{"id":58,"date":"2015-10-29T19:36:11","date_gmt":"2015-10-29T19:36:11","guid":{"rendered":"http:\/\/proftesting.com\/blog\/?p=58"},"modified":"2016-11-16T02:08:24","modified_gmt":"2016-11-16T02:08:24","slug":"20151029avoiding-a-third-best-outcome-the-white-house-weighs-in-on-smarter-occupational-licensure","status":"publish","type":"post","link":"https:\/\/www.proftesting.com\/blog\/2015\/10\/29\/20151029avoiding-a-third-best-outcome-the-white-house-weighs-in-on-smarter-occupational-licensure\/","title":{"rendered":"Avoiding a Third Best Outcome: The White House Weighs In On Smarter Occupational Licensure"},"content":{"rendered":"

David Cox<\/a><\/p>\n

Occupational Licensing\u2019s Rise to Attention<\/strong><\/p>\n

In the United States, the post-1950 expansion of the service economy fueled policies by States to license specialized skill-intensive occupations in rationally uncontested areas such as medicine and law. Subsequent progressive social reforms such as the consumer activist movement of the 60’s contributed to a public panglossian view of occupational licensure as a benevolent action enacted to protect them against unscrupulous, incompetent and unsafe providers of professional services. Legislators found little political reason to constrain proposals for licensure particularly when buoyed by the fact that licensing is principally self-funded through licensing fees giving it little if any impediment from budget or appropriation constraints.<\/p>\n

The metrics certainly seem to support this historical perspective. Analysis of labor market data indicates that licensing (the most restrictive form of labor market regulation) of the workforce has grown more than fivefold from 5 percent in1950 to 10 percent in 1970 and near 30 percent in 2008. When viewed from a public interest theory perspective, licensing as a response to public demand for protection seems to offer a credible means to protect consumer health and safety.\u00a0 Unfortunately, research evidencing its effectiveness has more often demonstrated poor relationships to public welfare or work quality but strong relationships to higher wages for those working in licensed occupations.\u00a0 Unsurprisingly these outcomes have opened a counter-narrative that views licensing from a capture theory perspective positing it as a protectionist political response to lobbying by the special interests of professional groups as a means to restrict competition and raise wages.<\/p>\n

Ultimately these tensions have contributed to the contemporary understanding of occupational regulation as a political process characterized by shifting disequilibrium between regulatory and de-regulatory proponents. However, a fresh discourse about the legitimate scope of government intervention sparked in part by systemic market failures such as the global economic crisis has opened a more contemporary lens on regulation. Rather than viewing occupational licensure as a zero sum exchange between free markets and government control, emerging views incorporate regulatory mechanisms as essential elements to the proper function of market economies.\u00a0 Deregulation as a reflexive response to faulty government intervention has been challenged by a progressive conversation that suggests the public interest goals of regulation can be achieved through improvement in its analysis, design, and implementation. Deregulation is not being replaced by the call for more regulation but by the call for better regulation.<\/p>\n

White House Offers \u201cA Framework for Policymakers\u201d<\/p>\n

In a new report<\/a> prepared by the Department of Treasury, Council of Economic Advisers, and the Department of Labor released from the White House this summer examines the rise of occupational licensing, its potential benefits and its potential for imposing hidden costs and inefficiency in a modern 21st-century market economy.<\/p>\n

Data cited in the report reveals that more than 1,100 jobs require a license, certification or registration in at least one State with fewer than 60 that are regulated consistently by all the States.\u00a0 The report concludes that this pattern of regulation points to a larger problem of inconsistent standards applied by States in the analysis of the need for regulating various occupations.\u00a0 Even when States do agree on the need to regulate an occupation, there is substantial variability on the minimum requirements to comply such as the amount of training or experience.<\/p>\n

Other harmful labor market effects of licensing included increased costs to consumers, reduction in employment opportunities that disproportionately impact low-wage workers, and restricted mobility of workers across State lines presenting particular burden for specific sub groups such as spouses of active military personnel who must often move across States.<\/p>\n

The White House entreat to policymakers is to take a regulatory analysis perspective that considers all costs, benefits, and externalities before initiating regulatory interventions. The report concludes “\u2026the practice of licensing can impose substantial costs on job seekers, consumers, and the economy more generally. This is particularly true when licensing regulations are poorly aligned toward consumer protection and when they are not updated to reflect a changing economy.”<\/p>\n

While the Federal Government has little direct control regarding State legislative practice, The President\u2019s budget proposal includes $15 million in grants to States interested in further analysis of occupational regulation\u2019s impact and improvement. The report recommends several best practices to ensure maintenance of a modern regulatory system that protects consumers without placing unnecessary restrictions on employment, innovation, or access to important goods and services including:<\/p>\n