Death and Occupational Licensing

by on May 15, 2017 at 6:53 am in Economics, Law | Permalink

My latest paper (with the excellent Brandon Pizzola) is on occupational licensing in the funeral services industry. Almost all of the previous work on occupational licensing has used cross-sectional data, comparing outcomes in states that license an occupation with outcomes in states that do not. Since many factors vary between states it’s difficult to be sure whether those studies are identifying causal effects. Pizzola and I take advantage of a unusual change, Colorado delicensed its funeral service industry in 1983. The time-series variation combined with the cross-sectional variation lets us examine and test the data in many ways.

In 1983, Colorado delicensed funeral services….the results from difference-in-differences, difference-in-difference-in-differences, and synthetic control specifications suggest occupational licensing causes a wage premium of 11-12 percent.

Importantly, we also do a cross-sectional test similar to those that have been done before in other industries and that test is also consistent with a wage premium of 11-12 percent. In other words, our paper makes all the previous papers on occupational licensing that use cross-sectional data more credible.

We find similar results from a standard cross-sectional wage regression using data on individuals in 1990. Thus, this suggests that cross-sectional regressions of wages on occupational licensing in other industries are a good baseline estimate of a causal effect.

Finally, consistent with an earlier paper by David Harrington and Kathy Krynski that used cross-sectional data, we find some evidence that licensing, which requires training in embalming, increases prices even more than the wage premium alone would suggest because under licensing consumers appear to be pushed away from cremation and towards more expensive burial.

Consistent with Colorado’s decision to delicense in 1983, we find no evidence that delicensing reduced quality in the funeral services industry.

1 Handle May 15, 2017 at 7:12 am

I know we are all supposed to stay on message opposing all the evil licensing with all our hearts and outrage burning as hot as a thousand suns, but the surprise in this case is that it doesn’t seem to make a big difference. Frankly an 11% premium doesn’t sound like that much to get excited about, and probably only represents a tiny hand full of new entrants instead of the purported hordes of aspiring morticians ready to save us a bundle but who are locked out of the system, man.

2 mulp May 15, 2017 at 8:57 am

It is 10% lower contribution to gdp.

Unless you believe lower prices of fixed quantity increase gdp.

Or you believe lower prices increases the number of people dying above the number born, which is still licensed.

3 dan1111 May 15, 2017 at 10:05 am

It will have a negative effect on GDP, as long as all the people who paid less for funerals take the money they saved and burn it, rather than investing it or spending it on other goods.

4 dan1111 May 15, 2017 at 10:04 am

Given that licencing is just one of many requirements to become a funeral director, 11% seems like a pretty big effect on salary.

5 daguix May 15, 2017 at 7:13 am

Roughly the same result has been found in France after the Pompes Funèbres lost their monopoly. The market has become very innovative since, with low cost funeral apps on the web and smartphones…

6 Jeff R May 15, 2017 at 8:17 am

“It’s like Uber, but for funerals.”

7 Art Deco May 15, 2017 at 10:12 am

low cost funeral apps on the web and smartphones…

I assume this is a gag post.

8 Andy Wood May 15, 2017 at 4:23 pm

Apparently not. A few moments with Google found me this:

https://www.funeralwise.com/digital-dying/five-awesome-funeral-apps/

And from Apple’s App Store I found this

Islamic Funeral by Zainab Organization
https://appsto.re/gb/zZ8VE.i

and this:

Matthews Aurora Funeral Solutions Catalog by Aurora Casket Company, LLC
https://appsto.re/gb/9uCAab.i

and this:

My Fantastic Funeral App by Fantastic Funeral
https://appsto.re/gb/r4ZLJ.i

and lots more…

9 rayward May 15, 2017 at 7:40 am

Embalming developed during the civil war, as enterprising embalmers would recover bodies on the battlefield, embalm them, and return the remains to their loved ones. For a good fee. Absent the embalming, the loved ones could not be sure if their brave soldier had died on the battlefield or had deserted. Today, what to do with the remains is fraught with religious connotations. For many, cremation violates religious principles. Lest one forget, Christians believe in the resurrection of the body not simply the soul. Having cremated the body might present a problem. A priest who spoke at a funeral I attended several years ago provided a very useful theory about the resurrection of the body. According to him, it’s not our old and decrepit body that ascends to heaven, but our young and beautiful body at the prime of life that ascends. That is reassurance for those of us who are fortunate enough to die old, but I’m not so sure it will help those who are cremated.

10 Thor May 15, 2017 at 10:24 am

+1

And by the way define prime of life! I wish to enter the realm of immortality in the prime of my physical life, say 30. But I really wish to be there in my cognitive-emotional prime, which is (was; if I recall correctly) 45.

How to coordinate that?

11 Dick the Butcher May 15, 2017 at 11:10 am

My understanding is the RC Church accepts cremation, but not the spreading of the ashes over mountains or seascapes. They want the remains, like Christian burials, placed in or on consecrated ground/mausoleums in RC cemeteries, or national cemeteries for us veterans.

Prayerfully read the Gospels. Jesus answers the (smart-aleck) Sadducee’s (they did not believe in the resurrection of the body) trick question about who, at the end of time, would be a woman’s (resurrected) husband. The woman had been widowed seven times and married (per Jewish law) in series the dead husband’s brothers. Jesus said resurrected men and women will not marry. They will be like the angels.

We should try damned hard to be good Christians . . .

12 ewig May 15, 2017 at 7:51 am

Do occupational licensing requirements that libertarians are always complaining about extend to trades like plumbers and electricians? Anyone who’s been burned by an unlicensed contractor has learned the hard way the value of hiring people who know what the F they’re doing. The professional licensing lobby pushes legislation to protect their members from cheap, unlicensed players performing terrible work and making a bad name for all contractors. This makes sense for when you’re renovating your house. Not so much when you’re having your nails done. This distinction is seldom made in occupational licensing pieces.

13 adam May 15, 2017 at 8:54 am

I’ve had licensed contractors mess stuff up a number of times. Licensing hardly ensures competence.

14 AndrewL May 15, 2017 at 11:54 am

That’s not what the contractor licensing is for. licensing is for the government to reasonably ensure that the contractor is familiar with all local codes, standards and techniques to perform “safe” work, i.e. work that wont blow up half the block or bring down the electric grid. It won’t ensure that you’ll get good work, but you should be reasonably sure that it won’t blow up and/or cause death and bodily injury to your neighbors or the public.

Not to say it can’t happen, but with the licensing system, you have your name and liability attached to your work so it’s not like you can just skip town and set up shop somewhere else to perform the same dangerous work all over again.

15 adam May 15, 2017 at 1:26 pm

Come on. That is nuts for a number of reasons. First, most contractor licenses are issued at a state level, so there’s no requirement to know the local codes as part of them. Second, a plumber cannot blow half the block or take down the electric grid unless he’s trying to do it. Even an electrician would be hard pressed to do that. And there’s no prohibition on doing your own electrical work in the vast majority of jurisdictions, so requiring a license wouldn’t work. Third, I’ve never seen this rational given. Instead, it is always customer protection. If you’ve seen that rationale given by an actual legislature or agency, please provide a link.

16 AndrewL May 15, 2017 at 4:08 pm

Yes, issued at the state level so you have to be familiar with the state building codes (local and state are identical, with a handful of additions to the local specific for the locality), that’s local. Yes the plumber can take down half the block doing gas pipe work (https://www.dnainfo.com/new-york/20150326/east-village/massive-explosion-rips-through-east-village-building)
Yes the electrician, can take down the electric grid if he tries hook a generator directly to your house without an ATS or some other kind of grid disconnect device or safety feature. and yes it is consumer protection, if the electrician wired your house wrong and bypassed the main circuit breaker because it kept tripping, then you’ll get your house burned down. Or they cheaped out and used the wrong gage wire for the current.
You’re getting your rational from the wrong places.

17 Art Deco May 15, 2017 at 10:09 am

By some accounts, the utility of licensing in barbering and cosmetology was in establishing it as a respectable line of work. See David Michaelis’ brief discussion of it in his biography of Charles M. Schulz. (Schulz’ father was a barber who established his shop in 1918, around the time this was taking place).

The problem you get with these discussions is a deficit of appreciation for the historical, sociological and political dimension of these practices. Why did people want barbers licensed but not hardware dealers? Economists have a fairly stereotyped response which partially illuminates matters but does not differentiate cases very well.

18 prior_test2 May 15, 2017 at 7:55 am

Indentured servitude reduces wages costs more. One wonder which state will be the first to bring back this honorable American way to make a living while learning a – delicensed – trade.

And do notice that the cites talk about ‘wage premium’ – nothing is noted that says those paying fees saw an 11-12% reduction. And really, why should fees be lowered merely because wages are?

19 Art Deco May 15, 2017 at 10:11 am

Indentured servitude

[eye roll]

20 Thiago Ribeiro May 15, 2017 at 8:16 am

“Colorado delicensed its funeral service industry in 1983. The time-series variation combined with the cross-sectional variation lets us examine and test the data in many ways.”
But have the dead lived better since 1983?

21 Dick the Butcher May 15, 2017 at 11:18 am

Good one!

An old (I’m old) joke concerning unsuccessful business investments by famous NY Yankee baseball stars in the 1960’s: “If Mickey Mantle and Whitey Ford invested in a funeral home, people would stop dying.”

Maybe Obama should have taken over the funeral industry. “If you like your embalmer. You can keep your embalmer.” Unlikely that , people would stop dying. Only the media would not report it.

22 Dick the Butcher May 15, 2017 at 8:21 am

I am “dying” to read the economics paper on de-licensing brain surgeons.

23 Thor May 15, 2017 at 10:46 am

“Were you looking for it at all?”

Not a chance.

24 Thor May 15, 2017 at 10:47 am

Sorry, that was meant as a reply to Art Deco’s question whether Alex was looking for disconfirming evidence.

25 Bill May 15, 2017 at 9:24 am

Yes, delicensing and placing it on the same regulatory status as taxidermy and hotel management.

My neighbor, an ag economist, wants to be buried in what he calls a “Mushroom Suit”: a product which you get buried in which doesn’t pollute and decomposes in an environmentally friendly way.

He even picked out the place and selected the rose bushes he wants placed on top.

Probably not legal. Check local ordinances. If you want to do it you’ve got to find a way to get the body out of the hospital. Review the Uncle Bernie movies.

Sounds like a movie.

26 Evans_KY May 15, 2017 at 9:56 am
27 Art Deco May 15, 2017 at 9:59 am

we find no evidence that delicensing reduced quality in the funeral services industry.

Were you looking for it at all?

Nearly the same corps of people were providing the services before and after the licensing requirements were removed. In a great many non-metropolitan areas, the local undertaker is a monopoly provider with personal connections to people all over town. The opportunities for market entry, particularly market entry which incorporates cutting corners with the corpses of your customers’ relatives, is fairly modest. Even in metropolitan zones like the one in which I grew up (pop 600,000), there’s been a certain amount of consolidation in the business and you have fewer than thirty providers (whose businesses do not typically employ more than a half-dozen people). The southwest suburbs had a population of over 150,000, but only six chapels. I’ve never heard of anyone arranging for a funeral across town from the deceased’s address and social circle (with the exception of one home selected because Jewish funerals were a speciality). The question is will you begin to have certain practices creeping in once the licensing requirements are removed.

28 Mark Thorson May 15, 2017 at 10:52 am

Certain practices? Like what? Necrophilia? Selling bodies to medical schools?

29 Art Deco May 15, 2017 at 11:41 am

Not my line of work. There have been scandals over the years. There was one back in my home town where people received a box of ashes from a funeral home the volume of which was well beyond what they were told to expect. They did not know what to do. Through some agency, they were put in touch with a physical anthropologist who examined the ashes and concluded that two people’s remains were to be found therein and that the quantum of ashes was what you’d expect of a fully grown male. They’d lost a baby. Then there was that gruesome business in Chattanooga a few years back. I’m not sure if the authorities ever figured out why he did what he did with those corpses.

30 Bill May 15, 2017 at 10:54 am

Taxidermy, I’m sorry, mortuary science, is for the living, not the dead.

A funeral home is a place to signal your grief as you look at a dead body,

Where you commiserate with the living in the basement of the church,

And, later,

Go out for a drink.

31 Art Deco May 15, 2017 at 11:37 am

A funeral home is a place to signal your grief as you look at a dead body,

Not everyone is an other-directed twit.

Go out for a drink.

Or a lush.

32 Bill May 15, 2017 at 1:30 pm

I guess you never want to piss off an undertaker who can do strange things to you when you can’t fight back.

33 John Mansfield May 15, 2017 at 1:56 pm

I was chatting once with someone whose father and grandfather had funeral businesses. He had a funny story about being sent when he was a teen-ager to pick up a body from another town. He used a pickup, and on the way back he was pulled over for speeding, and unfortunately he had left his wallet at home. So there the highway patrolman was with a teen-ager, identity unverified, transporting a body in a pickup. It took a while to establish that he wasn’t up to no good.

Disposing of corpses is one of those things were there ought to be some amount of regulation keeping track.

34 ohwilleke May 15, 2017 at 2:19 pm

There would not be a consensus on the ground that delicensing has had no downsides in Colorado. As a lawyer with a probate practice, it is an area I encounter with some regularity and there have been issues with reduced quality in handling of dead bodies and with abusive sales practices and lack of knowledge of how to handle issues like charging funerals to decedent’s credit cards and disputes among family members over who decides. They haven’t been huge issues, but they do exist.

Also, there doesn’t seem to be a conclusion in the paper on whether the wage reductions translated to lower consumer prices. If the result is lower wages and no price reductions, that doesn’t count as a win in my book.

35 Slugger May 15, 2017 at 3:15 pm

Professional licenses and other government interventions in a market invariably lead to gray and black market alternatives to the official market. We certainly observe this with drugs, sex work, gambling, etc. I have never heard of a bootleg funeral. I conclude that funeral licensing has little impact.

36 Jay May 15, 2017 at 7:08 pm

We just have to accept that there is a certain percentage of the population that will not feel comfortable receiving commercial services from someone they do not know unless someone else they do not know (but works for the government) says it is ok for the aforementioned unknown person to render such services. And here is the real kicker. This percentage of the population is going to FORCE the rest of us to live as paranoid as them by prohibiting others from contracting out the services from the “unlicensed”.

Actually the more I think about it there is an even more absurd turn to the story. The percentage of the population that is scared of “unlicensed” professionals will engage in fear-mongering. They will tell you if licensing is optional, then the “unlicensed” individuals will charge less, the “licensed” individuals will charge more and this will lead to economic segregation where only the rich can afford “licensed” (a.k.a. people who can safely perform the service) and the poor will receive life-threatening service from the “unlicensed”.

37 Randall Parker May 17, 2017 at 1:36 am

Only a monarchy or dictatorship could enforce a ban on occupational licensing.

Comments on this entry are closed.

Previous post:

Next post: