As the number of licensed professions in the United States has soared ever higher, the past decade has seen a number of pushes from state governments to reduce these burdensome regulations.
A new report from the Arkansas Center for Research in Economics documents the recent history of licensing deregulation, with lessons for future policymakers based on the successes and failures of other states:
Political leadership from the governor was one of the strongest factors influencing whether or not licensing was reformed. Governors accomplished this in a myriad of ways. Both Michigan Governor Rick Snyder and Arizona Governor Doug Ducey made licensing reform a priority as soon as they came into office, and they went to the public, educating them and convincing the public why reforming licensing is important. Some states saw their governors act unilaterally, such as when Oklahoma Governor Mary Fallon used executive orders and established a task force. On the other hand, a lack of leadership from the top can be detrimental to reform efforts. In Florida, Governor Rick Scott did not make reform of licensing a priority, although it was made a priority by members of the Florida House of Representatives. The result was a failed attempt at reforming licensing.
The establishment of commissions with clear guidelines was also an important step for many states. Many interest groups will come together to argue against licensing reform. However, having a report come from a thoughtful, reputable commission allows legislators to have a full range of expertise and research already finished before the legislative session even begins. One good example comes from Michigan, where Governor Rick Snyder created a commission to study Michigan’s licensing laws and make recommendations to the legislature on possible reform. This resulted in the delicensing of several occupations.
The report is targeted to legislators in Arkansas, but the experiences discussed can be applied anywhere.
The importance of an executive who is heavily invested in the licensing reform process can’t be overstated. Most obviously, governors can veto proposals to increase licensing without investing much in the issue, but the disparity between the successes in Michigan, Oklahoma, and Arizona and and the failure of Florida shows that engagement by the governor is necessary to win the tooth-and-nail fight put up by licensing’s supporters.
Also important is the presence of independent commissions to study the effects of licensing. These commissions are particularly effective at identifying professions for which licensing is a sub-optimal regulatory regime. That being said, even in states where licensing reform is passed, it usually falls short of recommendations by a wide margin. For example, of the 20 professions Michigan’s commission specifically recommended delicensing outright, only six were delicensed.
Another more modest reform adopted by many states is to assert more government regulation of licensing boards. The 2014 North Carolina State Board of Dental Examiners v. FTC decision found that licensing boards can engage in anti-competitive practices in violation of the Sherman Act if they lack sufficient oversight from the state. States have used both legislation and executive orders to bring their boards in compliance with the decision. These changes are particularly interesting, in part because they make no direct policy changes, but more so because they are an example of the Supreme Court providing “cover” for legislators who can point to the need to comply with federal law as a reason to reform.