New Research: Dispelling Three Myths on Occupational Licensing

New Research: Dispelling Three Myths on Occupational Licensing

A new bite-sized research paper from Jared Meyer and Victoria Eardley of the Foundation for Government Accountability addresses three common misconceptions about the effects of occupational licensing in the U.S.:

Myth: All licensing is necessary to protect public safety. Proponents often argue that the dramatic growth in occupational licensing is necessary to ensure consumer safety. However, the body of available evidence does not support this argument, and instead, often points to the contrary.

Indeed. Research cited by the report finds that in states with licensing restrictions on certain professions (and thus, higher prices for services) finds that would-be consumers instead do the work themselves, sometimes with dangerous results.

And, even if there were a clear link between licensing and consumer safety, there are alternatives to licensing that can achieve the same goal. Indeed, only a small handful of all of professions licensed across the U.S. are licensed in a majority of states. This doesn’t mean those professions are “unregulated”; the respective states just use a different regulatory regime to provide consumer protection.

Myth: Licensing protects quality. Not only does licensure fail to improve safety, but it also fails to improve quality. Research has found there to be no discernable difference in the quality of floral arrangements from florists in Louisiana—the only state that licenses florists—and Texas. Data showing that complaint rates for floral services in Louisiana were similar to those of unlicensed services in Mississippi and Arkansas further confirmed this finding.

A great deal of ink has been spilled on whether or not licensing improves quality, and the results are either mixed for find no clear link. Indeed, in some cases licensing requirements can reduce quality due to the onerous training requirements associated. The logic is that if potential workers must make a substantial up-front investment in the form of the time and energy it takes to meet licensing requirements, “any benefits from preservice training are overwhelmed by the adverse selection into programs that require nontransferable human capital investments.”

Myth: Licensing primarily affects higher earners.Traditionally-licensed occupations such as doctors, lawyers, and accountants represent high-income, high-risk jobs. However, the increase in occupations that require licensure has caused other jobs, many of which include low- to moderate-income occupations, to require licenses. Many licenses now apply to entry-level jobs that offer a path to upward mobility.

Perhaps not surprising for those familiar with the occupational licensing landscape, but it’s worth repeating. We might need to ensure minimum quality for high-skilled professionals (although generally not through licensing), but there’s little justification for licensing of lower-skilled workers, especially in light of the wide variation among state licensing requirements and the number of alternative methods of consumer protection available.

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By |2018-10-25T07:26:34-07:00October 25th, 2018|Blog, Occupational Licensing|