Occupational licensing is a barrier to interstate migration

…we find that the between-state migration rate for individuals in occupations with state-specific licensing exam requirements is 36 percent lower relative to members of other occupations. Members of licensed occupations with national licensing exams show no evidence of limited interstate migration.

That is from Janna E. Johnson and Morris E. Kleiner in the NBER working paper series.  Here are ungated copies.


Shit, even my barber knew that...

It is working as designed.

Maybe state-specific licensed occupations are more likely to be small businesses that have other inherent costs. Customers of a barbershop are unlikely to travel to another state for a cut if their habitual location moves.

Reputations are not very portable; it may not matter if the license is. Reputations would matter for trades such as electrical, plumbing, and the like.

The trade off between more local control and greater mobility exists. I'm not seeing evidence that centralization or elimination of licensing would appreciably increase the collective well-being.

I'll wholeheartedly agree that there is abuse in licensing, but I'm not sure this fixes anything. How would making more people involved solve this problem?

One could ask why not have an international licensing since this would open even more doors. I think there is a point where collective agreement takes more effort than it is worth. The time to get agreement is larger than the time to necessary changes and effectively nothing is ever agreed.

Personally, I like the state approach, since I get to observe. It isn't quite the same as an controlled experiment, but it does result in different methods being tested. It is unfortunate that the traits being selected for survival are not correlated with the public good, but I find this unlikely to change if at the national level. I'd expect that the result of a national system more money/lobbing involved since it becomes winner take all.

Teachers in the goverment schools are trapped due to license and vesting rules.

Union rules are separate.

Obtaining a license for teaching is fairly easy especially for those with Praxis and/or NBPTS. As long as the teacher didn't avoid requirements by being grandfathered in at their current job, the transition won't be that challenging.

The states that accept Parxis II outnumber those with their own tests.

Teachers aren't trapped. Their retirement may not be portable, but that has nothing to do with license. And there are interstate agreements/reciprocity.

Yeah, that's complete nonsense. Stephen Sawchuk wrote a whole series on how difficult it is to move to a new state and quickly get a teaching credential.

Transferring from one district to another is typically constrained by how many years seniority the teacher is granted. Many districts will only give a teacher 5 or 8 years experience when determining salary. Teachers moving from state to state are likewise bound by this restriction. So if you've got 15 years experience and change states, there's a serious risk you'll have to wait at least a year to get a teaching job, and when you do you'll get a paycut of thousands per year.

There are states that mandate teachers get all their experience years (Ohio) but most do not.

These aren't union rules, either. They are state and employer mandates that are deliberately designed to make it tough for teachers to switch out of a district or state.

And because there's a teacher shortage, these restrictions are being lifted in states with severe personnel needs. Edsource has been writing about California's shortage. Many Bay Area districts are lifting the years cap, taking 15 and 20 year teachers from other districts. This has led to a salary war, driving salaries up, because the desperate districts need teachers and salary is the only thing they have to entice.

The fact that they could lift the restriction easily, with no contract negotiation, reinforces the fact that the restrictions, like the retirement portability issue, are put on the occupation by the state.

I'm not familiar with the licensing requirements in other occupation; I suppose it's possible they are put in place by local operators fearing competition. But teacher pay and licensing restrictions are put in place by the employers.

Nothing you wrote has anything to do with obtaining teaching licenses when moving between states; you wrote about salary and how seniority is determined, which is largely controlled by the union, not the employer.

That those with seniority in the local union are in a position to protect their self-interest isn't too hard to figure out.

"I’m not seeing evidence that centralization or elimination of licensing would appreciably increase the collective well-being."

Just imagine your driver's license is only valid in the state you reside.

For some purposes it is only valid in the state issued. And if I move, legally I have to change my license. Additionally driving license laws between states are different.

Specifically, we are talking about the subset of occupations that are licensed at that state level. If these particular jobs were nationally controlled instead, would that increase mobility and lead to greater good? I don't see evidence that the answer is affirmative. My conjecture is that the inability to transfer the social capital of a positive reputation with the local customers restricts mobility more than state based licensing schemes.

When or how does the pushback begin? This is a hopeless issue.

Agreed. One of the funny things about occupational licenses is that you don't need one to sing opera or play baseball; you just have to be good at what you do ...

"One of the funny things about occupational licenses is that you don’t need one to sing opera or play baseball; you just have to be good at what you do"

Why is that funny? There is no danger to the public if an opera singer performs badly or somebody plays baseball poorly. They will get a bad reputation, and the audiences will stop paying to see them. Poof, they're gone. It's really a situation where markets can be relied upon to effectively sort things out, and the worst that will happen while they do is that a few people will sit through some not-so-hot performances. (If that much: opera singers and baseball players are not free-lancers. They're vetted and hired by organizations with strong incentives to maintain quality and the ability to do so.)

Occupational licensing is of value when markets cannot be relied on to remove substandard providers. The paradigmatic case is medicine, where the consumer is ill-equipped to judge the quality of what is being purchased, and is in a weak position to impose discipline in any case. All the more so as life and limb may be on the line.

The travesty is when licensing is imposed on barbers, for example, where there are no serious consequences and the customer is perfectly able to identify and avoid substandard providers.

In medicine, it is difficult to move, quite apart from licensure issues. You can't take your patients with you, and they are the most important "asset" of your practice. To move out of your current locale is to commit to starting over from scratch. Getting a new license is an additional burden, and the time-delay in application approvals can exacerbate that burden, but it's really minor compared to the logistics of starting over. Over time, as more physicians become employees working in large practices or institutions, mobility will increase and state-based licensure will become a more important barrier.

Where state-specific medical licensing becomes a burden is as an impediment to telemedicine. Radiologists can now receive digital images over the internet and read them just as if the pictures were generated in their own facilities. And the situations where state-specific knowledge would need to be brought to bear on the interpretation of an image are rare. But to do this, you need a medical license in the state where the patient is. Some radiologists, to sustain a telemedicine practice, have to get licensed in many states. With license fees typically being several hundreds of dollars per year, that starts to add up. The harm from this is mainly felt in states with few radiologists; those states are restricted in their ability to draw on the resources available in abundance (even in great surplus) elsewhere. Perhaps unsurprisingly, those states tend to have relatively lenient medical licensing requirements and are among the most accommodating of reciprocity.

Not quite clear to me while states can't get together to have reciprocal medical licensing.

Legal licensing could be a different issue due to differing state laws, but people's bodies are the same everywhere.

I could see an argument for licensing, or rather certification, as a way of improving information flow in a market where there's no easy way to find out reputation or establish performance metrics.
However two issues:
1. It shouldn't be illegal to practice without a license - you just need to make sure that information is available to customers.
2. Now that we have the internet, ratings, reviews and so on, not to mention all sorts of electronic data which can be mined to establish performance metrics, it shouldn't be necessary. Imagine, say, that you could go online and see for a particular obstetrician, what the C-section rate for that practice is. Or what the liklihood of delivery complications is, along with age and democraphic makeup of his patients. Or you could have some app which integrates a bunch of those data sources and comes up with a cost-effectiveness score. All sorts of possibilities there. There's all sorts of ways to make information freely accessible to patients without the need for a formal licensing program today.

We can't even get them to publish the accurate rates.

I think that doctors chasing statistics doesn't necessarily result in better care.

Clyde- It is more of an issue with telemedicine, but it is also a big problem for other physicians. ( I have a bunch of critical care docs working for us who do telemedicine and it is a total PITA.) I run a practice of a bit over 100 providers. We work across the state border. Getting enough people licensed to work at the one hospital across the border has been hell. Learning the new rules, the new licensing requirements, etc has been incredibly time consuming. There is no, as in none/nada, safety advantage with this state licensing. I also worked in Florida when I was younger. Hard to get a license there, yet it also had the sleaziest medical practices I have seen anywhere.


@npw, and the licensing regime is supposed to be better than "chasing statistics" ? How exactly?

"1.........you just need to make sure that information is available to customers."
If customers, who are generally ignorant of science, medicine, and stats, actually had the accurate information they might be able to make intelligent decisions. They won't, but at least they'd be able to make their own. My objection is that we can't get them to publish their rates, something that would help the situation as it is now. In general, I'm a fan of improving the existing state with straight forward fixes prior to making further change. If we can't get rates honestly, what makes you think we can get the rest?

"2. Now that we have the internet, ratings, reviews and so on..........."
I have less confidence than you that this system would be any less prone to corruption than the current one. I'd strongly support public availability of the data so we can make better informed choices, but I'd want to maintain medical license practice. I don't see a reason to maintain a state board, but I'm not seeing value to the general public by eliminating it in its entirety.

I don't see the jump from our current system to your proposal for elimination to result in better outcomes. Today one can add the disclaimer that they are not a doctor and proscribe something from GNC. I don't see your proposal a functional difference. If I had cancer, I could choose the Jobs route. I wouldn't, but I don't see where my freedom is meaningfully restricted. I also expect that expansion of this freedom will adversely who weren't burdened with an overabundance of schooling.

I suspect the variance of faith in meta-analysis courtesy of apps is a contributor. I don't think any chasing statistics is better since I believe that these will be manipulated and misunderstood. I think that the same incompetent, corrupt people will run the new system.

The internet doesn't give you the information you need. It simply doesn't.

Industry certification is a way to ensure a level of quality. For example, to get a stamp on a pressure vessel requires a document process of quality control and worker qualifications. Meaning that if I buy a pressure vessel rated at a certain number, it won't explode on me, doing damage and maybe killing someone. That is worth money, and the industry is more than willing to pay for it.

These information systems are not on the internet. They are maintained by industry organizations.

I would guess that 1/3 to 1/2 of the regulatory licensing structures have nothing to do with safety but everything to do with scope creep and market protection.

I'm not against industry certification, just against requiring it in order to practice a particular trade. Private certifications are a natural and normal part of any market. But there have been cases of people being prosecuted for practicing a profession without a license. There was a case in of some Paleo diet blogger being prosecuted for providing dietary advice without being a licensed dietician. It happens. I'm concerned here about the liberty of the person who wishes to practice a profession, not so much with the liberty of the consumer. Some occupational licensing schemes forbid people with criminal records from obtaining a license. Others require investments of time and money that are prohibitive for many people. One's choice of occupation is a huge aspect of one's life; most people spend the vast majority of their waking hours working at a job. What you choose to do for a living is a major expression of the self, and being denied the right to practice a desired profession is huge restriction on your liberty. Is protecting consumers from making stupid decisions really a higher social goal than allowing people the freedom to pursue happiness via their choice of occupation?

"Throughout the State of Florida, automobile technicians are not required to get a license to service cars or trucks!" http://asecertificationtraining.com/mechanics-license-requirements-state-florida/

And bad work by an auto mechanic could kill.

"Occupational licensing is of value when markets cannot be relied on to remove substandard providers."

Libertarian economists like Donald Boudreaux will point out that the market can always be relied upon to remove substandard providers.

Libertarian economists like Donald Boudreaux will gloss over the amount of damage substandard providers will do before that happens.

Why does removing substandard providers from the marketplace trump the right to pursue happiness?
I know it's somewhat annoying to have to pore through online reviews, but it's far more annoying to be legally forbidden from working in the occupation you wish to pursue.

Disagree about medicine, mostly due to the the change in relative importance of some of the factors you cite. Your point is quite valid for private practice docs (or really, for any business relying on repeat business from customers) - but how many patient-visits these days are in private practices vs. large organizations? If I want to move to another state, there is probably a large managed care organization I can get hired by who already have a waiting list, and I don't have to worry about finding my own patients. The other interesting thing about this paper relative to physicians is that they assume licensing in a state = exam in that state. I'm licensed in California as a result of passing the national medical board exam, but haven't heard of additional state-level exams if I want to get licensed elsewhere. So certainly it's a pain if I want to pay in money and time to get a license elsewhere, but certainly nothing like a new exam. (Still a barrier, just not an additional-exam-level barrier.) That said, exam or not, you're quite correct that where this is a barrier is in telemedicine, which is growing in psychiatry, and which I would consider doing more strongly if I didn't have to get a license in every state a patient might call me from.

To clyde: so we need government to protect us from bad haircuts, substandard interior designs, unwholesome tacos, dangerous Ride Shares, etc.??? Right, that's what I thought ...

Contact your state politicians and ask them to change the laws so that they honor other states licenses.

I thought that Tabarrok had exclusive rights to post on occupational licensing.

This is really more of an interstate migration post, which moves it to Tyler's side.

Then, wouldn't licensing laws require that *both* Alex and Tyler sign off on the post, Alex for his license to post on occupational licensing, Tyler for his license to post on interstate migration?

As long as we keep out all Californians and in addition lawyers from Texas, Oklahoma, Florida, and Arizona, it's golden.

Being subject to such regulatory structures, the study is correct.

In Canada we have a trade certification system that includes apprenticeship training and an interprovincial certification. Each province administers the programs and has their own twist on things, as well as jurisdiction over some things that aren't in the interprovincial agreement. Essentially if you do the apprenticeship hours and schooling and pass the interprovincial exam you can work in any province. Except Quebec. Each province has their contractor licensing system; you can work as an employee with the certification, but to contract a job requires provincial license and permits, etc.

The certification has nothing to do with qualifications, other than some experience in some aspects of the trade, and the ability at a certain point in time to pass a multiple choice test. In my trade the certification gets you in the door, from then you have to show that you can do the work. In fact, I am certified to work on equipment that I am not qualified to work on. The trade is very broad and very few people have experience in all aspects. The certification if valuable when accompanied by experience; it also works the other way around because if you have the experience you would likely have got it through an apprenticeship arrangement. Serious companies work that way.

The safety aspects come from the provincial application of the codes and procedures. I have been asked to produce certification very few times in the decades I have been working; once by the regulator who saw me working on something and didn't know who I was. A second time by an industrial customer whose ISO**** certification required having all that stuff on record. Customers generally don't care; reputation is far more valuable.

Electricians for example are required to have the certification. But the safety aspects come from the provincial regulations; a circuit cannot be energized without appropriate permits, inspections and procedures. Someone with certification may or may not be qualified, and the inspectors get to know the specialties and abilities of the electricians, and inspect on that basis. An electrician from BC could work in Alberta, but an electrical contractor has to set themselves up as an electrical contractor in the province they want to work in.

Safety ceases to be an issue with scope creep. There is no electrical safety requirements for low voltage wiring or computer wiring, but they are both regulated.

A tradesman with certification in Quebec has an interprovincial certification, and can work in any province. But an Ontario tradesman with the same interprovincial certification cannot work in Quebec. The regulations are designed to prevent workers from out of province. The construction regulatory structure in Quebec was extreme; so extreme that at one point over half the construction activity was done without certification, permits or anything. They were forced to change the system so they could at least collect taxes.

A trade magazine said that 80% of the construction projects in the greater Toronto area were done without required fees and permits. Something about the prices being $30,000 lower.

The electrical code has been changed recently to the point of being unworkable; electricians couldn't collect for work done to code requirements because the devices didn't work. An electrician told me that much of the renovation electrical work was now done without permit; the costs were lower and the installation more reliable. That is an illustration of a failure of a regulatory structure. The best regulatory structures have most leverage at the manufacturing level, where safety is built in from the start no matter how and by whom it is installed by. The pressure vessel manufacturing codes, written and maintained by the industry itself are an example of this.

Without interstate licensing restrictions

On lawyers

You might find me

On your doorstep.

Explain to me again: Why are lawyers licensed?

Also, explain to me: If night-schools can train mid-career professional to pass the bar...why do most students have to go to three years of law school after four years of undergraduate education?

Certainly, an AB in law is feasible (that is, just four years of college, even if the requirement of passing the bar is left unchanged....

This seems like a super important point. Dunno if I favor enlarging anti - 'tort reform' constituency, tho

An unsurprising result; and, of course, a problematic phenomenon.

But I suspect it's less problematic, and it's certainly less surprising, than the licensing requirements that the private sector has imposed on itself in recent years, unprompted by government, in the form of certifications. To take just one industry--nursing--there are now 183 different certifications (or so nurse.org estimates). All impede free entry in the labor market (some are de facto requirements). Virtually none serves a useful informational purpose. ("Certified Transcultural Nurse"? Give me a break.) And they provide another vivid example of how our economy has, since the 1980s, stupidly diverted resources away from those engaged in productive enterprise and to rent extractors.

At the very least someone should look at constitutional challenges through the Full Faith and Credit clause.

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