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Senate Hearings Hammer LicensingMarch 16, 2016 | |In his 1966 book “The Psychology of Science” Abraham Maslow quoted “If your only tool is a hammer then every problem looks like a nail.” Also known as “Maslow’s Hammer” or the law of the instrument, it refers to an excessive dependence upon a specific tool to perform a wide variety of functions. In the past year I have been reminded of this as a wave of rancor about the abuses of occupational licensure as a favored regulatory tool have flooded national media outlets including The New York Times, Forbes, National Public Radio and even the Daily Show. Punctuating this stream of consciousness has been the recent Senate Hearings – Occupational Licensing and the State Action Doctrine held by Senators Mike Lee (R-UT) and Amy Klobouchar (D-MN) on February 2nd. Witnesses providing testimony at the Hearing included:
In addition to these regulatory and legal experts the Senate panel listened to the testimony of Mr. Bill Main owner of Segway in the City who described the rather absurd requirements enacted by the District of Columbia for licensing tour guides. Requirements included a multiple-choice test on the District’s general history and geography which in Mr. Main’s words “had little or nothing to do with the topics that we wanted to discuss on our tours.” The District’s regulatory language made it illegal to describe any place or point of interest in the District on a tour without a license. Not surprisingly Mr. Main was later successful in challenging the licensing requirements under a First Amendment lawsuit with help from the Institute for Justice. Details of the case can be found here. Mr. Main’s testimony gave salience to the arguments presented that far too often, licensing (the most restrictive form of occupational regulation) is applied in a manner that results in a purely anticompetitive outcome unrelated to any reasonable rationale for enhancing public welfare. Similar stories have brought unwelcome attention to ill-conceived licensing regulation of occupations such as hair braiders, florists and casket makers to epitomize the need to reform occupational licensing.
STUDIES HAVE SHOWN…….and SHOWN…and SHOWN Over the course of the hearing, witness testimony supported the view that licensure should be used with great restraint. Familiar conclusions from research studies were presented that have been acknowledged by labor economists for decades. Most of the empirical research on occupational licensure reveals inconsistent effects on improving safety, quality or health while consistently demonstrating increased prices to consumers, hindrances to labor mobility, economic obstacles in low wage occupations, and immigrant labor. Given the level of growth in occupational licensing however, the findings in these studies would seem to have had little tempering effect on its use. I included below links to some of the most cited reports. If one reads the reports there will be little perceived difference in the economic themes between those written in 2015 and 1990.
I would recommend this document to anyone desiring a good primer on occupational regulation.
To further illustrate a point, below is a report created in 1938 by attorney Frank Hanft Professor of Law, University of North Carolina. Mr. Hanft presents a critique on what he refers to as haphazard licensing requirements in the North Carolina. These practices were as common at the time as they are today and by no means limited to the North Carolina. Among occupations highlighted in his report was the licensing of photographers, dry cleaners, and paper hangers. What is striking in reading this report is that little has changed since 1938
 Attribution: Joe Gratz SHOULD WE GET RID OF THE HAMMER? It’s wrong to think that we should throw the licensing hammer out of our tool box simply because we aren’t using it correctly. Yet, some of the messaging today seems to imply that. The fact remains that there are valid justifications for restrictive regulatory intervention of an occupation in order to deliver a critical level of performance, or to protect the public against an incompetent and dangerous practitioner. The regulator’s toolbox has an arsenal of less restrictive responses ranging from civil law, deceptive trade practice acts, inspections, bonding, registration, and certification. Other more modern methods and approaches include the use of applied behavioral economics, choice architecture, data analytics, reputation intermediaries, social cooperation and co-regulation and negative licensing. Trade groups such as the Council on Licensure Enforcement and Regulation (CLEAR) will play an increasingly important role in the dissemination and exchange of new ideas and best practices regulation. Training board members, lawmakers, and career service regulatory agency staff is vital to crafting better regulation. I was pleased to see an announcement for federal grant funding from the White House recently in this area. As the recent White House Report on occupational regulation stated “We believe that licensing should be seen as one regulatory tool among many where the appropriate tool depends on the nature of the problem.”
WHY HAS EVERY REGULATION PROBLEM BEEN A NAIL? Licensing has continued its expansion perhaps in some part due to its relative ease to enact legislatively without negative reaction from the public. Rarely are legislative proposals for licensing the result of demands by consumers concerned with protection from incompetents and charlatans. Requests for occupational licensure simply don’t register prominently in the public conscience. Instead, aspirant occupational groups lobby legislators to become licensed in order to achieve their own objectives of elevating professional status, authority and commercial advantage. In fact, scholars in work sociology such as Magali Larson and Theodore Caplow have generally viewed licensing as a necessary element in what is referred to as an occupation’s “professional project” or the professionalization of an occupation. Legislators operating from a public interest theory perspective are politically attracted to support these requests for licensure from constituent occupational groups as symbolic public protection action. Such requests can often move through the legislative process without much resistance unless other occupational groups see it as a competitive threat. Given the state of public apathy on this issue, the reality is that there is little political risk for a lawmaker to pursue licensing initiatives and little incentive to burden themselves with any extended effort to consider less restrictive alternatives to licensing. The resulting effect of this political reality on the behavior of occupational interests is to encourage their legislative requests for occupational regulation to be premised upon the use of licensure as the default restriction. This pulls the hammer out of the toolbox at the outset, rather than beginning with an analysis of the need to regulate or to explore other tools that would achieve the regulatory goal in a less restrictive manner. Even when Sunrise analysis of a proposed regulation is conducted, there can be weaknesses in the quality of the analysis and in some cases a bias toward providing a supporting rationale for the use of licensing as desired by its sponsors and advocates.
REGULATING THE REGULATORS Perhaps the most potentially significant development in regulatory reform discussed at the hearings is the recent Supreme Court Decision in North Carolina State Board of Dental Examiners v. Federal Trade Commission that I discussed in a previous blog post. Two perspectives on the topic from the Honorable Maureen K. Ohlhausen, commissioner, Federal Trade Commission Mr. Misha Tseytlin, solicitor general, and State of Wisconsin are worth reviewing. In my next blog post, I will attempt to summarize the key elements of the decision and its implications regarding antitrust immunity for activities of state regulatory board members.
CAUTIOUS OPTIMISM Time will tell whether the recent Federal attention given to improving occupational regulation will evolve into something more than just a just a warm breeze in a long history of regulatory reform efforts. Improving the practice of regulation is an important opportunity in a world of increasing mobility, constant technological change and transient boundaries of professional practice. Increasing the regulatory literacy of lawmakers, regulators and consumers is welcome. Categorized in: Industry News, Regulatory Power |
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