John Locke Update / Research Newsletter

Licensure’s safety and quality benefits remain elusive

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Late last year an audit (pdf file) of the State Board of Opticians determined that the board "will lack adequate funds to continue operating within the next year" and that, despite cost-cutting measures already undertaken, soon "will no longer be able to provide the licensing services and practitioner oversight that state law requires." The Office of State Auditor recommended either "increasing fees or consolidating operations with another licensing board."

Already a bill has been filed to increase fees and fines for a continued opticians board. Consolidation with, e.g., the State Board of Optometry does not appear to be under consideration.

The audit warned that "Unless changes are made, the State may have to discontinue licensing and overseeing opticians."

Right now, North Carolina, is one of only 21 states that require licensure of opticians. The majority of U.S. states don’t. What do the other states know that North Carolina doesn’t?

For that matter, not to pick on the opticians board, North Carolina is one of the more aggressive states in licensing occupations. Crossing the border into South Carolina reduces the number of licensed job categories by over two-thirds (including opticians). What does South Carolina know that we don’t?

Several reasons why licensure’s public safety benefits are unclear

Why do states get into the licensing of occupations? Economists studying occupational licensing generally find it restricts the supply of labor and drives up the price of labor and services. They find similarity between licensure and medieval guilds. By limiting the number of competitors in an occupation, it makes practicing members wealthier.

Supposedly, the idea behind occupational licensing is ensuring safety and quality of the service provided. On that question, the research literature is mixed at best.

Despite the safety rationale, several factors make it hard to tell whether licensing has actual, positive effects on overall safety and quality of work received:

Different states, different perception of safety needs. States differ widely over which occupations they choose to license. Among other things, this fact suggests that any public-safety need behind many licenses is subject to interpretation.

Hurdles keep out innovators. Getting and keeping a license has many costs (fees, tuition, time in school, exams, and also risk of fines, loss of license, and even jail for shoddy practice). These costs may discourage less competent or negligent providers — along with new entrants with better ideas and safety innovations. They also foster the wrong kind of creative thinking, into finding ways around the costly hurdles.

Codifying "the box." Licensure boards themselves can block any beneficial "outside the box" thinking in the profession in numerous ways:

  • Standardize practices that overlook emerging better practices.
  • Enforce standards and training requirements that don’t match the actual needs of the work.
  • Impose standards where they aren’t necessary, even on entrance exams, experience expectations, and pricing.
  • Maintain a composition bias; i.e., if the board comprises current members of the profession with their own biases for how the work — or even training for the work — "should" be done.

Grandfather clauses. Adding licensure to a profession usually involves "grandfathering" in current practitioners, which undercuts the foundational rationale for licensing the profession — that some providers are too unqualified and unsafe to be allowed to practice in the state.

Club mentality. Licensing boards, especially if they are made up of current license-holding practitioners, can become captured regulators. As such, they would discard their oversight role for more of a club mentality with their licensees. In those cases, the boards end up protecting rather than punishing wrongdoers, who are their peers in the profession.

My Carolina Cronyism report on occupational licensing made six recommendations:

  1. Reduce the number of licensing boards and licensed job categories
  2. Reform and merge licensing boards
  3. Encourage reciprocity
  4. Apply a principle of ‘least-cost state’
  5. Enact sunset provisions with periodic review for current licensing boards
  6. Enact sunrise provisions for any future licensing board

State leaders focused on job growth, a stronger economy, and regulatory reform would satisfy all three by taking steps to "de-guild" North Carolina.

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Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As Director of Regulatory Studies at the John Locke Foundation, Jon gets into the weeds in all kinds of policy areas, including electricity, occupational licensing, hydraulic… ...

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