Monday, February 07, 2011

Occupational Licensing Totally Out of Control


On the front page of today's WSJ, an excellent article about the rising occupational licensure in some states for some professions (see chart above, click to enlarge): "A License to Shampoo: Jobs Needing State Approval Rise," here are some key paragraphs:

"Mr. Kleiner, labor professor at the University of Minnesota, looked at census data covering several occupations that are regulated in some states but not others, including librarians, nutritionists and respiratory therapists. He found that employment growth in those professions was about 20% greater, on average, in the unregulated states between 1990 and 2000.

Licensing can also drive up costs to consumers. Licensed workers earn, on average, 15% more than their unlicensed counterparts in other states—a premium that may be reflected in their prices, according to a study published by the National Bureau of Economic Research and conducted by Mr. Kleiner and Alan Krueger, an economist at Princeton University.

Mr. Kleiner estimates that across the U.S. economy, occupational licensing adds at least $116 billion a year to the cost of services, which amounts to about 0.1% of total consumer spending. In a look at dentistry, Mr. Kleiner found that the average price of dental services rose 11% when a state made it more difficult to get a dental license.

In many service trades, licensure "is totally out of control," says Charles Wheelan, a lecturer in public policy at the University of Chicago. He says the marketplace might be a better judge than the government of whether a barber or a yoga instructor is competent. "It's fairly easy for you to tell whether you've gotten a bad haircut or not, and if quality turns out to be bad, it's not a big social problem," says Mr. Wheelan.

When a trade group does succeed in getting a licensing law passed, it sometimes exempts existing workers from the testing requirements. In Michigan, for instance, it will soon be a felony to practice massage without a license. Newcomers to the field must take 500 hours of classes and pass an exam to get that license. But a grandfather clause exempts most current massage therapists, including those who may never have taken a class at an accredited school."

MP: See Chapter IX ("Occupational Licensure") of Milton Friedman's book "Capitalism and Freedom."

19 Comments:

At 2/07/2011 3:57 PM, Blogger Ted said...

Let's start by getting restrictions on becoming a licensed Medical Doctor :)

 
At 2/07/2011 4:02 PM, Blogger Cooper said...

When I saw the headline I thought this had to be related to a local story I've been following since Friday.

First in a set of three http://www.newsobserver.com/2011/02/03/964781/citizen-activist-grates-on-state.html#

 
At 2/07/2011 4:07 PM, Blogger juandos said...

Not to worry though, Obama will baffle the business community with his brilliance ...

 
At 2/07/2011 4:24 PM, Blogger Dr. T said...

@Ted: State licensure of physicians is about verifying credentials and preventing fraud. It isn't about protecting the practices of physicians already in the state. Any person with an M.D. or D.O. degree from a US or Canadian medical school can get licensed in any state without extra courses or additional training.

That's often not the case for other workers being licensed by the states such as teachers, counsellors, social workers, nutritionists, occupational therapists, physical therapists, respiratory therapists, speech pathologists, pharmacists, medical technologists, radiation technologists, dental hygienists, barbers, hair stylists, manicurists, flower arrangers, daycare workers, plumbers, electricians, etc. who can be fully qualified to work in one state but require dozens or hundreds of hours of instruction and/or supervised experience to be licensed in another state.

 
At 2/07/2011 4:27 PM, Blogger Ron H. said...

Cooper,

I guess it doesn't pay to do too good of a job. Same problem for parents helping with school projects.

 
At 2/07/2011 5:04 PM, Blogger Ron H. said...

juandos,

"Not to worry though, Obama will baffle the business community with his brilliance ..."

What a clown we've elected. More "spread the wealth". Doesn't he realize by now how little most people like that idea?

I was afraid to play the video, as it looks like they are about to kiss. Tell me it ain't so, & I'll watch it.

 
At 2/07/2011 5:15 PM, Blogger Ron H. said...

Dr. T,

"State licensure of physicians is about verifying credentials and preventing fraud."

Apparently it doesn't work as well as we would like.

Couldn't a private rating agency serve a similar function?

 
At 2/07/2011 5:33 PM, Blogger Cooper said...

Ron H.
The worst part is I work for the state so I'm neck deep in all of it. Even though my profession is one that requires licensing, I'm quite opposed to it. It's to the point in some states that even saying you're an "engineer" is polite conversation can get you hit with a misdemeanor or worse. Much less the act of fraudulently advertising a degree or skill you do not posses.

 
At 2/07/2011 6:35 PM, Blogger Ron H. said...

"It's to the point in some states that even saying you're an "engineer" is polite conversation can get you hit with a misdemeanor or worse. Much less the act of fraudulently advertising a degree or skill you do not posses."

Hmm. Interesting. A Microsoft Certified Network Engineer, isn't licensed. It would be interesting to hear the argument against them calling themselves engineers.

 
At 2/07/2011 9:45 PM, Blogger Buddy R Pacifico said...

Ron H, brings up an excellent point about certification. Certification is probably much better in a lot of cases, such as barbers or plumbers, then state licensure. The neighbor kid, who grew up next door, probably gained more value as a Cisco Certified Network Specialist (in high school) then from a state license.

BTW, that kid is now in charge of all pcs on the Microsoft Redmond campus.

 
At 2/07/2011 10:25 PM, Blogger Ron H. said...

Buddy,

Certification makes way more sense to me, of course all levels of government like that license revenue.

A certificate is a selling point for a service provider. I suppose it helps assure people that the provider is competent.

But, I could, for instance, choose to use a barber without a certificate if the price was better. Anyone who doesn't consistently please their customers won't stay in business long.

Stossel has had some good segments on this subject.

 
At 2/08/2011 12:59 AM, Blogger Hydra said...

I think "certification" is mostly a fraudulent money maker. It does have some value, and it needs constant updating, which provides currency, but mostly it is overpriced trash.

Regardless, it is small change compared to the costs associated with unnecessary or overly strict zoning regulations and building codes.

 
At 2/08/2011 1:41 AM, Blogger Ron H. said...

"I think "certification" is mostly a fraudulent money maker. It does have some value, and it needs constant updating, which provides currency, but mostly it is overpriced trash."

Are you sure you don't mean licensing instead of certification? After all, certification is voluntary, and a service provider can use it to reassure customers of their qualifications if they feel such a thing is important. I am happy with a barber who gives me a good haircut, and I don't care what training, licenses, or certificates he has. the fact that he has been in business for many years tells me everything I need to know about his ability to satisfy customers.

Licenses, on the other hand, are government imposed requirements, that help keep out competition and do nothing to assure me a good haircut, but only raise the price.

 
At 2/08/2011 7:57 AM, Blogger juandos said...

"Licenses, on the other hand, are government imposed requirements, that help keep out competition and do nothing to assure me a good haircut, but only raise the price"...

Hmmmm, well I personally think Ron H's observation here pretty much matches my own experiences...

 
At 2/08/2011 12:33 PM, Blogger Ron H. said...

"Hmmmm, well I personally think Ron H's observation here pretty much matches my own experiences..."

I have had this license debate with my barber. He is convinced that his license protects me. Poor guy has been drinking the cool-aid. But, what can I expect; he's from the People's Republic of Massachusetts.

 
At 2/08/2011 1:47 PM, Blogger Hydra said...

No I meant certification as in PMP, A+ and a bunch of other oversold crap.

 
At 2/08/2011 3:21 PM, Blogger chrissyrudd said...

Massachusetts is license crazy. When I moved there I was licensed to teach 5-12 US and World History, and coach. I would have had to take 6 separate tests at $100 a peice to be licensed the same. At that time there was also some question as to whether I would have to repeat my student teaching experience. I paid for and prepared for 2 of the tests until we decided we would not be staying in the state. MA did not refund me. I personally don't believe tests can determine if a teacher is qualified or not to teach, but it's a great way to make money.

 
At 2/08/2011 6:13 PM, Blogger Ron H. said...

"No I meant certification as in PMP, A+ and a bunch of other oversold crap."

Ya, those are pretty meaningless. Too bad so many employers believe in them.

 
At 2/08/2011 6:18 PM, Blogger Ron H. said...

"I personally don't believe tests can determine if a teacher is qualified or not to teach, but it's a great way to make money."

chrissyrudd, I think you have nailed it.

 

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