When and Why Should We License Jobs, and When Shouldn’t We?

The discussion of state regulation of occupations, or occupational licensing, should start with a couple of questions: 1) When and why should we regulate the labor markets through state licensing; 2) and when and why shouldn’t we regulate the labor markets through licensing?

Medical doctors (physicians) represent one of the earliest licensed occupations. Intuitively, most of us are comfortable with the idea that people ought not “practice medicine without a license,” because while licensing doesn’t guarantee that there will never be any problems, it does ascertain that at some point in time, the licensee completed minimum standards for entrance into the profession. In the case of medical professionals, most of us would agree that the health and safety of individuals may be better served by licensing those who have the most intimate contact with patients.

But where does it stop? In 1960, only about five percent of all occupations in Nebraska were regulated through licensing by government. Today, almost twenty percent of occupations require licensing of some sort by the state. This year, the Nebraska Legislature has bills which propose to add Surgical Technicians and Art Therapists to the licensed medical professions; Locator licenses (for those who come out and mark your yard when you “call before you dig”); and a number of other add-ons (or added licensing requirements) for licenses that have already been created.

Ultimately, both economists and policy analysts who have studied the impact of occupational licensing suggest that policymakers should ask some important questions before granting licensed status to occupations, because licenses tend to restrict the pool of those in the occupation, especially in middle- and low-income jobs, where the costs of becoming qualified for a license may be prohibitive to those who are considering the job. When the labor pool in the occupation is low, consumers can be left without the services of that occupation.

The Nebraska Department of Health and Human Services lays out an appropriate philosophy when considering regulation of health-related occupations by the state: “Regulate only when necessary to protect the public or advance the public interest via improved access to care; increase regulation only when it is necessary to protect the public, and; proposals must be both necessary and sufficient to address credentialing or credentialing-related issues or problems.”

That understanding of job regulation through licensing—“only when necessary to protect the public”—is one that was expanded beyond the health occupations arena with the passage of the Occupational Board Reform Act (LB299) in the 105th Legislature. That expansion of review was especially important in light of the realization that the state was requiring licenses for things like horse massage and hair braiding. If the state licenses, it should be with the well-being of the general consumer and the public in mind. In my next article, I’ll talk about one of the dangers of licensing that policymakers need to avoid.

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