Obama Vs. Occupational Licensing
Occupational licensing occurs when the state government legislates that a person cannot practice a trade, for example law, medicine, or hair-braiding, without a license. For years, free-market researchers have recognized that this increases costs and reduces choices for consumers, and prevents entrepreneurs from entering markets.
Now look who’s joined the ranks of critics of occupational licensing: President Obama! In a welcome report bearing the imprimatur of the White House, the Department of the Treasury, the Council of Economic Advisers, and the Department of Labor conclude that:
Over the past several decades, the share of U.S. workers holding an occupational license has grown sharply. When designed and implemented carefully, licensing can offer important health and safety protections to consumers, as well as benefits to workers. However, the current licensing regime in the United States also creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as State certification, may offer a better balance between consumer protections and flexibility for workers.
The report comprises a thorough literature review and original research on the consequences of the current regime of occupational licensing in the U.S. This is especially important in health care.
As shown in Figure 3, the proportion of workers in health care and education has increased from about 13 percent of the workforce to 22 percent. As shown in Figure 4, health care has the highest proportion of workers subject to occupational licensing.
I’m glad President Obama recognizes the need to dismantle the barriers to entry that occupational licensing creates. Maybe that’s an area of mutual interest that both Democrats and Republicans can agree on.
The U.S. is most innovative in the field of computer science. Notice that it’s the area of industry where licensure is the lowest. Any kid can peck on a iPad, laptop or Android device and learn computer code and write apps and sell them if there is a demand.
On the other hand, health care has the highest percent of licensure. It is also the segment of the economy where prices are rising the fastest.
One item that I find strange. In transportation, the proportion of workers licensed is only 60%. I assume that means the people who service vehicles but are not professional drivers/pilots don’t need to be licensed. I believe it’s safe to say that 100% of transportation workers who are directly involved in the process are licensed.
John—This has been recognized for a long time, but the mechanism by which licensure is imposed is almost wholly political, not really generated by any objective analysis of the requirements of the work. A worker group decides to seek licensure to make it harder for others not so licensed to have the job, and to be able to pressure employers to make a job fit their license and not require them to do anything else. California has some 44 separate categories, of whom only those who have direct physical interaction with patients should have one. Take lab techs; 4 years of college, then additional technical training, yet most lab work now is automated. It has to be. And even the maintenance of the machines is done by the tech reps of the manufacturer.
In other words, this is union behavior. Legislators are suckers for this kind of pressure as it makes them look concerned about patient safety.
I have written on this and will send reprints as soon as our move is over. Also, I have a broad approach to correction of this: Allow large healthcare system to have waivers if they educate their own staffs and award institutional licenses. Want mah paper?
By the way–your recent blogs are marvelous.
WANDA JOY
Thank you.