California Should Address Licensing Reform – And Stop Adding Violins To The String Section
In 1850 California passed its first professional licensing law requiring foreigners to buy a monthly license to mine gold. During the next hundred years the state so dramatically expanded its licensing regime that by 1950 one in every twenty workers required a license. Today one in five working Californians requires a license from the state government; a recent study found that California is the most broadly licensed state in the nation.
Hurt most by such regimes are low-income people. A 2017 study by the Institute for Justice reported that California requires licenses for 76 of 102 lower‑income professions. To receive a professional license in California requires on average $486 in annual fees, 827 days of education and experience, and two exams. The list of occupations requiring a license in California is so lengthy that a state commission could not compile a complete list.
The principal beneficiaries of licensing laws are those who already hold licenses, which allow them to drive up prices and reduce competition. The principal losers are consumers, who pay higher prices and suffer more inconvenience, and potential workers, who find fewer work opportunities and suffer lower wages. Consumers annually pay an extra $200 billion annually as a result of professional licensing requirements, which also prevent the existence of nearly three million jobs nationwide, concentrated most in states like California that employ the most onerous licensing regimes.
California’s professional licensing regime is also inconsistent, with many professions with safety concerns requiring less onerous licensing than those without safety concerns. For example, manicurists require four hundred hours of training and education compared to a hundred and sixty hours for an emergency medical technician and none for a crane operator. California requires professional licenses for a number of professions, including animal trainer, tree trimmer, psychiatric technician, still machine setter for dairy equipment, travel agent, and dental assistant, that are licensed in fewer than ten states.
Professional licensing is especially costly to former offenders, military spouses, veterans, immigrants, and the poor. Former offenders are frequently denied professional licenses on the basis of their past criminal convictions even when those convictions have nothing to do with the profession in question. Denying professional licenses to them makes it even more difficult for them to turn their lives around. Between 1997 and 2007 recidivism rates grew by more than 9 percent in states with the heaviest licensing burdens and shrank by nearly 3 percent in states with the lowest licensing burdens.
Military spouses move frequently and face different professional licensing requirements between states, which offer little reciprocity in licensing. Although California has passed laws in recent years to help military spouses secure some professional licenses more quickly, a more comprehensive solution is necessary. California should consider solutions for everyone who has moved here, not just military spouses. Veterans face their own challenges when they complete military service. Often they’re required to redo education and training already received while in the military to meet professional licensing requirements.
California has made some efforts to help veterans with this issue during the last few years, but, similar to the efforts for spouses, they’re piecemeal. Immigrants face substantial challenges from professional licensing requirements that do not always credit their foreign education and experience, trapping them in lower-wage employment not reflecting their skills and putting up bureaucratic barriers difficult to navigate for people new to the country.
Studies have consistently found that licensing laws produce no better or safer services for consumers than do less protectionist and less costly alternatives. California’s Little Hoover Commission (no relation to the Hoover Institution) determined in an October 2016 report that the professional licensing process “often is a political activity instead of a thoughtful examination of how best to protect consumers.” Special interests’ representing existing professional license holders focus the discussion on what is best for practitioners, not consumers. They fight to expand the areas where only they can do business. For example, only licensed funeral directors in several states (but fortunately not including California) can sell funeral merchandise such as caskets.
The first step in addressing California’s protectionist and harmful professional licensing regime is to stop adding to it. To his credit, California governor Jerry Brown has stood up against special interest groups’ protectionist attempts to add new licensing requirements. For example, in October 2015 he vetoed legislation (Assembly Bill 1279, the so-called Music Therapy Act) that would have regulated music therapists, writing in his veto message that the bill “appears to be unnecessary as . . . a private sector group already has defined standards for board certification. Why has the state now add another violin to the orchestra?”
Now it’s time for Governor Brown to ask the State Legislature to modernize California’s entire licensing system. To begin he should identify all licensed professions and determine whether state licensing is necessary, particularly for professions that are not licensed in other states and not suffering negative consequences from the lack of licensing.
A number of alternatives to licensing offer benefits to consumers and job seekers with fewer costs, including quality service self‑disclosure, third‑party professional certification, voluntary bonding or insurance, and market competition.
Regulatory options not requiring professional licensing include private causes of action, deceptive trade practice acts, inspections, mandatory bonding or insurance, registration, or state certification. For professions that remain licensed the requirements should be reduced and modernized whenever possible. All professional licensing requirements should receive sunset provisions that would require the legislature to regularly re-evaluate them to ensure they are still necessary. California should also consider creating a legal right to challenge unnecessary licensing restrictions. That would give workers an avenue to push back on restrictions when special interests control the legislature.
Professional licensing reform is an opportunity for politicians to show they are concerned about jobs and wages. The Federal Trade Commission is even willing to provide funding and support with which states would be able to address professional licensing reform.
Governor Brown should seize this issue and cement a legacy of securing increased economic opportunity for low‑income and marginalized Californians.
