Do we need occupational licensing?

by on March 2, 2006 at 8:31 am in Law | Permalink

Alan Krueger writes:

In a new book, "Licensing Occupations: Ensuring Quality or Restricting
Competition?" (Upjohn Institute, 2006), Morris M. Kleiner, an economist
at the University of Minnesota, questions whether occupational
licensing has gone too far. He provides much evidence that the balance
of occupational licensing has shifted away from protecting consumers
and toward limiting the supply of workers in various professions. A
result is that services provided by licensed workers are more expensive
than necessary and that quality is not noticeably affected.

Read more here.  I can’t yet find this listed on Amazon.com, any pointers?  Here is a pdf of part of the book.  Here is a home page for the book.

1 A Tykhyy March 2, 2006 at 9:19 am

Seems quite reasonable. It is necessary to protect customers from various quacks somehow, and licensing is one way; but I’m ok wit h the market determining the supply of quality services. Licensing may be even non-governmental, e.g. Forest Stewardship Council, but it must be trustworthy or its primary purpose is undermined. It seems that heavily institutionalized licensing systems tend to degrade in this way, with the license becoming a purely bureaucratic piece of paper and a barrier to competition, and on top of that failing to ensure quality.

2 ElamBend March 2, 2006 at 9:23 am

Also, the Bar passage rate in many states is set by the State Bar arbitrarily, after the test. It is essentially a decision taken as to how many people will be allowed to pass.
Just like any guild, the Bar has an interest in limiting the competition (which is at odds with law schools which want as many paying students as possible).

3 Peter March 2, 2006 at 9:58 am

“Just like any guild, the Bar has an interest in limiting the competition (which is at odds with law schools which want as many paying students as possible).”

And it’s clear that the law schools have won out, with there being a glut of lawyers in most areas.

4 Boris Lvin March 2, 2006 at 10:41 am

What is truly amazing is that there are still plenty of people around who believe that occupational licensing has something to do with anything but monopoly and protectionism!

5 Donald A. Coffin March 2, 2006 at 12:27 pm

The now widespread 150-credit-hour requirement to sit for the CPA exam has had two consequences–a dramatic decline in the number of people taking the CPA exam and a less dramatic increase in pass rates. Two articles in the most recent Journal of Labor Research address these developments.

6 bk March 2, 2006 at 3:47 pm

This a huge topic. I’m not anti-licensing but I’m against overly restrictive licensing and regulations that limit competition and raises consumer costs. Surely governments should be limited to doing this in cases where their interests in protecting consumers are legitimate, because someone might die, be maimed, be poisoned, be defrauded of large sums of money, etc,

And don’t forget that licensing sometimes arises privately, in response to a public perception that a profession’s practitioners mighe be unsavory. Financial planners have a non-governmental certification organization, for example. But do we really need a state to, say, license hairdressers, barbers, etc? Or landscapers? the latter need only be licensed or certified, to say, use certain types of equipment. Or in some cases better yet, simply be required to carry insurance that protects their customers from their mess-ups.

The part of this that’s really vexing is that many of the older and more established guild-style professions have enough power to protect their domain (I call it their jolly roger zone, where they have run up their black flag and declared sovereignty) from the sort of reasonable cherry picking of their easier and less dangerous but still lucrative tasks. In most places, you’re technically breaking the law if you say replace a light switch or something. Here in MA, it’s a law that only police officers may direct traffic around dangerous private construction work, and that they have to be paid double time for a 4 hour minimum. That’s right: give or take a $160 minimum paycheck to stop cars while a backhoe digs a trench for a sewer hook up.

7 Michael Vassar March 2, 2006 at 4:15 pm

Not amazing at all Boris. Adam Smith and Johnathon Swift mocked and criticized ocupational licensing, but the economic consensus among intelligent lay-people hasn’t really changed much between their day and ours.

8 Daniel Strauss Vasques March 2, 2006 at 6:16 pm

I’ve been thinking a lot about this issue lately. For me, this is exactly like FDA permissions – hence, I don’t agree with it.

It would be way better if instead of licences, certificates were given, for the sake of signaling.

Here in Brazil, for instance, “consensual divorce” is a very simple judicial procedure, but demands a lawyer anyway, which have minimum prices fixed by the BAR, by the way. I have no doubt this increases the costs of divorcing (some will argue this is a good thing).

9 Kathleen Fasanella March 2, 2006 at 6:53 pm

I have an unusual occupation and there aren’t many of us. I’m a pattern maker for apparel and sewn products. Industrial pattern makers don’t collect enviable revenues rather, it’s the opposite. There are hacks who prey on start up manufacturers and they charge 10 times the going rate (you want evidence, no problem).

Very often over the past ten years, people have suggested I start a movement to licence the occupation, and so, prevent customer abuses (it’s not likely to happen tho, pattern makers tend not to be joiners, hell, we rarely even advertise). However, I can assure you, there are legitimate reasons to license occupations rather than revenue. I know that may be true of many situations but it’s not true of all of them. It takes a long time to become skilled; people won’t suddenly become pattern makers for the money. It’s not as though you can do a week end seminar, a semester or even a couple years of school to be qualified. It’s closer to the time period of medical school and internship to be qualified. The ratio of investment in learning the trade compared to the financial return just isn’t there. You don’t do this for the money, that’s for sure. So, there’s no monopoly and the only protectionism going on is to save manufacturers from 90% overcharges from unqualified hacks.

10 TomHynes March 3, 2006 at 1:39 pm

Kathleen’s comment is a classic. Replace “pattern maker” with almost any profession:

1. We aren’t doing it for us, just to protect the public from unscrupulous practicioners who “prey” on the little guy.

2. We are highly trained and don’t get paid what we should.

11 Psychologist November 7, 2006 at 3:55 pm

Foreign educated psychologists who attempt to obtain a license to practice psychology in the US are faced with an unpleasant reality:

US psychology-regulating authorities do not recognize the validity of the usual qualifications required to obtain a license to practice psychology in countries which do not have a US school system. This differs from the situation for foreign-trained lawyers and medical practitioners.

American State laws pertaining to psychology regulation are now unanimous in requiring that licensed psychologists have a degree called a PhD. US psychology-licensing boards require that such degrees contain content equivalent to APA approved American PhDs and refuse to consider the psychology content of any training given an undergraduate tag, even when these have been developed in accordance with the APA guidelines for an accredited PhD program. There is currently no legal clause or administrative guideline in any American State or Province which acknowledges that non-US PhDs are typically advanced research degrees which are not sufficient for professional licensure because they are orthogonal to professional training and not hierarchically sequential to it. Nor are there clauses which acknowledge that the international equivalents of the US professional PhD in psychology are often given different names, including those that are reserved for pre- and low-level professional degrees in the US system. These omissions effectively disqualify the best and most appropriately foreign trained professional psychologists from US licensure, while allowing those with inappropriate training to apply.

Contrary to the international norm, licensed members of the psychology profession do not perform first-instance evaluations of foreign psychology credentials in the USA. Instead they are done by the staff of private evaluation agencies and university admission offices who have little or no training in psychology, are ignorant of the findings of reputable studies in comparative international education, use invalid measuring tools and have vested interests in devaluing foreign qualifications.

There is no regional adaptation system that allows international psychologists to complete unmet local requirements and familiarize themselves with the culture and ideology underpinning the practice of psychology in the USA. In most other countries, foreign professionals go through a short acclimatization program that does not deny them their professional status or their right to advance their careers.

Faced with this situation, some internationally trained psychologists choose to enter the standard US educational system, not because their training is inadequate or insufficient, but because American professional degrees are the only ones recognized within the US system. Many others, especially those with family commitments, have no option but to leave their professional field and work in jobs that are far below their capabilities. Talent and potential are wasted and lives are damaged.

There is an alarming shortage of psychologists in the US with appropriate linguistic and cultural training who can attend to the needs of the country’s large minority communities. When the debate over immigration issues questions the contribution of immigrants to the country‚Äôs development, it is regrettable that well-trained and capable professional immigrants, who are best suited to address the mental health needs of these communities, are not given fair and appropriate evaluations of their credentials and are thus effectively blocked from obtaining licensure. This policy discriminates against internationally trained psychologists, against minority communities whose mental health needs are not appropriately being met and against American psychology practitioners who are isolated from the best of their internationally trained professional peers.

We believe this silly and inequitable situation should be changed.

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