying to work and take care of their families.”

Opposition came partly from the education and training providers. “I can’t think of anything where cutting education is a good idea,” said James Rogers, with the Salon Schools Group, according to the news bureau. He added that while “large salons might be able to provide quality, on-the-job training, most won’t.”

The Case for Compacts

Workers licensed in one state often face new licensing requirements if they move to another state. Interstate licensing compacts—in which several states agree on a single set of standards—can help increase job market fluidity.

Supporters point to success stories like the Enhanced Nurse Licensure Compact, which launched last year and already includes 29 states. When requirements are consistent across the country, supporters contend, licensing boards are less able to act against the public interest.

Critics contend that compacts can be costly to develop and that they can lead to two-tier fee systems with a “traditional” license fee and “compact plus” fee.

The effort to re-examine occupational licensing enjoys broad bipartisan support. There are many ways to go about it, but best practices include ensuring the problem is clearly identified, understanding the full range of options available and monitoring regulations over time.

Lawmakers will consider some, or all, of these approaches when reviewing their current regulations. After all, they need to understand where they are before they can move toward where they want to be.

Albert Downs and Iris Hentze are policy researchers in the Employment, Labor and Retirement Program at NCSL. Their colleagues Allison Hiltz and Suzanne Hultin contributed to this article.

 

Sidebar: States Form Consortium

With the help of the National Conference of State Legislatures, the Council of State Governments and the National Governors Association Center for Best Practices, 11 states formed the National Occupational Licensing Learning Consortium to share policy options, discuss best practices and engage with experts in occupational and professional regulation.

Through this project, which is funded by the U.S. Department of Labor, Employment and Training Administration, each state will develop a plan to reduce unnecessary barriers to the labor market. Of particular interest will be the challenges facing military veterans and their families, immigrants with work authorization, ex-offenders, and the chronically unemployed.

The group recently released the National Occupational Licensing Database detailing, among other things, the education and training requirements, initial licensing and renewal fees, and portability of 34 occupations across the 50 states and the District of Columbia. Access the database.

Sidebar: What Are the Least Restrictive Regulations?

Many factors affect jobs and the people who do them. Recent legislation in Mississippi ranked the following 11 labor and market forces on a continuum from the least to most restrictive. Occupational licensing ranked as the most restrictive influence on businesses and workers.

  1. Market competition
  2. Third-party or consumer-created ratings and reviews
  3. Private certification
  4. Being sued for deceptive trade practices that harm consumers
  5. Rules on selling specific goods or services to consumers
  6. Inspection of workplaces, products or services
  7. Bonding or insurance
  8. Registration requirements
  9. Government certifications
  10. A specialty medical occupational license
  11. An occupational license

Source: Mississippi House Bill 1425, 2017

Sidebar: Occupations Licensed by All 50 States and D.C.

  • Barbers
  • Certified nursing assistants
  • Cosmetologists
  • Dental hygienists
  • Emergency medical technicians
  • Heavy tractor trailer truck drivers
  • Insurance sales agents
  • Licensed practical nurses
  • Physical therapy assistants
  • School bus drivers
  • Transit city bus drivers

Note: Occupations were limited to those that require less than a bachelor’s degree, are projected to grow at a higher rate than the national average between 2014 and 2024, and currently have employment levels of 10,000 or greater.

Source: NCSL’s National Occupational Licensing Database, February 2018

 

Additional Resources

National Occupational Licensing Database: Produced by the National Conference of State Legislatures, the National Governors Association Center for Best Practices and the Council of State Governments, with grant support from the U.S. Department of Labor, Employment and Training Administration, to contribute to the understanding of the variation in occupational licensing burdens across the country and particularly among professions for which these laws may pose unnecessary barriers to employment.

Occupational Licensing Project: Recent research and publications on occupational licensing by our staff or staff from our partner organizations, The Council of State Governments and the National Governors Association, Center for Best Practices.

“States making it easier for ex-offenders to get occupational licenses,” by Rebecca Pirius, from the NCSL blog.

NCSL Resources