licensing report final nonembargo

Transcript

1 OCCUPATIONAL LICENSI NG: A FRAMEWORK FOR POLI CYMAKERS July 2015

2 This report was prepared by , Office of Economic Policy the Department of the Treasury the Council of Economic Advisers, and the Department of Labor. 1

3 Contents ... ... ... ... 3 Executive Summary ... ... ... ... 6 Introduction: Why Does Occupational Licensing Matter? The Costs and Benefits of Licensing ... I. ... ... 11 ... Benefits of Licensing ... ... ... ... 11 Costs of Licensing ... ... ... ... ... 12 The Eviden ce on Licensing’s Costs and Benefits ... ... ... 13 II. ... ... 17 The Prevalence of Licensing: National Increase, State Differences ... ... ... The Increase in Licensing Over Time 17 ... Why Has Licensing Increased? ... ... ... ... 19 Variation in Licensing across States ... ... ... ... 23 III. Licensing and the Evolving Marketplace ... ... ... 28 The Rise of Telework ... ... ... ... 28 The More Flexible Workplace and Scope of Practice ... ... ... 30 32 The Arrival of Distance Learning ... ... ... ... The Emergence of Consumer Information and Review Markets ... 34 ... ... ... ... 35 Licensing for Workers with a Criminal Record ... ... ... ... 38 Licensing for Foreign Immigrants ... 39 ... ... Declining Mobility in the U.S. Labor Force 41 IV. Licensing Reforms ... ... ... ... . Framework for Licensing Reform ... ... ... ... 41 Discussion of Selected Best Practices and Examples ... ... ... 43 ... ... Conclusion ... ... 56 ... . V. ... ... ... ... 58 Research Appendix ... ... ... .. 58 Impacts on Quality, Health, and Safety ... ... 60 ... ... ... Impact on Prices Impact on Employment and Wages ... ... ... ... 61 ... ... ... ... 64 Impact on Geographic Mobility References ... ... ... ... ... 67 2

4 Executive Summary decades , the share of U.S. workers holding an occupational license has Over t he past several When designed and implemented , licensing can offer important health grown sharply. carefully benefits to workers. and safety protections to consumers, as well as the current However, l icensing regime in the United States also creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that goods and services, raise the price of licensing requirements restrict empl oyment opportunities, and make it more difficult for workers to take their skills across State lines. T oo often, policymakers do not carefully weigh these costs and benefits making decisions about when through licensing. In some cases, alternative forms of whether or how to regulate a profession occupational regulation, such as State certification, may offer a better balance between consumer protections and flexibility for workers. This report outlines the growth of licensing over the past se its costs and benefits, veral decades, and its impacts on workers and work arrangements. The report recommends several best practices to ensure that licensing protects consumers without placing unnecessary restrictions on employment, innovation, or access to important goods and services. Occupational licensing has grown rapidly over the past few decades . - More than one quarter of U.S. workers now require a license to do their jobs, with most  of these workers licensed by the State . The share of workers li censed at the State level s - fold since the 1950s. has risen five  About two - thirds of this change stems from an increase in the number of professions that require a license, with the remaining growth coming from changing composition of the workforce. - designed and implemented carefully , licensing can benefit consumers through higher When quality services and improved health and safety standards. some cases, licensing help  In s to ensure high - quality services , safeguard against serious harms , and offer worke . rs clear guidelines around professional development and training  However , to realize these benefits licensing requirements must closely match the qualifications needed to perform the job , a goal that is not always achieved or may not be maintained when l icensing expands and jobs change . Licensing may also help practitioners to professionalize, encouraging individuals to invest  in occupational skills and creating career paths for licensed workers. For example, accountants in s requiring more experience (three or more years) are 26 to 36 State more likely to have acquired training since starting their current job. percent 3

5 But by making it harder to enter a profession, licensing can also reduce employment rkers, and increase costs for consumers. opportunities and lower wages for excluded wo  Research shows that by imposing additional requirements on people seeking to enter licensed professions, licensing can reduce total employment in the licensed professions. lower Estimates find that un licensed workers e arn 10 to 15 percent  wages than licensed workers with similar levels of education, training, and experience. also , with research showing  L icensing laws lead to higher prices for goods and services effects on prices of between 3 and 16 percent. Moreo ver, in a number of other studies, licensing did not increase the quality of goods and services, suggesting that consumers are sometimes paying higher prices without getting improved goods or services. Licensing requirements vary substantially by State , c reating barriers to workers moving across State lines and inefficiencies for businesses and the economy as a whole . , Estimates suggest that o ver 1,100 occupations are regulated in a t least one State  but fewer than 60 are regulated in all 50 States, showing substantial differences in which For example, funeral attendants are licensed in occupations States choose to regulate . nine States and florists are licensed in only one State. , ranging from a low of 12  licensed workers varies widely State - by - State The share of percent in South Carolina to a high of 33 percent in Iowa. Most of these State differences are due to State policies, not differences in occupation mix across States.  States also have very different requirements for obtaining a license. For example, Michigan requires three years of education and training to become a licensed security guard, while most other State s require only 11 days or less. South Dakota, Iowa, and Nebraska require 16 months of education to become a licensed co smetologist, while New York and Massachusetts require less than 8 months. icensed workers  L are sometimes unable to use distance or online education to fulfill continuing educa State s do not automatically accept tion requirements, as some accreditation fro State s. Similarly, State licensing m good schools based in other requirements can prevent workers from teleworking or taking advantage of new technologies , thereby inhibiting innovation. s . The costs of licensing fall disproportionately on certain population  About 35 percent of military spouses in the labor force work in professions that require State licenses or certification, and they are ten times more likely to have moved across military spouses may These State lines in the last year than their civilian counterparts. 4

6 have difficulty acquiring a new license each time they move meeting different license or State their new requirements in .  Licensing requirements often make it difficult for immigrants to work in fields where they have valuable experie nce and training. This deprives the U.S. market of a large share of their skills, and makes it difficult for these workers to make their full contribution to the workforce. can be denied a license due to In half the State s, applicants any kind of criminal conviction ,  it is relevant to the license sought or how long ago it occurred . regardless of whether It often takes for some State s six months to a year to simply review an applicant’s criminal history and make an initial determination about whether she qualifies for a license. individually, to safeguard the Best practices in licensing can allow States, working together or well - being of consumers while maintaining a modernized regulatory system that meets the needs of workers and busin esses . Licensing best practices include: to those that address legitimate public health and safety  Limiting licensing requirements concerns to ease the burden of licensing on workers.  Applying the results of comprehensive cost - benefit assessments of li censing laws to reduce the number of unnecessary or overly restrictive licenses. -  Within groups of States, harmonizing regulatory requirements as much as possible, and compacts where appropriate entering into inter - State that recognize licenses from other State to increase the mobility of skilled workers . s Allowing practitioners to offer services to the full extent of their current competency , to  ensure that all qualified workers are able to offer services. In order for the economy to successfully continue to innovate and grow, we must ensure that we are able to take full advantage of all of America’s talented labor. By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer e xpenses by over one hundred billion dollars. The stakes involved are high , and to help our economy grow to its full potential we need to create a 21st century regulatory system — one that protects public health and welfare while promoting economic growth, in novation, competition , and job creation. 5

7 Introduction: Why Doe ? s Occupational Licensing Matter While the U.S. economy has grown substantially years , m any American workers over the past 20 1 fully not this growth . shared T o build on the Administration’s progress and their families have in a stronger foundation for shared and sustainable growth , we must ensure that in creating regulatory policies expand economic opportunity and are designed appropriately to both s workers President Obama in 2011 furthered these maintain the high performance of America’ . an Executive Order goals by signing identify and use the “best, most ordering federal agencies to innovative, and least burdensome tools for achieving regulatory ends , ” and outlining a number of steps agen cies must take when regulating , such as using cost - benefit analysis and specifying 2 performance objectives. Oc , a form of regulation that requires individuals who want to perform cupational licensing to obtain the permission of the certain types of work , is also central to these goals . government In many fields, occupational licensing plays an important role in protecting consumers and ensuring quality. Few people, for example, would feel comfortable traveling in a commercial plane flown by an unlicensed medical procedure performed by an unlicensed pilot or having a physician . However, licensing policies can be designed in many different ways, and the ways in which they are designed and implemented affect workers’ access to jobs , the wages they are paid , the ease with which they can move across S tate lines, as well as consumers’ access to These factors in turn dynamism and growth in the essential goods and services . help determine economy overall. This report the key issues surrounding occupational licensing , and examines needs of today’s optimizing identifies licensing policy to meet the several ideas for economy. Consumers are likely most familiar with licensing requirements for professionals like dentists, lawyers, and physicians, but today licensing requirements extend to a very broad set of workers. For example, florists auctioneers, scrap metal recyclers, and barbers are all licensed in some , States . Individuals working in a licensed occupation without a license can be forced to cease even prosecuted wor , fined, or in some cases, king and incarcerated . Licenses are most commonly issued and regulated by state governments, but localities and the Federal government also U.S. license certain forms of work. In total, about 25 percent of today’s workforce is in a n occupation State level , up from less than 5 percent in the early 1950s , and this licensed at the 3 d This means that a large share of share is higher when local and Federal licenses are include . ith the time and means to complete what are often American jobs are only accessible to those w One study found that for a subset of low - and medium - skilled lengthy licensing requirements. 4 of jobs, the average license required around 9 months education and training. 1 The Economic Report of the President . Council of Economic Advisers. 2015. 2 Executive Order 13563. January 18, 2011. Federal Register 76(14). 3 Kleiner, Morris M. and Alan B. Krueger. 2013. “Analyzing the Extent and Influence of Occupational Licensing on the Labor Market.” Journal of Labor Economics 31, no. 2: S173 - S202. 4 Carpenter, Dick, Angela C. Erickson, Lisa Knepper, and John K. Ross. 2012. “License to Work: A National Study of Burdens from Occupational Licensing.” Institute for Justice. https://ww w.ij.org/licensetowork. 6

8 There are few sources of compre United States , but the existing hensive data on licensing in the substantially States . According to data show that licensing is widespread and that it varies across Council of State Governments , over 1,1 00 jobs were licensed, the most recent estimates from the in at least one State . Of this number, fewer than 60 were regulated by all certified, or registered 5 , 6 States the . States vary dramatically in their rates of licensure More recent evidence shows that and training required to receive a license , s uggest ing that States are not treating occupations 7 equivalently with regard to whether they do or do not require a license . When designed and implemented appropriately, licensing can benefit practitioners and through improving quality and protect consumers public health and safety. This can be ing especially important in situations where it is costly or difficult for consumers to obtain information on service quality , or where low - quality practitioners can potentially inflict serious harm on consumers or the public at large . Doctors’ competence, for instance, is difficult for their prospective patients to evaluate, and the consequences of inferior work may be severe . Licensing can also provide recourse for consumers when practitioners fail to safely or adequately deliver services. In addition, licensing can benefit practitioners by encourag ing individuals to invest in lifelong occupational skills, thereby creating career paths for licensed workers. also burdens on Yet while licensing can bring benefits, current system s of licensure can place workers, employers, and consumers , and too often are inconsistent, inefficient, and arbitrary . States The evidence in this report suggests that licensing restricts mobility across , increases the cost of goods and services to consumers, and reduces access to jobs in licensed occupations. The employment barriers created by licensing may raise wages for those who are successful in gaining entry to a licensed occupation , but they also rais e p rices for consumers and limit opportunity for other workers in terms of both wages and employment. By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion 8 s imposed by licensing can prevent workers from succeeding in the best job The barrier dollars. 5 Brinegar, Pamela L. and Kara L. Schmitt. 1992. “State Occupational and Professional Licensure.” The Book of the States 567 – 80. Lexington, KY: Council of State Governments. 6 . A license represents formal permission from a There are a number of terms used throughout this report government body to practice in an occupation. Licensing laws not only determine whether an individual can practice, but they also often enumerate what services she can provide as part of her practice. This is commonly referred to scope of practice . In addition to occupational licensing, there are two other less restrictive forms of traditional as State certification occupational regulation: state certification and registration. - to - title,” means that , or “right individuals seeking to assume a profession’s official title must obtain the permission of the government, but anyone is allowed to perform the duties of the profession, regardless of whether or not they have been certified. Certification can also be done by private certifying bodies, which give their imprimatur to workers who have met their standards. Registration is the least restrictive form of occupational regulation. It generally just involves individuals paying a fee and filing their names, addresses , and qualifications with the government. This ensures that practitioners can be reached in the event of a complaint, thereby supporting civil remedies for consumer harm. Benjamin Shimberg. 1980. Occupational Licensing: A Public Perspective . Educational T esting Service. 7 Kleiner, Morris M. 2015. “Reforming Occupational Licensing Policies.” The Hamilton Project. Brookings Institution. http://www.hamiltonproject.org/papers/reforming_occupational_licensing_policies/. 8 Kleiner (2015). 7

9 for them, which in turn makes our labor market less efficient and ultimately can limit economic growth. populations . For example, military spouses, T certain hese impacts may be especially harmful for who are highly mobile and frequently have to relocate across lines , have a difficult time State Our licensure system can also prevent immigrants obtaining a new license each time they move. experience abroad from applying their skills in the U.S., who have considerable training and work since often they do not meet the relevant licensing requirements. In addition, licensing often laws exclu the formerly incarcerated or those with criminal records , contain blanket sions for ss of whether their records are relevant to the job for which they are applying regardle . This renders a great number of individuals – as many as one in three Americans has some form of criminal record (either for an arrest or a conviction) – ineligible for a large share of jobs, in turn 9 perpetuating unstable economic situations for these individuals. Licensing practices also need to keep pace Current with developments in today’s economy. icensing requirements complicate the use of distance learning, which may r ely on out - l - State of providers, for both students and workers engaging in continuing education required in their fields. Moreover, students seeking to invest in training for a new career may not be aware of the full extent of license requirements or of how these vary across States and therefore limit their ability to relocate in the future. Licensing laws also frequently do not allow providers to offer may impede access to services in areas such services to the full extent of their competency, and as law and health care. The relative magnitude of these costs and benefits depends on the specific circumstances for being considered must be carefully weighed in each each profession , s so licensing proposal 10 inst Important considerations include the risk posed to the public by unlicensed ance. lead to quality improvements, and the practitioners, the extent to which licensing requirements . and mobility I n some impacts of licensing on the cost of goods and services, practitioner supply, cases where public health and safety concerns are less salient, alternative forms of occupational may be appropriate. For example, regulation certification requirements may restrict the State use of a profession’s title to those who have been certified, but allows anyone to perfo rm the certification can provide consumers with additional duties of the profession. In doing so, regarding providers’ quality, without restri cting consumer choice or limiting entry information into the workforce . reviews the evidence on these costs and benefits, and the trends and State This report examines differences . There is ample evidence that States and other jurisdictions should revi ew in licensing current licensing practices with an aim toward rationalizing these regulations and lowering barriers to employment. Toward this end, the final portion of this report provides guidance in the 9 Vallas, Rebecca and Sharon Dietrich. 2014. “One Strike and You’re Out: How We Can Eliminate Barriers to Economic Security and Mobility for People with Criminal Records.” Center for American Progress. https://www.americanprogress.org/issues/poverty/report/2014/12/02/102308/one - strike - and - youre - out/. 10 While this report uses various specific professions as examples to illustrate broader trends in licensing, it is beyond the scope of this report to recommend reforms to State or other regulations for specific occupations. 8

10 atives to alleviate the negative form of suggested best practices; an overview of various initi impacts of licensing, while still ensuring quality and protecting consumers ; and a set of resources for policymakers seeking to take further action . 9

11 S L ICENSING AND C REDENTIALING FOR S ERVICE M EMBERS , V ETERANS , AND TREAMLINING ILITARY F M AMILIES primarily falls to States, and to better serve our returning service members and their licensing Occupational the nearly States have recently taken steps to ease all heavy burdens that our licensing system families, on servi ce members, veterans, and military families. places Many jobs, like paramedics, truck drivers, welders, require either a State occupational license or a national certification to be hired, and nurses, and current system of occupational regulation makes it ver y difficult for service members and veterans to our civilian licenses and certifications that directly translate to obtain military training. Oftentimes, service their members and veterans are required to repeat education or training in order to receive these occupational training though much or all of their military and experience overlaps with licensure or credentials, even requirements. According to a 2012 survey, 60 percent of veteran respondents said they had certification a their militar y skills trouble into civilian job experience. translating Furthermore, our patchwork system of State licensure creates additional challenges for military families, and who more mobile than the general population are frequently have to acquire new licenses when much they mo ve across State lines. According to a joint analysis by the Department of Defense and the Department the Treasury, about 35 percent of military spouses in the labor force work in professions of times State licenses or certification, and they are ten more likely to have moved across State that require b in the last year than their civilian counterparts. lines In response to these challenges, under the President’s direction, the Department of Defense established Credentialing and Licensing Task the in 2012, charged with identifying and creating Military Force opportunities for service members to earn occupational credentials and licenses through civilian partnerships with national certifying bodies. With the help of the Task Force’s efforts, hundreds of servi ce members earned or are in the process of earning machinist, logistics, welding, and engineering have high - demand certifications jobs, and efforts are underway to develop for similar pathways manufacturing for the attainment of information technology cert ifications. In addition, the Obama Administration has partnered with States to streamline State occupational licensing for members, veterans, and their spouses. At service the National Governors Association meeting in February 2012, First Lady Michelle O bama and Dr. Jill Biden called upon all 50 governors to help expedite professional licenses or certification for military spouses when they move to a new State. Through State Department collaboration with State legislators and regulators, the towards of Defense has work ed military adoption best practices that can expedite the transfer of spouse licenses that are in good of c are substantially equivalent. standing As of May 2015, all 50 States had streamlined the process for and d since First Lady Michelle Obama and Dr. Jill Biden’s call to governors. licensing spousal a Prudential Iraq and Afghanistan Veterans of America and Financial, Inc. 2012. Veterans’ Employment Perceptions and Experiences of Transitioning from Military to Civilian Life. Challenges: http://www.prudential.com/documents/public/VeteransEmploymentChallenges.pdf . b Military Department of the Treasury and U.S. Department of Defense. 2012. Supporting U.S. Families: our Best Practices for Streamlining Occupational Licensing State Lines. Across http://www.defense.gov/home/pdf/Occupational_Licensing_and_Military_Spouses_Report_vFINAL.PDF . c National Economic Council and Council of Economic Advisers. 2013. The Fast Track to Civilian Employment: Members, Streamlining tialing and Licensing for Service Creden Veterans, and their Spouses. d Department of Defense and States, Partnering to Support Military Families. “Removing Licensure Spouses.” Impediments for Transitioning Military http://www.usa4militaryfamilies.dod.mil/MOS/f?p=USA4:ISSUE:0::::P2_ISSUE:2 10

12 I. The Costs and Benefits of Licensing The key question for regulators, legislators, and the public is: do the benefits of current licensing State and every requirements outweigh the costs? The answer will not be the same in every first provide an overview of occupation, but to begin to understand the tradeoffs, we the major costs and benefits of licensing. We then provide a summary of the empirical research into whether these costs and benefits materialize. Benefits of Licensing Licensing is usually justified on the grounds quality and protects the public that it improves against incompetent or dangerous quality . This argument is strongest when low - practitioners practitioners can potentially , or when it is difficult for consumers to evaluate inflict serious harm provider quality This can be the case when, for example, it is diffic ult to learn a beforehand. requires specialized provider’s reputation or to try out different providers, or when evaluation . knowledge or expertise Practitioners may also seek to become licensed as part of a move toward greater Licensing represen ts the professionalization. State’s sanction of practitioners’ work , and so licensing an occupation can confer legitimacy and increase social status for practitioners. It can also build community and cohesiveness within an occupation, and help to standardize work functions . When licensing functions in these ways, it can provide benefits to practitioners through 11 and influence. increased recognition of their work Even when health and safety are not an issue, increasing consumer information through and low can beneficial . If consumers are unable to distinguish between high - regulation - be quality providers before purchasing a good or receiving a service, low - quality providers can remain in the market without being recognized as such , reducing the average quality in th e 12 market and reducing the incentives for other providers to invest in quality improvements. Furthermore, if consumers are sufficiently concerned about getting a low - quality provider, then informational uncertainty may depress demand for goods and services . Consumers who would otherwise purchase a product if they knew it were high - quality might forgo their purchase if the quality were uncertain. possible Licensing is one way to address these problem s through forcing providers to meet certain quality bench marks , and creating greater incentives to invest in . increased training and skill development 11 Barne s, Linda L. 2003. “The Acupuncture Wars: The Professionalizing of American Acupuncture — A View from Massachusetts.” Medical Anthropology 22, no. 3: 261 - 301. 12 Akerlof, George A. 1970. “The Market for Lemons: Quality Uncertainty and the Market Mechanism.” Qu arterly Journal of Economics 84, no. 3: 488 - 500 ; Kleiner, Morris M. 2000. “Occupational Licensing.” Journal of Economic Perspectives 14, no. 4: 189 - 202. American Economic Association; Shapiro, Carl. 1986. “Investment, Moral Hazard, 862. - and Occupational Licensi ng.” Review of Economic Studies 53, no. 5: 843 11

13 Costs of Licensing quality, health and safety benefits of licensing do not always materialize . When However, the come at a cost that is easy to they do, they overlook because it is borne by many different people - to and is difficult to observe in day day experience. - First, b y imposing requirements on people seeking to enter licensed professions — such as additional training and education, fees, exams, and paperw — licensing reduces employment ork in the licensed occupation and hence competition, driving up the price of goods and services for consumers. This could benefit licensed practitioners, who might earn more than they would in such as to educational an unlicensed market , or the fina ncial benefits could flow elsewhere, 13 are excluded from the or other licensing entities . institutions But the w ages of workers who First, occupation are reduced in two ways . those who would otherwise have worked in a more may enter highly paid occupation a less well - paid occupation . Second, wages in less well - paid, fall unlicensed occupation s may even lower due to the increased number of workers enter ing ower wages in turn discourage labor force participat ion among the excluded, lowering them . L their employment rate. Through both of these channels, licensing can shift resources from workers with lower income - show that 52 Data percent of licensed and fewer skills to those with higher income and skills. 14 degree, compared to 38 percent of unlicensed workers. workers hold a Lower - Bachelor’s income workers are less likely to be able to afford the tuition and lost wages associated with r to many licensed jobs for them. It is also licensing’s educational requirements, closing the doo lower - income workers who are hurt if wages fall in unlicensed jobs, since on average, unlicensed 15 percent workers earn than licensed workers. less 28 ensing places to many restrictions on Fundamentally, licensing affects who takes what job. If lic o this allocation of workers, it can reduce the overall efficiency of the labor market. When workers no t enter jobs that make the best use of their skills, this hampers growth and may even lessen can 16 Licensin g may also affect entrepreneurship. Licensed workers are more likely to be innovation. self - employed than other workers. Sixteen percent of licensed workers report being self - 17 13 percent of unlicensed workers. employed, as compared to Just as important, entrepreneurs in new areas that overlap with a licensed occupation – such as someone who is creating a website 13 Smith, Adam. 1776. An Inquiry into the Nature and Causes of the Wealth of Nations , Book I, Ch. 10, Part II ; Kleiner, W.E. Upjohn Institute for Morris M. 2006. “Licensing Occupations: Ensuring Quality or Restriction Competition?” 1954. - 15. Kalamazoo, MI: Upjohn Institute Press ; Friedman, Milton and Simon Kuznets. 1 Employment Research “Income from Independent Professional Practice.” New York, NY: NBER ; Law, Marc T., and Sukkoo Kim. 2005. “Specialization and Regulation: The Rise of Professionals and the Emergence of Occupational Licensing Regulation.” Journal of Economic History 65, no. 3: 723 - 756. Cambridge University Press. 14 Kleiner and Krueger (201 3), Westat Data; UST calculations. 15 Kleiner and Krueger (2013), Westat Data; UST and CEA calculations. 16 Slivinski, Stephen. 2015. “Bootstraps Tangles in Red Tape: How Occupational Licensing Hinders Low - Income Entrepreneurship.” Goldwater Institute with s upport from the Ewing Marion Kauffman Foundation. https://goldwater - media.s3.amazonaws.com/cms_page_media/2015/4/15/OccLicensingKauffman.pdf. 17 Kleiner and Krueger (2013), Westat Data; UST and CEA calculations. 12

14 to enable consumers to take legal action may find themselves required to hold a license – overlaps with that of another licensed occupation. In this case, because a small part of their work 18 the web entrepreneur may be required to hold a law license. State level, licensed practitioners typically Finally, since many occupations are licensed at the when they move across States have to acquire a new license . This alone entails various paying fees , fillin g out administrative paperwork, and submitting an procedural hurdles, such as . application and waiting for it to be processed ince each State sets its own licensing Moreover, s req these often vary across State lines, and licensed uirements, individuals seeking to move to another State often discover that they must meet new qualifications (such as education, experience, training, testing, etc.) if they want to continue working in the ir occupation. The resulting costs in both time and money can discourage people from moving or lead them to exit their occupation . This system is especially burdensome for some populations, such as military 19 State lines. Diminished mobility generate s spouses, who are very likely to move across inefficiency in the labor market, with workers unable to migrate easily to the jobs in which they are most productive. In times of economic distress, this reduced mobility would be especially harmful, as workers would have a difficult time leaving – or for some practitioners, delivering services to – hard - hit areas. The Evidence on Licensing’s Costs and Benefits Empirical r esearch on the costs and benefits of licensing stretches back several decades and focuses on a diverse set of occupations. We provide more detail on these studies in the Research Appendix, but here we summarize research on four major areas of licensing’s impact s : service quality and worker mobility. , prices , wages and employment , I we re able to limit the practice of an occupation to high f licensing quality practitioners , then it - would be expected to improve quality and public health and safety. A wide range of studies have examined whether this happens . With the caveat s that the literature focuses on specific examples and that quality is difficult to measure , most research do es not find that licensing improves quality or public health and safety. We summarize several studies on licensing’s quality impacts in Resea rch Appendix Table . S tric ter licensing was associated with quality 1 out of the 12 studies reviewed. improvements in only 2 T here is also evidence that many licensing boards are not diligent in monitoring licensed practitioners, which contributes to a lack of quality improvement under licensing. These boards often rely on consumer complaints and third - party reports to monitor practitioner quality, but only a small fraction of consumer complaints result 20 in any kind of disciplinary action. 18 Slivinski (2015) finds that low - income entr epreneurship activity is substantially reduced in States that license a large fraction of low - income occupations. 19 U.S. Department of the Treasury and U.S. Department of Defense (2012). 20 Shimberg (1980); Swankin, David A. 2012. “Regulation of the Profes sions: Where Have We Been? Where Are We Going?” FARB Speech. 13

15 Q s often difficult to measure, but the evidence on uality can be defined in many ways and i licensing’s effects on prices is unequivocal: many studies find that more restrictive licensing laws lead to higher prices for consumers (see Research Appendix . In 9 of the 11 studies we reviewed ) , significantly higher prices accompanied stricter licensing. To take just two examples, Table 2 State licensing of nurse practitioners raises the price of a well - child medical exam more restrictive 21 , and imposing greater licensing requirements on dental hygienists and by 3 to 16 percent 22 . the average price of a dental visit by 7 to 11 percent assistants increase s While there is compelling evidence that licensing raises prices for consumers, there is less evidence on occupational practitioners , which would be one supply of whether licensing restricts way in which it might contribute to higher prices . This should appear as lower employment in In licensed professions, relative to the employment that would prevail with less restricted entry. empir ical study of the employment effects of licensing , researchers found that 100 one notable additional hours of required training decreased the number of Vietnamese manicurists by almost 23 State . 18 percent in a This suggests that at least among licensed workers who face a choice of S makes it less likely that workers will enter tates in which to locate, more stringent licensing licensed professions in those S tates . However, t he effect of restricting entry to licensed occupations has generally proved easier to study in terms of wages: restrictions are expected to raise the wages of those who manage to 24 ata enter licensed occupations, and lower the wages of other workers, leading to a wage gap. D from Kleiner and Krueger (2013) show that , licensed workers earn 28 percent more on average, 25 T his gap in part reflects other differences between these two groups . than unlicensed workers therefore important It is of workers that can contribute to higher earnings for licensed workers. rising due to artificial scarcity and to distinguish between licensed workers’ wages due to rising the increased education and training brought about by licensing. Researchers have taken a number of approaches to account for these differences and get a better estimate of the true impact of licensing on wage s . E stimates that account for differences in education, training, and find that licensing results in 10 percent to 15 percent higher wages for licensed experience 26 workers relative to unlicensed workers . M ore sophisticated analyses seek to identify truly comparable groups of workers who differ only in terms of their licensure status. One approach is to compare workers in the same occupation 21 Kleiner, Morris M., Allison Marier, Kyoung Won Park, and Coady Wing. 2014. “Relaxing Occupational Licensing Requirements: Analyzing Wages and Prices for a Medical Service.” NBER Working Paper 1 9906. 22 Liang, J. N. and Jonathan D. Ogur. 1987. “Restrictions on Dental Auxiliaries: An Economic Policy Analysis.” Bureau of Economics. Washington, DC: Federal Trade Commission. 23 Federman, Maya N., David E. Harrington, and Kathy J. Krynski. 2006. “The Impact of State Licensing Regulations on Low - Skilled Immigrants: The Case of Vietnamese Manicurists.” American Economic Review 96, no. 2: 237 - 241. 24 Kleiner, Morris M. and Kyoung W on Park. 2010. “Battles Among Licensed Occupations: Analyzing Government Regulations on Labor Market Outcomes for Dentists and Hygienists.” NBER Working Paper 16560. 25 Kleiner and Krueger (2013), Westat Data; UST calculations. 26 Kleiner, Morris M. and Ala n B. Krueger. 2010. “The Prevalence and Effects of Occupational Licensing.” British 687. - Journal of Industrial Relations 48, no. 4: 676 14

16 but with different licensing status. This can happen because some tates license an occupation S States commonly only require some practitioners of an while others do not, and also because occupation to hold a license. A second approach is to compare earnings for the same workers as they switch into or out of a licensed occ upation. Both approaches do more to account for differences between licensed and unlicensed workers that the first set of estimates cited above. more modest impacts – under 10 percent – of licensing on wages , These approaches typically find 27 tes show no significant impact at all but some estima . licensing has on interstate mobility There State has been , but less research on the impact that this too is a key outcome since mobility can contribute to wage growth for workers and economic 28 ets . One study recovery for local mark examine s data on 14 occupations and find s that more 29 restrictive licensing statutes reduce interstate migration. State Forthcoming analysis of five licensed occupations finds that, controlling for observable differences that could affect migration rates, individuals in three of these occupations have lower interstate migration rates than their 30 hile their in trastate migration rates are similar. peers in other occupations, w This is to be expected if a - based licensure system depressed mobility. Workers licensed in a given State State face no added costs to intrastate moves, which do not affect their licensed status, but typic ally do bear substantial costs of re - licensing after an interstate move. Comparable unlicensed workers, by contrast, face no licensing - related costs to either type of move, and should orkers. lines at a higher rate than licensed w consequently migrate across State To help fill this gap in the literature, we have carried our own analysis . As shown in Figure 1 out , State below lines between there are substantial differences in the likelihood of moving across workers in licensed occupations versus other workers, while there are only modest highly differences between the two groups in the likelihood of moving within a State . The figure shows that interstate migration rates for workers in the most - licensed occupations are lower by an amount equal to nearly 14 compared to those in the least - percent of the average migration rate - State migration is licensed occupations. But the difference between these workers in within much smaller, only about 3 percent of the average rate. These imp acts are also much larger for younger licensed workers , in the age range where adult mobility is higher as workers are choosing 27 Gittleman, Maury, Mark A. Klee, and Morris M. Kleiner. 2015. “Analyzing the Labor Market Outcomes of Occupational Lic ensing.” NBER Working Paper 20961; Gittleman, Maury and Morris M. Kleiner. 2013. “Wage Effects of Unionization and Occupational Licensing Coverage in the United States.” NBER Working Paper 19061; Klee, Mark A. 2013. “How Do Professional Licensing Regulatio ns Affect Practitioners? New Evidence.” U.S. Bureau of Labor - Statistics, SEHSD Working Paper 2013 30. 28 Wozniak, Abigail. 2010. “Are College Graduates More Responsive to Distant Labor Market Opportunities?” Journal 45, no. 4: 944 - of Human Resources lanchard, Olivier and Lawrence Katz. 1992. “Regional Evolutions.” 970; B Brookings Papers on Economic Activity no. 1: 1 - 75. 29 Gay, Robert, Karen Greene, and Morris Kleiner. 1982. “Barriers to Labor Migration: The Case of Occupational Licensing.” Relations 21, no. 3: 383 - 391; Holen (1965) also finds that dentists and lawyers are less mobile Industrial than physicians, for whom she asserts State licensure restrictions represent less of a barrier to moving across States. Holen, Arlene. 1965. “Effects of Profess ional Licensing Arrangements on Interstate Labor Mobility and Resource Allocation.” Journal of Political Economy 73, no. 5 : 492 - 498. 30 Johnson, Janna E. and Morris M. Kleiner. 2015. “Is Occupational Licensing a Barrier to Interstate Migration?” Forthcomin g. 15

17 percent of the average interstate migration rate 20 where to start their careers. T his difference is for those under 35 , compare d to an impact of about 12 percent for workers over 35. 16

18 II. The Prevalence of Licensing: National Increase, State Differences The Increase in Licensing Over Time only very recently, Systematic data on who holds a license have been hard to come by until al analysis difficult . What we know about the rise in licensing over time comes making historic from the efforts of Kleiner and Krueger (2013) , who chart the historical growth in licensing us ing a combination of data from the Council of State Governments, the Department of Labor, and two surveys that they commissioned through Gallup and Westat in 2006 and 2008 , respectively . We reproduce their results below (Figure 2) . Using their data, we show that the percentage of the workforce covere d by State licensing laws grew from less than 5 percent in the early 1950s to 2 5 31 percent by 2008 , meaning that the State licensing rate grew roughly five - fold during this period . T he 2006 Gallup and 2008 Westat surveys were the first surveys to collect information on 32 workers licensed at the local and Federal levels , in addition to those licensed by the States . Although State licenses account for the bulk of licensing, the addition of local and Federal . licensed occupations further raises the sh are of the workforce that is licensed to 2 9 percent More recent data on licensing prevalence come from a new module of the Census Bureau’s Survey of Income and Program Participation (SIPP), the first large government survey to 31 Kleiner and Krueger (2013). The data from the 1950s come from the Council of State Governments, the data for the 1960s are from Greene (1969), the data for the 1980s are from Kleiner (1990), and the data for 2000 are from Kleiner (2006); Greene, Karen . 1969. “Occupational Licensing and the Supply of Nonprofessional Manpower.” Washington, DC: Manpower Administration, U.S. Department of Labor; Kleiner, Morris M. 1990. "Are There 42nd Annual Proceedings. United States: Economic Rents for More Restrictive Occupational Licensing Practices?' Industrial Relations Research Association 177 - 185. 32 leiner and Krueger (2013). K 17

19 specifically ask questions about licensing and certification . In this source, 28 percent of civilian a license or certification , and about workers aged 18 through 64 had attained in the fall of 2012 33 , re However, because of the way the questions were posed . searchers 20 percent were licensed cannot confidently distinguish between licensed and certified workers. Other analyzing this data limitations of the SIPP mean that it may be a less reliable source of information on licensing Kleiner and Krueger’s Westat survey , although gathering information on prevalence than an important step in furthering research licensing in a major survey for the first time is certainly 34 . on these issues ATA ON D HO H OLDS A L ICENSE W Two major sources of data on who holds a license are currently available for analysis: a dataset assembled Program for Kleiner and Krueger (2013) by Westat, and a survey module from the Survey of Income and Kleiner Participation (SIPP). The Westat survey was designed by and Krueger in order to precisely assess survey from information market labor of set modest a collect whether a respondent holds a license and to that respondents. The SIPP is a U.S. Census Bureau survey collects a large set of information on income, benefits use, living arrangements, and family structu re but that has recently added questions relevant to useful, worker and certification. The SIPP questions, while licensing do not reliably distinguish licenses and By contrast, the Westat survey asked whether a given credential was legally r equired for certification. order to distinguish between workers with licenses and those employment at the worker’s current job, in certifications. with The data sources have other strengths and weaknesses. The smaller Westat survey was short and two focused s were interviewed once and asked a total – of 52 questions. The SIPP is a more detailed respondent longitudinal survey that follows the same households over multiple years. Though the SIPP’s panel nature is an advantage in many contexts, it may be a liability in this case. The licensing and certification questions main were asked after respondents had already answered the SIPP questions, which generally take 30 to a have may rendered 40 minutes to attrition answer. The module was also added late in the SIPP panel, after Westat the sample somewhat less representative of the overall population. On the other hand, the SIPP as survey small, containing approximately 2,500 respondents, was compared to about 58,000 respondents in the SIPP module. More survey data will become available next government year. The Current Population Survey began including questions on certification and licensing in January 2015, and the data being collected will three 2016. sometime in be made available for public use a correspondence. private Bureau, Census U.S. 33 Gittleman, Klee, and Kleiner (2015). 34 Gittleman, Klee, and Kleiner (2015) note that sample attrition likely biases their estimates upwar d, but the relatively low percentage of workers in some universally licensed occupations (such as surgeons) who report having derived estimates of licensing prevalence may be biased downward. - a license or certification suggests that SIPP 18

20 Why Has Licensing Increased? There are two ways to account for the increase in State licensing over the past few decades . One possibility is that this increase reflects changes in the composition of our workforce. O ur economy has changed in significant ways since the 1950s, with employment shifting increasingly - As service into services. sector workers are more likely to be licensed than workers in the goods percent 16 — 3 2 producing sector of service sector wo rkers are licensed compared to percent of increased the workers outside the service sector — this employment shift may therefore have 35 share of workers holding a license. A second possibility is that more occupations have become licensed over time. We first examine the role of the shift to services in raising licensing prevalence. For example, certain heavily - licensed professions in fields such as health and education have experienced 3 substantial employment gains over the past few decades (Figure e share of the workforce ). Th in the education and health fields rose from less than 13 percent in the late 1960s to over 22 percent today. These fields, as shown below, have some of the highest rates of licensing in current data (Figure 4) . More than 80 pe rcent of health care practitioners report holding a license, and more than 60 percent of support workers in health care also hold licenses. Among workers in education, nearly 60 percent hold a license. 35 Kleiner and Krue ger (2013), Westat data; CEA calculations. 19

21 The growing share of workers in these heavily li censed occupations may therefore have contributed to the rise in licensing prevalence. However, that this changing analysis shows composition of the workforce can only explain part of the overall increase in licensing. Figure 5 compares the documented shar e of the licensed workforce to a series that adjusts for changes in workforce composition , but holds the fraction licensed in each occupation constant at 2008 36 . third of the increase in the levels a little more than one - The results suggest that only estimate is percentage of workers licensed at the State level from the 1960s to the 2008 explained by composition of the workforce . This means that the remaining two - the changing thirds of the growth in licensing comes fro m an increase in the number of licensed professions. 36 To make the adjustment, we use Kleiner and Krueger’s estimates of the shares of State licensed workers in each - occupation in 2008, and adjust for changes in occupational mix back to 1968, taking advantage of a h istorically consistent occupational classification system contained in the Integrated Public Use Microdata Series version of the Current Population Survey. Note that the aggregate share licensed according to the Kleiner and Krueger estimate does not match the counterfactual percent licensed in 2008 because the proportion of workers within each occupation is different in the Kleiner and Krueger data and in the Current Population Survey. Meyer, Peter B. and Anastasiya M. Osborne. 2005. “Proposed category syst em for 1960 - 2000 Census Occupations.” U.S. Bureau of Labor Statistics. Working Paper 383 ; Alexander, J. Trent, Sarah Flood, Katie Genadek, Miriam King, Steven Ruggles, Matthew B. Schroeder, and Brandon Trample. 2010. Integrated Public Use Microdata Series, Current Population - readable database] Survey: Version 3.0. [Machine 20

22 The importance of an increase in the number of licensed occupations – not just the number of suggests that licensing has expanded considerably into sectors that were not licensed workers – lly associated with it. The figure below shows that among licensed workers today, fewer historica — than half are in health care, education, and law traditionally very highly licensed occupations. Instead, large shares of licensed workers today are in sales, manageme nt and even craft sectors like construction and repair. Share of All Licensed Workers in the 12 Occupations 6: Figure with the Most Licensed Workers Health Care Practitioners Education Transportation Sales Management Construction Personal care Protective Service Health Care Support Installation, Maintenance,... Business and Financial Production 5 20 15 10 0 Occupation's Share of All Licensed Workers (Percent) Kleiner and Krueger (2013) Westat data; Current Population Survey Outgoing Rotation Source: Group; CEA calculations. A trend toward increasing skill and job training requirements over time may be one factor in the 37 more licensing. political process behind Conversations with regulators and industry groups 37 Cairo, Isabel. 2013. “The Slowdown in Business Employment Dynamics: The Role of Changing Skill Demands.” Job Market Paper. http://www.econ.upf.edu/gpefm/jm/pdf/paper/JMP%20Cairo.pdf. 21

23 indicate that practitioners in new fields often view licensing as one necessary step — along with toward — others, such as forming professional schools, associations, and accreditation systems 38 Following in the footsteps of more established professions such achieving professionalization. as physicians and lawyers, practitioners in newer areas may view professionalization as both in helping to achieve greater legitimacy, cultural authority and beneficial for the profession — 39 as well as serving wider social interests , through improving quality and public safety . — income , some argue that by identifying qualified practitioners, licensing can spur demand for In addition b y reducing consumer uncertainty about the quality of the licensed service . In licensed workers 40 is way, licensing itself can increase the number of licensed workers. Indeed, there is evidence th th the turn of the 20 from century that licensing was adopted in response to increased specialization and technological developments that made it more difficult for consumers to judge 41 . the quality of professional services producer Others argue that tend to be much more politically influential than consumer groups groups . L icensing is a policy with concentrated benefits (for the licensed practitioners) and diffu se costs (for consumers and would be practitioners) . Thus, practitioners have a greater interest in - licensing and may be better able to influence policy through their active professional 42 associations . Empirical work suggests that licensed professions’ de gree of political influence is 43 one of the most important factors in determining whether These States regulate an occupation. organizational factors may therefore also play a role in the overall rise in licensing. Finally, licensing boards are often - revenue neutral, and in some cases, even revenue 44 generating. While there has been some movement over time away from funding licensing 38 Starr, Paul. 2009. “Professionalization and Public Health: Historical Legacies, Continuing Dilemmas.” Journal of Public Health Management Practice 15, no. 6: S26 - S30. 39 Starr, Paul. 1982. The Social Transformation of American Medicine . New York, NY: Basic Books; Law and Kim (2005) find evidence from the Progressive Era that licensing was adopted in response to increased specialization and technological developments that made it more difficult for consumers to judge the quality of professional services. 40 Ar row, Kenneth J. 1971. “Essays in the Theory of Risk - Bearing.” Chicago, IL: Markham Publishing Co. ; Arrow, Kenneth J. 1963. “Uncertainty and the Welfare Economics of Medical Care. 1963.” American Economic Review 53, – no. 5: 941 969; Kleiner (2006). 41 Law and Kim (2005). 42 ; Olson, Mancur. Friedman, Milton. 1962. “Capitalism and Freedom.” Chicago, IL: The University of Chicago Press 1965. “The Logic of Collective Action: Public Goods and the Theory of Groups.” Harvard University Press; Stigler, 1971. “The Theory of Economic Regulation.” George. 2, no. The Bell Journal of Economics and Management Science 1: 3 - 21. 43 Wheelan, Charles. 1999. “Politics or Public Interest? An Empirical Examination of Occupational Licensure.” The University of Chicago, unpubl ished manuscript; White, William D. 1980. “Mandatory Licensing of Registered Nurses: Introduction and Impact.” Occupational Licensure and Regulation. Washington, DC: American Enterprise Institute Press; Paul, Chris. 1984. “Physician Licensure Legislation a nd the Quality of Medical Care.” Atlantic Economic Journal 12, no. 4: 18 - 30. 44 Thornton, Robert J. and Edward J. Timmons. 2015. “The De - Licensing of Occupations in the United States.” Monthly Bureau of Labor Statistics. Labor Review. U.S. 22

24 45 Thus, legislators boards exclusively through fees, fees remain the primary funding mechanism. considering a new licensin g proposal often do not have to grapple with the prospect of finding additional funding. Variation in Licensing across States Recent evidence also shows that States vary dramatically in their rates of licensure, ranging from 46 of workers in South Carolina to 33 percent in Iowa. a low of 12 percent These large differences in licensing prevalence suggest that are not treating occupations equivalently with regard States to whether they do or do not require a license. For example, a analysis of Institute for Justice n State found that only 15 102 low - and moderate - income occupations licensed in at least one occupations were licensed in 40 or more, and the average occupation was licensed in only States 47 States . each In the figure below, we show the fraction of workers licensed in 22 State , using a new Harris survey used by Kleiner and Vorotnikov (2015). Many States have a licensed share that is 20 to 25 percent of their workforce, but three States license more than 30 percent of their workers and five States (Table 1) . license less than 15 percent 45 Swankin (2012). 46 Kleiner (2015). 47 Carpenter et al. (2012). 23

25 Table 1. Percent of Workforce Licensed by State Share Share Share Share Licensed State State Licensed State State Licensed Licensed 20.9 Illinois 24.7 Montana 21.3 Rhode Island 14.5 Alabama Indiana 25.5 24.6 14.9 Nebraska Alaska South Carolina 12.4 Arizona Iowa 33.3 Nevada 30.7 South Dakota 21.8 22.3 23.1 20.2 Kansas 14.9 New Hampshire 14.7 Tennessee Arkansas 24.1 California 20.7 Kentucky 27.8 New Jersey 20.7 Texas 25.9 23.8 Utah Louisiana Colorado 17.2 New Mexico 22.3 Maine 20.7 New York 20.7 Vermont 16.8 24.7 Connecticut Delaware 15.3 Maryland 17.2 North Carolina 22.0 Virginia 17.2 30.5 District of Columbia 19.7 Massachusetts 21.3 North Dakota 26.6 Washington Michigan 20.6 25.8 Florida 28.7 West Virginia Ohio 18.1 Georgia Minnesota 15.0 Oklahoma 25.0 Wisconsin 18.4 15.7 Hawaii 26.6 Mississippi 23.1 Oregon 26.1 Wyoming 21.2 Idaho 22.8 Missouri 21.3 Pennsylvania 20.2 Source: Kleiner and Vorotnikov (2015), Harris data. Note: Kleiner and Vorotnikov limited their analysis to individuals 18 or older who at the time of the survey were either currently employed or had been employed during the previous twelve months. 24

26 Interestingly, this variation in licensing prevalence appears not to be driven by differences in State States SIPP data to test how To see this, we used licensing rates occupational mix across . if would change State had the same occupation mix but kept their own licensing rates every within occupations . Th is resulting picture was very similar to the actual distribution of shares licensed across States in Figure 7 , indicating that differences in occupational mix are not the primary determinant of State licensing differences. share of workers with a license, but also in the difficulty of obtaining States vary not only in the a license . State licensing laws vary in terms of the substantive requirements they impose, such as examinations, fees, minimum amounts of education, training or experience, language requirements, etc. The collection of these is sometimes called licensing burden. In practice, the extent to which licensing laws pose a barrier to entry depe nds on the stringency of these require some also requirements. For example, while all States require manicurists to be licensed, proof , and the required amount of training at a State - approved of English proficiency cosmetology school varies from 100 to 600 hours . data on licensing burden comprehensive Though it is difficult to obtain , information collected by and medium the Institute for Justice on 102 low - - wage occupations provides a sense of the range of licensing burden across occupations and across St , in terms of education and experience ates . States range from prerequisites, licensure fees, examinations, and minimum age requirements it takes an estimated average of 113 days (about four months) to fulfill the Pennsylvania, where educational and experie nce requirements for the average licensed occupation examined, to 48 . 724 days (about two years) , where it takes Hawaii 48 Carpenter et al. (2012). 25

27 Table 2. Education/Experience Burdens by State (Days) State Days State Days State Days State Days 182.0 Illinois 203.0 Montana 133.0 Rhode Island 211.0 Alabama Nebraska 179.0 Indiana 251.0 402.0 147.0 South Carolina Alaska Arizona Iowa 181.0 Nevada 601.0 South Dakota 271.0 599.0 222.0 689.0 Kansas 166.0 New Hampshire 230.0 Tennessee Arkansas 326.0 California 549.0 Kentucky 324.0 New Jersey 292.0 Texas Utah New Mexico 417.0 413.0 Colorado 227.0 Louisiana 163.0 Maine 226.0 New York 283.0 Vermont 402.0 230.0 Connecticut Delaware 195.0 Maryland 446.0 North Carolina 250.0 Virginia 462.0 199.0 District of Columbia 311.0 Massachusetts 293.0 North Dakota 132.0 Washington 256.0 Michigan Florida 603.0 247.0 West Virginia Ohio 341.0 324.0 Minnesota 290.0 Oklahoma 416.0 Wisconsin 145.0 Georgia Mississippi Hawaii 724.0 155.0 196.0 Oregon 568.0 Wyoming Idaho 240.0 Missouri 220.0 Pennsylvania 113.0 Source: Carpenter et al., 2012. Note: Sample of 102 lower- and middle-skill occupations. Hours averaged over all licensed occupations from the sample of 102, by state. 26

28 In addition to fulfilling these requirements, workers seeking a license face other procedural burdens, such as learning what the licensing requirements are and how to apply for a license, filling out the requisite paperwork, and waiting for their applications to be processed. These burdens are especially large for individuals with criminal records; it can take six months to a year f or the relevant agency or board to review an applicant’s criminal history and make an initial 49 determination about whether she qualifies for a license. 49 Neighly, Madeline, Maurice Emsellem, and Anastasia Christman. 2014. “A Healthy Balance: Expanding Expanding Health Care Job Opportunities for Californians with a Criminal Record While Ensuring Patient Safety and Security .” Full National Employment Law Project. http://www.nelp.org/content/uploads/2015/01/Healthy - Balance - - Report.pdf. 27

29 III. Licensing and the Evolving Marketplace , the real world is the same now as five decades ago the basic economics behind licensing While These changes have important implications for how to workplace has changed considerably. retain flexibility in the labor market while still using licensing to protect consumers. Some — like the rise o f telework and distance learning — reflect new possibilities within the changes As the labor market changes, American economy. licensing rules set down in earlier decades may become an increasingly poor fit for the emerging occupational structure, necessitating cont inuing review and updates. On the other hand, other features of today’s workplace reflect longer - run trends in which licensing may play a contributing role. For example, worker mobility in the United whether the rise e have speculated as to States has declined in the last several decades, and som 50 of licensing might be a driver of this trend. This section identifies several areas in which the U.S. workplace has undergone substantial th change since lice nsing began to expand in the latter half of the 20 century . We discuss the key system of licensing poses challenges for changes in each area and then explain how the current each. The Rise of Telework The same technology that allows workers in a large corporation to consult with clients and carry her work remotely also allows the solo licensed practitioner to do similar tasks remotely. on ot - conferencing technology as well as simpler long - distance voice Falling costs of internet video communication now allow licens ed practitioners to consult easily acros s State lines. W orking from home is one indicator of the ability to do work from a distance, and this has been on the rise, with 44 percent more workers reporting that they work from home on a regular basis 51 since 2001. Moreover a large share of workers in highly licensed occupations say they have the ability to work from remote location — particularly those in legal and social service occupations a (see Figure 9 below) . 50 Davis, Steven J. and John Haltiwanger. 2014. “Labor Market Fluidity and Economic Performance.” NBER Working Paper 20479. 51 American Community Survey 2001 - 2013; CEA calculations. 3.4 percent of the workforce reported working from k in 2001 versus 4.4 percent in 2013. home at least once a wee 28

30 Figure 9: Licensing and Remote Work by Occupation Percent Transportation Able to Work Remotely Healthcare support Licensed Legal Protective service Education Healthcare practitioner 50 100 80 70 60 90 40 30 20 10 0 and Krueger (2013) Westat data; CEA calculations. Source: Kleiner Telework offers important opportunities for both licensed practitioners and their clients. Telework can enable more flexible scheduling and work locations, something that is important in helping workers with competing demands on their time stay in the labor force and maintain work - life balance. It has the potential to offer clients more continuous access to providers and practitioners access to more specialized providers , as well as increasing the pool of competing Examples of the impact of telework on licensed occupations . abound in the health care overall - locations as remote as from rays and scans x read in Boston can now fields. Radiologists 52 Insurance companies often provide clients access to a nurse - staffed call center to Rwanda . answer minor medical questions. These nurses resi de and practice near t he call center location, A - - phone diagnoses for clients across the country. the but they may take calls and make over study comparing telenursing from home versus from a call center found that nurses working from home were more product ive and took fewer sick days, and they triaged patients with the same 53 symptoms in a similar manner . licensure requirements in adapting progress some States have made while However, to allow for are sometimes required to obtain licenses in every State where patients telework, practitioners In a 2009 report to Congress, the Department of Health and Human Services reside. recommended expanding telehealth networks and reducing legal barriers, based on the effectiveness of telehea lth in responding t o public health emergencies and disasters. For example, e vents that require sheltering in place or quarantine may restrict access to health care . Telehealth applications including hotlines and interactive web - based programs were used th New York City and extensively following the September 11 , 2001 terrorist attacks on Washington, D.C. , and during recent hurricanes. They have prove n to be an effective means of 52 Massachusetts General Hospital Imaging. 2011. “Imaging News.” http://www.massgeneral.org/imaging/news/newsarticle.aspx?id=2807. 53 - 123. Collegian 16, no. St George, Ian, et al. 2009. “How Safe is Telenursing from Home?” 3: 119 29

31 provid large numbers of people spread out over great distances with information and ing 54 how and care for themselves and others . cope guidance on he ability licensed practitioners to provide services outside their jurisdictions of license raises of T , since licensure is intended protect the health and questions about accountability for clients to State in which the license is held . safety of the citizens of the The National Council of State Boards of Nursing was early to recognize this concern, and as part of their Nurse Licensure Compact , the of agreed that the St ate participating practitioner residence should govern eligibility for a States - state) license, though nurses working across state lines are also held accountable Compact (multi 55 to the rules of the S tate in which they are practicing . State licensure has proven to be a barrier to the growth and development of telework in fields document outside of health care as well or example, clients can now use online F providers to . produce certain kinds of legal documents, such as wills and trusts, or to file for a patent or tradema rk . However, such companies run the s tate - by - s tate risk of being found to have engaged 56 start offering a broader set of legal services . in the unauthorized practice of law if they The More Flexible Workplace and Scope of Practice Licensing laws not only dictate whether an individual can practice at all , but also often determine what services she can provide as part of her practice. R egulations that place excessively stringent scope of practice can have effects very similar to the overall impact restrictions on practitioners’ of licensing: limiting the supply of labor , restricting competition, increasing wages for incumbent 57 , and increasing the cost of services. Scope of practitioners but restricting access for others State to State , even though many practice laws also vary from professions have standardized 58 wide education standards and examinations. nation The content - of these laws are a particular s source of tension among groups of professions that provide complementary and sometimes overlapping services , such as or competing dentists and dental hygienists, doctors and advanced practice nurses, architects and interior designers, engineers and architects, and electricians and 59 electrical engineers. 54 U.S. Department of Health and Human Services. 2009. Pandemic and All - Hazards Preparedness Act, Telehealth http://www.phe.gov/Pr Report to Congress. eparedness/legal/pahpa/Documents/telehealthrtc - 091207.pdf . 55 National Council of State Boards of Nursing. 2015. “25 Nurse Licensure Compact (NLC) States.” ation_2015.pdf https://www.ncsbn.org/NLC_Implement ; American Nurses Association. 2013. “Nurse Licensure Compact.” http://www.nursingworld.org/MainMenuCategories/Policy - Advocacy/State/Legislative - Agenda - - TalkingPoints.pdf. Reports/LicensureCompact/INLC 56 Law: Promoting Access to Justice through the (Un)Corporate Practice of Hadfield, Gillian K. 2014. “The Cost of Law.” 38: 43 - 63 ; Knapp, Sarah. 2013. “Can LegalZoom Be the Answer to International Review of Law and Economics the Justice Gap?” Georgetown Journal of Legal Ethics 26, no. 4: 821 - 836. 57 For example, Kleiner et al. (2014) find that more restrictive scope of practice licensing for nurse practitioners increases physician wages and hours worked, and decreases NP wages and hours worked. 58 Swankin, David A., Rebecca LeBuhn, and Artem Gulish. 2010. “Discussion Draft: Building a Better Mousetrap to Address Scope of Practice Issues.” Citizen Advocacy Center . 59 Kleiner, Morris M. Guild - Ridden Labor Markets: The Curious Case of Occupational Licensing . Kalamazoo, MI: W.E. Upjohn Institute Press. Fo rthcoming. 30

32 S cop e of practice issues have arisen in response to concerns about the lack of affordable ome s , for example in law . Various - level studies have found that a large proportion of the services State 60 income households goes unmet. Data from c - legal needs reported by low ourt systems reveal large numbers of unrepresented or “pro se” litigants in courts. For example, a California study estimates that 67 percent of petitioners in family law cases were unrepresented, and over 90 61 represented. A study in New York found that percent of defendants in eviction cases were un eviction , child support, and consumer debt matters were over 95 percent of people in 62 One survey found that 62 percent of judges said that pro se litigants were unrepresented. 63 negatively impacted by their lack of representation. In an effort to help address these issues, the Supreme Court of Washington State in 2012 adopted d a new ca a rule that create , “limited license legal technicians” (LLLTs) tegory of legal practitioners to provide certain limited kinds of legal services, such as preparing court documents and 64 performing legal research, in approved areas. Other States may follow suit. LLLTs are req uired to take about a year of classes at a community college, pass a licensing exam, and fulfill 65 supervised experience requirements. The first area to be approved is family law. Scope of practice has long been a focus in the health care conte xt, in large part because particular . Current scope of practice laws for a dvanced of concerns about access to primary care ractice p r n urses — egistered nurse practitioners (NPs) with master’s degrees or more — nurses such as vary dramatically by State , both in terms of their substantive content and the level of specificity 66 that they provide. But State - level evidence suggests that easing scope of practice laws for 60 Documenting the Justice Gap in America: The Current Unmet Civil Legal Needs Legal Services Corporation. 2009. of Low - Income Americans. http://www.lsc.gov/sites/default/files/LSC/pdfs/documenting_the_justice_gap_in_america_2009.pdf. 61 Council of California. 2004. . Represented Litigants Judicial - Statewide Action Plan for Serving Self http://www.courts.ca.gov/documents/selfreplitsrept.pdf . 62 Report to the Chief Judge of the St ate of Task Force to Expand Access to Civil Legal Services in New York. 2010. https://www.nycourts.gov/ip/access - civil - New York. - services/PDF/CLS - TaskForceREPORT.pdf. legal 63 Klein, Linda. 2010. Report on the Survey of Judges on the Impact of the Economic Downturn on Representation in the Courts . ABA Coalition for Justice . ht tp://www.americanbar.org/content/dam/aba/migrated/JusticeCenter/PublicDocuments/CoalitionforJusticeSurv eyReport.authcheckdam.pdf. 64 Ambrogi, Robert. 2015. “Who Says you Need a Law Degree to Practice Law?” Washington Post. http://www.washingtonpost.com/opin ions/closing - - - justice - gap/2015/03/13/a5f576c8 - c754 - 11e4 - aa1a the 86135599fb0f_story.html. 65 Washington State Bar Association. 2015. “Limited License Legal Technicians (LLLT).” http://www.wsba.org/licensing - and - lawyer - conduct/limited - licenses/legal - technicians . 66 Institute of Medicine of the National Academies. 2010. “The Future of Nursing: Focus on Scope of Practice.” Nursing http://www.iom.edu/Reports/2010/The - Future - of - - - Leading Change - Advancing - Health/Report - Brief - Scope - - of Practice.asp x . APRNs have completed specialty - specific graduate programs and fall into four main categories: nurse anesthetists, nurse midwives, clinical nurse specialists, and nurse practitioners. The term Advanced Practice Nurse (APN) is also sometimes used intercha ngeably, but that term can also be used more broadly and has no single generally accepted regulatory definition; Newhouse, Robin P., et al. 2011. “Advanced Practice Nurse Outcomes ican Association of Nurse 250; Amer 1990 - 2008: A Systematic Review.” Nursing Economics 29, no. 5: 230 - Practitioners. 2015. “2015 Nurse Practitioner State Practice Environment.” 31

33 APRNs increasing access to certain primary care represents a viable means of . Research services APRNs can provide a range of primary care services to patients as effectively as finds that 67 Between 1998 and 2010, States physicians. with the least restrictive regulations of NP s (e.g., gained more licensed NPs those not requiring physician supervision for practice or prescriptions) , and patients in those States had a 2.5 - fold greater likelihood of patients’ per 100,000 residents 68 patients in the most restrictive States . receiving their primary care from NPs than did Stange (2014) finds that greater supply of NPs an d physician assistants (PAs) has had minimal impacts ha ve on access to health care and utilization, but that expansions in prescriptive authority for NPs 69 been associated with modest increases in utilization. The Arrival of Distance Learning In 201 3 , 11.3 percent of all U.S. undergraduate students (2.0 million students) were enrolled in institutions in which all instructional content was delivered through distance education, and more than one in four undergraduates took at least one distance education course (4.6 million 70 students). Students can now take courses remotely from training providers in almost any State . (see Figure 2 T he prevalence of online undergraduate education has grown dramatically since 200 71 10) . - http://www.aanp.org/images/documents/State - reg/stateregulator ymap.pdf ; Iglehart, John K. “Expanding the leg Role of Advanced Nurse Practitioners — Risks and Rewards.” The New England Journal of Medicine 368, no. 20: 1935 - 1941. 67 Stanik - Hutt, Julie, et al. 2013. “The Quality and Effectiveness of Care Provided by Nurse Pra ctitioners.” Journal for Nurse Practitioners 9, no. 8: 492 - 500; Institute of Medicine (2010); Lenz, Elizabeth R., Mary O’Neil Mundinger, Robert L. Kane, Sarah C. Hopkins, and Susan X. Lin. 2004. “Primary Care Outcomes in Patients Treated by Nurse - Practiti oners or Physicians: Two - Year Follow Up.” Medical Care Research and Review 61, no. 3: 332 - 51. 68 - Fang, Figaro L. Loresto Jr., Linda R. Rounds, and James S. Goodwin. 2013. “States with the Least Kuo, Yong rease in Patients Seen By Nurse Practitioners.” 32, Restrictive Regulations Experienced the Largest Inc Health Affairs - no. 7: 1236 1243. 69 Stange, Kevin. 2014. “How Does Provider Supply and Regulation Influence Health Care Markets? Evidence from Nurse Practitioners and Physician Assistants.” Journal of Hea lth Economics 33: 1 - 27. 70 Institute of Education Sciences. 2015. The Condition of Education 2015 . U.S. Department of Education. http://nces.ed.gov/pubs2015/2015144.pdf . 71 Allen, Elaine and Jeff Seaman . 2014. “Grade Change: Tracking Online Education in the United States.” Babson Survey Research Group . http://www.onlinelearningsurvey.com/reports/gradechange.pdf. 32

34 Figure 10: Online Learning Enrollment as a Share of Total Enrollment Percent 50 40 30 20 10 0 2002 2006 2008 2010 2012 2004 Source: Allen and Seaman (2014) Online courses offer many opportunities for students to gain skills at low cost while following a State flexible schedule. They can also help higher education systems reduce duplication of narrow of online coursework obtained training programs through the use of reciprocal recognition And the rate of online course usage is high among students in State through another ’s system. ) , although clinical the heavily licensed fields of health (33 percent) and law (43 percent 72 nnot be completed online . components of training in these fields ca a commonly used practice for continuing professional education in Distance education is also All U.S. territories currently mandate some form of licensed occupations. s State and some is also common in nursing , ; continuing education re licensu - continuing medical education for re 73 accounting . Many providers are online or distance providers, which , and in the legal profession may be the most convenient option for professionals for whom taking time away from the office to attend classes or in - person trainings can be costly. in distance education. O ccupational licensing boards ’ practices may aff ect students’ partic ipation nurse licensing boards automatically accept degrees and credentials from a list of Many 74 - Although some . tate s preapproved schools, which tend to be schools with physical locations in s tate institutions, these degrees may need to go through additional accept degrees from ou t - of - accreditation, for example by an outside group like the Accreditation Commission for Education in Nursing. If the State of the licensing board and the State of the educational institu tion are both ) (see b ox - part of the National Council for State Authorization Reciprocity Agreements ( NC SARA ) below , however, accreditation by the State of the educational institution serves as accreditation 72 Study - . National Postsecondary Student Aid U.S. National Center for Education Statistics. 2013. 12 2011 . Tabulated from PowerStats; CEA calculations. http://nces.ed.gov/pubs2013/2013165.pdf Department of Education. 73 iew of Online Learning.” Third Moore, Michael G. and Greg Kearsley. 2012. “Distance Education: A Systems V edition. Wadsworth Cengage Learning. http://www.cengagebrain.com.au/content/moore20992_1111520992_02.01_chapter01.pdf. 74 See nursinglicensure.org for a full list of State board requirements. NursingLicensure.org. 2015 N/LVN and . LP ure.org/. Registered Nurse License Requirements by State. http://www.nursinglicens 33

35 in the of the licensing board. However, in some States where these forms of accreditation State - of s tate institutions is not possible, a nursing student may have to get a license in the - of an out of their institution and have it transferred through an endorsement process to the State State nt to practice. In some cases, these requirements may create additional hurdles where they wa for students who take ad vantage of distance education. TATE A GREEMENTS A ECIPROCITY R UTHORIZATION T S OUNCIL FOR C ATIONAL N HE State for Council National The Reciprocity Agreements (NC - SARA) provides Authorization a standardized are States member all across programs education distance accrediting of means which there 23), (of accreditation making easier for distance education institutions to gain it in multiple States – in the past, a territories and States the of each of rocess p application the through go to had institutions separately. easily more can institutions accredited standardization, SARA - NC Under offer distance education programs SARA in more States, thus education distance more to access - NC member a is that State each giving of - increasing the size of the market and programs, students with more choices. States that join NC providing Most requirements. of number agree a must SARA to acceptable an demonstrate must they importantly, process for approving in - State institutio ns for SARA participation, and they must task a State agency with housing and administering SARA activities, including resolution of student complaints. a See nc - sara.org for more information. - Council for State Authorization Reciprocity Agreements. http://nc National . sara.org/ The Emergence of Consumer Information and Review Markets often rely on reputations when first choosing a service provider, be that a doctor, a Consumers . Yet consumers do not always have enough information to hair stylist, or a home contractor providers’ quality . accurately judge n these case s, o ccupational licensing or certification can I potentially provide a means of ensuring quality or helping consumers to identify high - quality the providers In recent years , however, . growth of online consumer information and review made it websites has easier for consumers to find information on the quality of firms and practitioners , and some observers have argued that consumer protection regulation should be 75 . updated to reflect this new access to information tes also have limitations in On the other hand, online reputational si their ability to inform consumers. P articipants may have an incentive to game their ratings, reducing the confidence 75 Cowen, Tyler and Alex Tabarrok. 2015. “The End of Asymmetric Information.” Cato Unbound. http://www.cato - unbound.org/2015/04/06/alex - tabarrok - tyler - cowen/end - asymmetric - information ; Thierer, Adam, Christopher Koopman, Anne Hobson, and Chris Kuiper. 2015. “How the Internet, the Sharing Economy, and Reputationa l Feedback Mechanisms Solve the ‘Lemons Problem.’” Mercatus Working Paper. Problem.pdf. - Lemons - http://mercatus.org/sites/default/files/Thierer 34

36 76 Q uality may not always be apparent even after the service has been consumers place in them. how and the way received, information is presented can have a substantial impact on that 77 consumers interpret and respond to it . Thus, there continues to be an important role for appropriately targeted regulation in protecting consumers. Criminal Record Licensing for Workers with a In many cases , a criminal record is an obstacle to obtaining a license. Data from the American Bar Association show that individuals with felonies are ineligible for thousands of professional 78 and certifications . licenses For example, indiv iduals with a felony are ineligible for a land 79 surveyor license in Alabama or an optometry license in California. - reaching implications. It is estimated that between 70 and 100 million These exclusions have far 80 have a criminal record. Americans (as many as one in three) Around 688,000 individuals were released from Federal and State prisons in 2011, nearly all of whom will need to seek 81 employment. L aws restricting licensing opportunities for workers with criminal records have a 82 on Black and Hispanic workers . disproportionate impact Many of these individuals have criminal histories which should not automatically disqualify them from work in a licensed profession. 76 California Brown, Jennifer and John Morgan. 2006. “Reputation in Online Auctions: The Market for Trust.” ement Review Manag - 81. 49, no. 1: 61 77 Luca, Michael. 2011. “Reviews, Reputation, and Revenue: The Case of Yelp.com.” HBS Working Paper . 78 Consequences American Bar Association National Inventory of Collateral of Conviction. http://www.abacollateralconsequences.org/search/ . 79 Alabama Administrative Code r. 330 - X - 3 - .01; California Business and Professions Code § 3057. http://optometry.ca.gov/formspubs/endorsement.p df. 80 This estimate includes individuals who have State records of arrests or subsequent dispositions. Most convictions are for misdemeanors and non - serious infractions, and many records are for arrests without convictions. As evident from the range in est imates cited above, there is considerable uncertainty surrounding the total number of Americans with criminal records. The Department of Justice reports that over 100.5 million Americans have state criminal history records. However, individuals may have re cords in multiple States, so the National Employment Law Center suggests discounting the DOJ’s estimate by 30 percent, resulting in an estimate of closer to one in four adult Americans with a criminal record. On the other hand, in some states, misdemeanor arrests for less serious crimes do not require fingerprinting, and thus the DOJ’s estimate may undercount these individuals. Bureau of Justice Statistics. 2012. “Survey of State Criminal History Information Systems, 2012.” U.S. Department of Justice. https ://www.ncjrs.gov/pdffiles1/bjs/grants/244563.pdf; Vallas and Dietrich (2014); Rodriguez, Michelle Natividad and Maurice Emsellem. 2011. “65 Million ‘Need Not Apply’: The Case for Reforming Criminal Background Checks for Employment.” National Employment Law Center. http://www.nelp.org/content/uploads/2015/03/65_Million_Need_Not_Apply.pdf. 81 Carson, E. Ann and William J. Sabol. 2012. “Prisoners in 2011.” U.S. Department of Justice, Bureau of Justice Statistics. http://www.bjs.gov/content/pub/pdf/p11.pdf ; Minton, Todd D. 2013. “Jail Inmates at Midyear 2012 – Statistical Tables.” U.S. Department of Justice, Bureau of Justice Statistics. http://www.bjs.gov/content/pub/pdf/jim12st.pdf . 82 Neighly, Emsellem, and Christman (2014). 35

37 While it is understandable that some kinds of criminal convictions should disqualify app licants , in many cases a criminal conviction of any kind may be a bar to licensure. for certain kinds of jobs , - five States Twenty and the District of Columbia have no standards in place governing the relevance of conviction records of applicants for occupational licenses . In these States , a licensing board may deny a license to an applicant who has a criminal convi ction, regardless of whether the conviction is relevant to the license sou whether there were any ght, how recent it was, or extenuating circumstance . In many States , employers and occupational licensing boards are also s permitted to ask about and consider arrests that never led to a conviction in making their 83 employment decision. In have standards in place that require some kind of relationship between the contrast , 25 States license sought and the applicant’s criminal history. For instance, the Texas Occupations Code states that “each licensing authority shall issue g uidelines... [stating] the reasons a particular 84 . While some offenses, like homicide and crime is considered to relate to a particular license ” crimes for many licenses in Texas, other offenses only disqualify assault, are disqualifying applicants for specif ic licenses for which the conviction is relevant . For example, the Texas is a basis for denying Occupations Code provides that a conviction for animal cruelty or revoking a licensed breeder license, while a conviction for driving while intoxicated is a basis for denying 85 a tow truck operators’ license. 83 The Legal Action Center. After Prison: Roadblocks to Reentry: A Report on State Legal Barriers Facing People with Criminal Records. http://www.lac.org/roadblocks - to - reentry/main.php?view=law&subaction=4 . 84 53, Texas Occupations Code, Title 2, Chapter Subchapter B, Sec. 53.025. http://www.statutes.legis.state.tx.us/Docs/OC/htm/OC .53.htm. 85 Texas Department of Licensing and Regulation. “Guidelines for License Applicants with Criminal Convictions.” http://www.tdlr.texas.gov/crimconvict.htm. 36

38 37

39 R L ICENSES FOR S TUDENT L EVOCATION OF D EFAULT OAN In 21 States, defaulting on student loan debt can result in the suspension or revocation of a worker’s a of license. occupational This policy affects a large segment the population, as the student loan market has loan student the of size the 2015, and 2000 Between experienced substantial growth in recent years. terms, by 170 percent in inflation - adjusted increased with rou ghly $1.1 trillion in outstanding market b by held over 41 million individuals as of the beginning of 2015. balances The policy is also misguided, as to repay a student loan. more difficult for the worker losing an occupational license may make it is reform in est inter However, one with practice, this ending law a passed recently Montana building. c legislator arguing that it was unnecessarily punitive and in A bill to repeal a similar law counterproductive. d e th of out it make not legislature. Iowa was recently drafted, but did a Center. and Licenses Professional Suspend That Statutes and Laws State 2014. Law Consumer National . Certificates - - and - Licenses Professional - Suspend - That - Statutes - and - Laws - content/uploads/2015/02/State - http://www.jwj.org/wp Certifi . cates.pdf b Analysis Tax of Office data; System Data Loan Student National of sample percent Department of Education 4 calculations. c Whitney, ; http://leg.mt.gov/bills/2015/billhtml/HB0363.htm 363. House 2015. Legislature. Montana 2015. Eric. Bill . Revoking for Laws Review “States Student Loan Defaults.” Licenses NPR loan http://www.npr.org/2015/04/08/398037156/States - review - laws - revoking - licenses - . defaults - for - student - d Iowa Legislature. 2015. House File 196. . ICE/default.asp?Category=billinfo&Service=Billbook&menu=false&hbill=HF196 - http://coolice.legis.iowa.gov/Cool Licensing for Foreign Immigrants Many immigrants arrive in the United States having already completed extensive education, job training, or work experience abroad. For example, 30 percent of working - age immigrants in 2010 had at least a college degree. However, research indicat es that high - skilled immigrants have a hard time finding employment that allows them to make full use of their skills. Hall et al. (2011) find that nearly half of immigrants with a bachelor’s degree are overqualified for their current jobs, compared to aro und one - third of their native - born counterparts , resulting in 86 underutilization . of valuable skills One likely contributing factor is that immigrants must often complete duplicative and costly requirements in order to acquire a U.S. license in their chos en career. In many cases, the training or experience that these immigrants acquired overseas does not count toward fulfilling the relevant licensing requirements. For example, in Illinois, if an engineer earns a degree from most 86 Hall, Matthew, Audrey Singer, Gordon F. De Jong, and Deborah Roempke Graefe. 2011. “The Ge ography of State of Metropolitan America no. 33. The Brookings Immigrant Skills: Educational Profiles of Metropolitan Areas.” - Institution. http://www.brookings.edu/~/media/research/files/papers/2011/6/immigrants singer/06_immigrants_singer.pdf. 38

40 universities abroad, she mu st submit proof that she worked under a U.S. engineer for four years; 87 other work experience abroad will not suffice. Licensing requirements that prevent qualified immigrants from finding employment in their chosen profession affect not only the workers themselves, but also consumers . immigrant Removing such requirements has the potential to improve access to services, especially among 88 - end of the income distribution. those at the middle and lower Declining Mobility in the U.S. Labor Force State lines. As Licensed workers are less likely to move over longer distances, notably across discussed earlier, it can be difficult to know what to make of this comparison, since individuals e do or do not require State willingly choose lines of work with the understanding that thes as discussed above, the similar rates at which unlicensed and licensed licensing. However, workers move within States suggests that those workers may not actually be very different in their desire to move. Rather, t feren ce in interstate migration rates further suggests he large dif that licensing constitutes a significant barrier to relocation. may choose their occupation with the understanding that it requires a State Many workers license, life events can intervene to change their expectations about the need to make a but cross - s tate move. For example, military spouses may have entered their field before marriage. Other events like a local disaster or a health crisis for a parent – may mean that workers who – had never planned to move across State lines after receiving a license suddenly find themselves needing to do so. In such cases, the need to re - license is an important concern. If States don’t licensing en the financial barriers of offer certifying), th a temporary license to practice (while re - are even more significant. There are clear benefits to mobility, both for workers employers, and the economy at large, and , on limits to mobility are themselves a cause for concern. At the very least, the restrictions mobility should be weighed as costs, both to a State ’s own population and to employers in that State who may be seeking to hire licensed workers from a broader, national labor pool. However, overall geographic mobility has been declining since the 1970s in the United States, as shown 89 below. It is unlikely that licensing is the sole driver of this change – the rise in licensing pre - date s the decline by at least two decades and short - distance moves have declined alongside long - 87 nny, Nancy Younan, and Rebecca Tancredi. 2014. “Foreign Lopez, Fa - Educated Engineers: Barriers to Employment and Professional Relicensing in Illinois.” Illinois Coalition for Immigrant and Refugee Rights. http://icirr.org/content/report discusses - barriers - immigrant - engineers - illinois. - 88 Baker, Dean. 2014. “Doctors and Drugs: Promoting Growth and Equality through Free Trade.” Cato Online Forum . http://www.cato.org/publications/cato - online - forum/doctors - drugs - promoting - growth - equality - through - free - trade . 89 Molloy, Raven, Christopher L. Smith, and Abigail Wozniak. 2014. “Declining Migration within the U.S.: The Role of king Paper 20065. the Labor Market.” NBER Wor 39

41 distance moves but licensi ng may play a contributing role, as posited by Davis and Haltiwanger – 90 (2014). Figure 12: Migration Rates by Distance Migration Rate Migration Rate 0.18 0.045 2013 county - Intra 0.16 Inter - county, 0.040 (right axis) same state 0.14 (left axis) 0.035 0.12 0.030 0.1 0.08 0.025 state - Inter (left axis) 0.06 0.020 0.04 0.015 0.02 0 0.010 1997 1948 1962 1969 1976 1983 1990 1955 2004 2011 and Wozniak (2014). Source: Molloy, Smith, Note. Migration rates of the civilian population age 16 and up from the Current Population Survey. - 1989 migration rates are calculated from microdata and exclude imputed values. Sample details Post 91 are given in Molloy, Smith and W ozniak (2011) and Saks and Wozniak (2011). OMPACT NTERSTATE EDICAL L I C M (IMLC) ICENSURE As of May 2015, an interstate compact has gone into effect for physicians in nine States, with more States organized expected to join over the next year. It is somewhat differently from the Nurse Licensure C ompact (NLC) . Rather than creating a separate interstate license that can be used in multiple States, as the NLC a once. at licenses State individual many acquire to physicians for easier it make They does, the IMLC will will full rights to practice in States for which have they obtain a license, regardless of permanent residence. Fees will still be payable to each jurisdiction in which a license is acquired. Licensure like th e updated NLC, the Interstate Medical However, Compact will be a two - tiered system. Only physicians who meet relatively stringent requirements will be permitted to participate in the compact, but other will still be able to acquire State doctors licenses under the pre - existing regime. a Chaudhry, Humayun J., Lisa A. Robin, Eric M. Fish, Donald H. Polk, and J. Daniel Gifford. 2015. “Improving Access and 17: no. 372, Medicine of Journal England New The Compact.” Licensure Medical 1583. - 1581 Mobility – The Interstate 90 Davis and Haltiwanger (2014). 91 Molloy, Raven, Christopher L. Smith, and Abigail Wozniak. 2011. “Internal Migration in the United States.” Journal of Economic Perspectives 25, no. 3: 173 - 196. American Economic Association; Saks, Raven E. and Abigail Wozniak. 2011. “Labor Reallocation over the Business Cycle: New Evidence from Internal Migration.” Journal of Labor - 739. The University of Chicago Press. 29, no. 4: 697 Economics 40

42 IV. Licensing Reforms The prior sections the growth in licensing and the impacts that licensing may have have described , worker mobility , and the price of goods and services, on employment well as special burdens as that licensing may place on specific populations, such as those with criminal records, military - . These concerns need to be spouses, teleworkers, entrepreneurs, and low wage workers goals weighed against the of promoting consumer hea lth and safety as well as other professional objectives that groups may seek with licensing . Recognizing that , in many cases , the costs and benefits of licensing are not appropriately weighed, State policymakers and industry representatives are spearheadin g a number of reform efforts to promote a more thoughtful approach to licensing . Although licensing policy falls in the purview of individual States, the Federal government can help to facilitate State reforms by providing information and resources to St ates. The President’s FY2016 Budget includes $15 million in new discretionary funding at the Department of Labor to identify, explore, and address areas where licensing requirements create barriers to labor market that the Office of the First Lady and Dr. Biden progress entry or labor mobility. This builds on the to work with States to reduce licensing barriers have through the Joining Forces init i ative made for veterans and military spouse s . This section enumerates a number of considera tions that policymakers should take into consideration in order to ensure that occupational regulation serves the public interest . It also outlines , and describes several Federal some promising efforts to improve our system of licensing initiatives to prom ote licensing reform . Based on existing research and conversations with policymakers and industry representatives from over 25 States , we present a number of practices that may lead to more and effective licensing systems . transparent We then discuss several of these proposals in more detail. Framework for Licensing Reform Because occupations are diverse in their tasks, aims and responsibilities, successfully regulating them often requires a tailored approach. Nevertheless, there are a number of commo n factors that p olicymakers contemplating enacting, revising, or repealing a n occupational regulation must consider. We summarize these factors in the box below and discuss them in more detail in the text that follows. 41

43 L B EST P RACTICES ICENSING that Licensing Restrictions are Closely Targeted to Protecting Public Health and Safety, and are Ensure Overly Broad or Burdensome Not are cases where public health and 1. safety concerns mild, consider using alternative systems that In less restrictive than l are such as voluntary State certification (“right - to - title”) or icensing, registration (filing basic information with a State registry). sure that substantive requirements of licensing 2. (e.g., education and experience Make requirements) are closely tied to public health and safety concerns. 3. Minimize procedural burdens of acquiring a license, in terms of fees, complexity of requirements, processing and paperwork. time, 4. licensure is deemed appropriate, allow all licensed professionals to provide services to the Where of their current competency, even if this full means that multiple professions provide extent overlapping services. 5. Review licensing requirements for the formerly incarcerated, immigrants, and veterans to ensure that laws do not prevent qualified licensing individuals from securing employment opportunities, while still providing appropriate protections for consumers. of Facilitate a Careful Consideration Licensure’s Costs and Benefits benefit and 1. Carry out comprehensive cost - sunrise assessments of l icensing laws through both regular reviews, incorporating criteria like: sunset safety presence of legitimate  health and concerns or substantial fiduciary The public responsibilities; Whether existing legal remedies, consumer rating and reputa tional mechanisms, and  adequate - less approaches are burdensome to protect consumers; regulatory  Whether the proposed licensing requirements are actually well - tailored to ensure quality and protect consumers;  The effect that the license would have on practi tioner supply;  The effect that the license would have on the price of goods and services; and the  Administrative costs of enforcing license. 2. suggests that removing licenses is much Evidence difficult than enacting them, so sunset more reviews in particula r may be ineffective without certain protections. To strengthen both sunset and sunrise reviews, consider taking such measures as:  Providing agencies or sunrise and sunset commissions responsible for conducting the adequate cost analysis with benefit reso urces; -  Ensuring that the cost - benefit review process is insulated against political interference; be  that a minimum number of votes Legislating required to overrule the sunrise or sunset agency’s recommendation;  42

44 L .) ONT (C P EST B ICENSING RACTICES legislatures State within committees specialized Appointing  that are responsible for all issues, licensing will work with the that State agency in charge of conducting the and review. 3. Promote the appointment of public representatives to licensing boards, alongside professional members. Mobility to Barriers Licensing’s Reduce to Work extent maximum the to requirements licensing Harmonize 1. States. across possible for 2. Form interstate compacts that make it easier licensed workers to practice and relocate across to regulators State enabling also histories. performance practitioners’ while share State lines, individuals excluding cally categori avoid arrangement, interstate an such forming When 3. a with of licensing States. participating stringent most the requirements criminal record or adopting the interstate for licenses is difficult, consider a “two - tiered” standards common on agreeing If 4. flexible restricting rules their retain to requirements more with es Stat allows that structure while satisfy who workers to reciprocity interstate bar. higher a Discussion of Selected Best Practices and Examples As discussed above, applying certain best practices in occupational licensing can ensure that public safety and health needs are met while maintaining flexibility in the labor market and provide more detail on how State governments could apply opportunities for workers. Below we these practices to their occupationa l licensing systems, as well as examples of current State initiatives to build a more modern regulatory structure. Ensure that Licensing Restrictions are Closely Targeted to Protecting Public Heal th and Safety, and are N ot Overly Broad or Burdensome Consider Forms of Occupational Regulations Alternative 92 Other regulatory options short of licensing are generally available. These options include ed), registration, bonding and insurance, certification (whether private or government - administer and inspection, among others. may vary in terms of the burdens they place on T hese alternatives workers, and may be more effective in targeting different types of regulatory problems. For 92 Shimberg and Roederer (1994) provide much of the framework that we discuss here. Shimberg, Benjamin and Doug Roederer. 1994. “Questions a Legislator Should Ask.” Second Edition. Lexington, KY: The Council on Licensure, Enforcement and Regulation. 43

45 instance, inspecti on of business establishment s can be an effective means of enforcing regular health and safety restrictions. Certification , or “right - to -  title,” restricts the use of a profession’s title to those who have been certified, but allows anyone to perform the duties of the profession, regardless of whether they have been certified or not. By restricting use of a title to workers wh o have achieved certain minimum requirements, certification may represent a less restrictive means of providing consumers with information regarding provider quality. Regulation through certification provides information to consumers while allowing them to choose the quality they can afford, and does so without limiting workers’ access to the or occupations where the consequences of low quality service are not Thus, f occupation. in some cases be severe, voluntary certification from a private or public accreditor may Certification is less appropriate, however, when the more appropriate than licensing. public is likely to make improper or dangerous decisions, and when these decisions might 93 for others . have spillover consequences Certification should reflect o verall practitioner quality , and States should consider including a mechanism for evaluating and revoking certification when a practitioner no longer meets the quality standards. suring that is useful for en simply maintaining a list of practitioners  Registration – – providers are easily reached in the case of a complaint. It can also provide needed tate data agencies. S information about labor supply in an occupation to Registration can be combined with some minimum standards, such as providing documentatio n for qualification or a character reference, that are typically less burdensome than those required by licensing. Mandatory bonding , with or without insurance, is another alternative. With bonding,  against which consumer claims can employers or workers are required to maintain funds be made. This both communicates confidence in the expected quality of work and ensures that consumers will be compensated in the event they suffer harm. Alternatively, a similar purpose, with the insurance worker or firm may purchase insurance. This serves a company’s willingness to sell a policy itself signaling confidence in the expected quality of work.  Direct regulation of firms and establishments , in particular through inspection, in many instances may be more effecti ve and less burdensome than licensing. As discussed above, licensing requirements are not always tied to quality improvements, and licensing boards 94 are often not diligent in monitoring and disciplining licensed practitioners. By contrast, on of establishments can result in more regular monitoring and inspection direct regulati 93 ncern with private certification in particular is that private competition could lead to a number of certifiers, One co leaving consumers unable to distinguish between high and low - quality certification. In response to this problem, the State could impose minimum standards or in some other way regulate private certification, or the State could itself shoulder the responsibility of certifying workers. 94 44, no. 1: 6 Gellhorn, Walter. 1976. “The Abuse of Occupational Licensing.” The University of Chicago Law Review - 27; Shimberg (1980). 44

46 without excluding practitioners from the labor force. For example, establishments that while service serve alcoholic beverages are often regulated at the establishment level, are workers unlicensed. often In weighing the most appropriate form of regulation, policymakers should also account for the costs of administering and enforcing the regulation. These costs vary depending on the content of licensing requirements and activities o f the boards. For instance, licensing boards will often oversee entrance requirements regarding education and experience, set rules for other States ’ licensees, and hear complaints against violators of licensing regulations. Some States have implemented or are considering adopting alternative regulatory approaches . For example, in 2015, the Indiana legislature passed a law that sets up a pilot program that would registry of privately certified individuals. Occupations that are currently lic create a State ensed will be unaffected (as will workers in health care occupations), but associations that privately workers certify will be able to apply to have their certification count in currently unlicensed fields as “ State registered . ” Conditional on meeting a set of requirements , certified workers will then 95 have exclusive right to use the title “ State registered , ” but not an exclusive right to practice. In conversations with State regulators, they have suggested that some professionals have been nsing not because unlicensed practitioners are a threat to public safety, but because seeking lice third - parties won’t recognize unlicensed practitioners in situations such as reimbursement for - to identify and services. In these cases, States may want to engage with third party payers add ress appropriate paths forward. Reducing the Substantive and Procedural Burdens of Professional Regulations Regardless of whether a profession is licensed or certified, it is important that the application process be as straightforward and transparent as possible, and that the requirements for obtaining a license or certification be narrowly tied to the specific public health and safety concerns of the work. There are two ways in which requirements tend to drift from these objectives. The first is when practitioners, often through the regulatory boards they participate in, act to raise standards. For example, the American Physical Therapy Association has considered 96 R a bachelor’s degree for obtaining a physical therapist assista nt license. egulatory requiring agencies also sometimes apply the requirements of an older occupation to a new but related - type of work. For example, the “corporate practice of law” doctrine, which prohibits non lawyers from participating in the financing, ownership, or management of law businesses, has been plied to online legal document and information companies seeking to provide ap online legal 97 assistance or other innovative products. These services are related to the activities of lawyers 95 Indiana General Assembly. 2015. House Bill 1303. https://iga.in.gov/legislative/2015/bills/house/1303. 96 American Physical Therapy Association. 2012. “ APTA to Explore Feasibility of Transitioning PTA Education to Bachelor Degree Lev el.” http://www.apta.org/PTinMotion/NewsNow/2012/6/15/HODRC20/ . 97 Hadfield (2014). 45

47 but are new forms of work that merit separate considerat ion of the need for legitimately . licensing the labor market effects of specific occupational regulations sometimes Also, depend less on their than on other factors, such as their formal category substantive and procedural requirements, as well as norms within the lab or market. For example, a doctor who is not “board - 98 obtain or maintain a position for practice may find it difficult to By certified” in a hospital. is not well enforced, or if it imposes only minimal substantive contrast, if a particular license - requireme nts (e.g., educational and training standards) and is procedurally very easy to obtain (for example, it entails minimal paperwork and processing time), then it may have less of an impact on workers and consumers. TREAMLINING R EQUIRED T RAINING TO F OCUS ON H EALTH AND S AFETY S Professional Beauty Association (PBA) represents a The variety of professions related to personal cosmetologists, appearance: barbers, hairdressers, and manicurists, among others. Cosmetologists are States, uniformly though requirements vary substantiall y across licensed, with some requiring more than as much education as twice others. On average, more than a year of education is required, with fees that are often non - trivial. of types general two for pushing now is PBA The are they First, etologists. cosm of licensing the in reform schooling should to standardize requirements for hours of seeking across States. This eventually help make qualifications licensing for advocating it simpler for workers to move across States. Second, they are (mostly related aligned safety and health public with closely more are that curriculum) school required to an reform. licensing concerns. This second initiative in particular is important step forward for requirements safety. Limiting Many occupations have educational public that are not necess ary to promote to requirements licensing are necessary to protect the public can go a long way towards those that regime. licensing intrusive - minimally rational, a achieving Full Extent of their Current C ompetency Allow Licensed Professionals to Provide Services to the When licensing is deemed appropriate for a given occupation, policymakers must also determine the Typically, this becomes an licensed activity, or “scope of practice . ” the boundaries of important issue when multiple licensed occupations provide complementary or overlapping services. For instance, physicians and nurse practitioners may both prescribe medicines in some States . According to the Pew Health Professi ons Committee report in 1995, policymakers should endeavor to allow practitioners to offer services to the full extent of their competency and 98 Freed, Gary L., Kelly M. Dunham, and Acham Gebremariam. 2013. “Changes in Hospitals’ Credentiali ng - 303. Journal of Hospital Medicine 8, no. 6: 298 Requirements for Board Certification from 2005 to 2010.” 46

48 knowledge, even if this means that multiple professions are licensed to offer overlapping 99 services. States simply focus on scope of practice on a case - by - States have While most case basis, a few scope of practice rules in a more comprehensive manner, primarily in recently considered their the health care context. In 2007, Pennsylvania expanded the types of services that can be provided by physician assistants, advanced practice nurses, physical therapists, and pharmacists. In 2008, the Colorado Governor commissioned a committee to investigate options for improving utilization of non - o, an interim legislative committee was physician providers. In New Mexic established to help legislators evaluate proposed scope of practice reforms. Minnesota and 100 California both have agencies that review scope of practice rules and potential policy changes. Connecticut’s State legisla ture conducted a particularly thorough 2009 review of scope of practice for the health care professions, including comparisons with regulatory models from 101 . other In keeping with the academic literature, Connecticut’s report emphasizes the States e of evaluating scope of practice implications for consumer acc importanc ess to care. It also that the legislature set up a process by which any health care profession could recommends ice review submit a request to change its scope of practice. Since 2012, the scope of pract committee has received 21 requests from different health care occupations’ associations through 102 this process and has ruled on 6 of them. Easing Exclusions for Workers with Criminal Records 103 Occupational licenses are often unavailable to worker Licensing s with criminal records. regulations often refer broadly to “good moral character” as a requirement for holding a license, and in practice this has in many cases been interpreted to ban individuals with any criminal 104 record. Policymakers should endeavor to strike a more appropriate balance between protecting the public and ensuring that licensing laws do not prevent qualified individuals from policymakers should refrain from categorically . First, securing employment opportunities 99 Pew Health Professions Committee. 1995. “Reforming Health Care Workforce Regulation: Policy Considerations Report of the Ta for the 21st Century.” on Health Care Workforce Regulation . skforce http://www.futurehealth.ucsf.edu/Content/29/1995 - 12_Reforming_Health_Care_Workforce_Regulation_Policy_Considerations_for_the_21st_Century.pdf. 100 Swankin, LeBuhn, and Gulish (2010). 101 Connecticut General Assembl y. 2009. “Scope of Practice Determination for Health Care Professions.” Legislative Program Review and Investigations Committee. http://www.cga.ct.gov/2009/pridata/Studies/PDF/Scope_of_Practice_Final_Report.PDF. 102 Connecticut Department of Public Health. – 2015. Scope of Practice Requests for 2014 2015. http://www.ct.gov/dph/cwp/view.asp?a=3121&Q=563950&PM=1 . 103 Law Project. This paragraph benefited from a conversation with the National Employment 104 Craddock, Larry. 2008. “’Good Moral Character’ as a Licensing Standard.” Journal of the National Association of Administrative Law Judiciary 28, no. 2: 450 - 469; See Massachusetts Department of Health and Human Services for example of a state regulation in Massachusetts requiring good moral character. Massachusetts Department of Health and Human Services. Good Moral Character Requirements for Li censing. http://www.mass.gov/eohhs/gov/departments/dph/programs/hcq/dhpl/nursing/licensing/good - moral - cha racter - . licensure.html requirements - for - 47

49 excluding indivi duals with criminal records, and instead should only exclude those individuals Second, whose convictions are recent and relevant, and pose a legitimate threat to public safety. a timely right to appeal and seek waivers from are provided with it is important that workers it is important that licensing boards provide transparent . Finally, criminal background exclusions 105 and clear explanations of their background check requirements . s and Benefits Facilitate a Careful Consideration of Licensure’s Cost Sunset and Sunrise Reviews States conduct “sunrise” or “sunset” reviews of occupational licensure. Both sunrise and Many - sunset reviews subject licensing frameworks to a cost Sunrise reviews trigger benefit analysis. cost - benefit analysis wh en a new licensing proposal is enacted, while sunset reviews apply cost - benefit analysis to licensing laws that have been in place for some time. Currently, 13 States have in place some sort of sunrise law, while 32 States maintain some sort of sunset proc ess and 10 106 have both . States States vary in how thoroughly and independently they administer sunrise and sunset reviews. Ideally during a sunrise or sunset review, analysts would estimate the costs and benefits of the , licensing proposal or legislation in a careful and thorough manner, comparing licensing with alternative regulatory options , as well as legislative inaction. Florida, for instance, requires in its Sunr ise Act that licensure only be used when “the overall cost - effectiveness and economic impact of the proposed regulation, including the indirect costs to consumers, will be favorable” and 107 L - “other types of less restrictive regulation would not effectively pro tect the public . ” er ong reviews term of licensing are especially useful , since the labor market and quality impacts of . licensing may only materialize gradually over time There is some evidence to suggest that sunrise reviews can be more successful at limiting the growth of licensing than sunset reviews are at removing unnecessary licensing. Thornton and Timmons (2015) he successful “de - licensing” discover only eight instances in the past 40 years of t State level, and in four of these cases, attempts to relicense the of an occupation at the They find that State sunset committees usually recommend the occupations followed afterward. e in continuation of the license, and th that rare instances when they recommend that licensing 108 laws be repealed, the legislature usually ignores the recommendation. State Conversations with State regulators also suggested that sunrise review may be more efficacious than sunset review. 105 Neighly, Emsellem, and Christman (2014). 106 The Council on Licensure, Enforcement, and Regulation defines sunset and sunrise reviews as follows: “Sunset is the automatic termination of regulatory boards and agencie s unless legislative action is taken to reinstate them... Sunrise is a process under which an occupation or profession wishing to receive State certification or licensure must propose the components of the legislation, along with cost and benefit estimates of the proposed regulation. The profession must then convince the legislators that consumers will be unduly harmed if the proposed legislation is not adopted.” Council on Licensure Enforcement and Regulation. Sunrise, Sunset and State Agency Audits . http: //www.clearhq.org/page - 486181. 107 Fla. Stat. § 11.62 108 Thornton and Timmons (2015). 48

50 Since 5 , Maine’s Department of Professional and Financial Regulation has conducted a sunrise 199 review of any proposed legislation that would establish an occupational licensing board or expand a current practitioner’s scope of practice. ession to be Depending on the type of prof he sunrise process can take up to a year for research to regulated, t be conducted and for a legislative committee to evaluate the proposal based on 13 review criteria and make a final decision whether to regulate the profession . According to Maine’s Department of Professional and Financial Regulation, only one occupation has acquired a licensed status in the past 15 109 years . A sunset review can nevertheless be useful because , even if licensing was justified when first introduced, technologi cal and economic changes may have rendered it unnecessary or overly restrictive. Periodic examination of existing rules is thus helpful in maintaining the quality of occupational regulation. Sunset reviews also have the benefit of reviewing complaints lodg ed with the licensing board. These can provide important insight into the value of continuing the license. Often, the large majority of complaints are filed by other practitioners – not consumers and are related to workers practicing without a license ra ther than any substantive violation of – 110 rules concerning health and safety. Sunset reviews have to carefully consider what the In principle, complaint record means. few complaints could mean that licensing a particular occupation eliminates all dangerous conduct, but it can also mean that genuine consumer harms are very rare in the occupation. 109 0 Maine Revised Statutes Title 32 § 60 - J. http://legislature.maine.gov/statutes/32/title32sec6 ; - J.html Maine Department of Professional and Financial Regulation. 2015. Private Correspondence. 110 Loten, Angus and Sarah E. Needleman. 2014. “State Licensing Boards Under Fire from Within.” The Wall Street Journal . http://www.wsj.com/articles/state - lice nsing - boards - under - fire - from - within - 1409184515; Rhode, Deborah. 1981. “Policing the Professional Monopoly: A Constitutional and Empirical Analysis of Unauthorized Practice - 112. Prohibitions.” Stanford Law Review 34, no. 1: 1 49

51 To strengthen both sunset and sunrise review , i t is important that the agency responsible for conducting the cost - benefit analysis is provided with adequate res ources and is insulated from political interference. the State agency in In addition, State legislatures might further empower charge of conducting the review, for example, by legislating that some minimum number of votes be required to overrule the agency ’s recommendation. Appointing a specialized committee within the State legislature that is responsible for licensing issues may also be helpful to serve as a locus for institutional knowledge on licensing and to educate other legislators. ibility for supervising licensing laws and conducting sunrise and sunset reviews in Vesting respons a single “umbrella agency” can be a helpful way to simultaneously ensure adequate resources, ch in establishing its efficiency, and sufficient analytical expertise. Colorado has taken this approa 111 . DORA’s sunrise review nonpartisan Department of Regulatory Agencies (DORA) s ha ve though the legislature identified many new proposals for licensure that did not pass scrutiny , has 112 not always followed their recommendations . 111 Kleiner (2015) includes a di scussion of DORA. 112 Colorado’s Department of Regulatory Agencies. Interview by National Economic Council. 2015. Washington, DC. 50

52 Recent Reviews of Licensing Policy by States Having an established sunrise process in place is a good way to prevent future unnecessary burdens in licensing, but as licensing is already extensive in some States , reviewing current way for to reduce occupational licensing barriers. This has States licenses systematically may be a been done in several recently with varying degrees of success. States reviewed their In 2011, Michigan’s Office of Regulatory Reinvention occupational regulations using cost benefit cri teria similar to those listed in the best practices - and recommended that 18 occupations, such as immigration clerical assistant and insurance solicitor , be deregulated , 113 . legislature to The office then worked with the State though only some of these were licensed 114 try to some of these professions . and deregulate enact these recommendations - member legislative The Texas Legislature created The Texas Sunset Advisory Commission, a 12 State agencies, in 1977. In 2013, the Texas commission designed to examine the efficiency of - licensing an occupation. The following House expanded the commission’s set of criteria for de year, the commission reviewed the Texas Department of State Health and recommended that 6 115 . licensed occupations be deregulated 4, the Program Evaluation Division (PED) of the North Carolina General Assembly called for In 201 the establish ment of a nine - member Occupational Licensing Commission , which would primarily conduct sunrise reviews of profession s that wish to require licensure, mediate disagreements between occupational licensing agencies regarding jurisdictional authority, and review annual would have five public members who are reporting requirements. Importantly, the commission not licensed in an occupation regulated by an occupational licensing entity, which reduce would who may feel obligated to protect the number of potential conflicts of interest from members 116 their occupation from scrutiny. PED reviewed 55 occupational li censing agencies to determine if there was a In addition, the continued need for licensure in these occupations. PED scored each agency based on demonstrable impact for harm, the number of complaints and significant disciplinary actions, and were the number of other that license the occupation. T he 12 lowest - scoring agencies States 117 recommended for further review by the General Assembly . 113 - 154 - 10573_11472 - 275935 -- RSS,00.html. See http://www.michigan.gov/lara/0,4601,7 114 Michigan Department of Licensing and Regulatory Affairs. 2012. Office of Regulatory Reinvention Issues Recommendations to Deregulate 18 Occupations; Eliminate 9 Boards. http://www.michigan.gov/lara/0,4601,7 - 154 - 10573_11472 - 275935 -- RSS,00.html ; Michigan Licensing and Regulatory Affairs. 2015. Private correspondence. 115 T hornton and Timmons (2015) ; Texas Legislature. 2015. Senate Bill 202. 116 North Carolina General Assembly Legislative Services Office. 2014. “Occupational Licensing Agencies Should Not be Centralized, but Stronger Oversight is Needed.” Final Report to the Jo int Legislative Program Evaluation Oversight Committee no. 2014 - 15. http://www.ncleg.net/PED/Reports/documents/OccLic/OccLic_Report.pdf. 117 North Carolina General Assembly Legislative Services Office (2014). 51

53 Public Membership on Licensing Boards Another potentially promising practice is to appoint more public members to licensing boards. Originally, licensing boards were almost exclusively populated by members of the regulated professions. Professional members often oppose public membership on the grounds that public some ember, and members lack the technical expertise necessary to be an effective board m S tates still have in place statutory requirements that governors appoint only those individuals State professional association to serve as licensee members of a licensing nominated by a 118 board. Though have the advantage of expertise in technical matters related to members of a profession their fields, they are also more likely than public members to favor the interests of their and nonprofits began to profession over the interests of the public. For this reason, some States rioritize the inclusion of public members. California was a pioneer in this effort, achieving public p States have since member majorities on some boards as early as the 1970s, and many other 119 experimented with public members on their boards. reliable empirical evidence There is little regarding the effectiveness of this reform, but anecdotal evidence suggests the value of public representation has varied greatly depending on how such members are identified and selected, es are made clear, and whether sufficient training and whether their roles and responsibiliti 120 support are provided to them. ECENT S UPREME C OURT R ECISION ON L ICENSING B OARDS AND A NTITRUST L AW D States’ legal authority to license professions is well - established. In 1889, the Supreme Court i n Dent v. West Virginia the rights of States to license professions. Under established a line of cases starting with Parker v. Brown , State licensing boards have been assumed to be shielded from Federal antitrust liability, in the 1 courts manner as State and legislatures. same Federal v. Dental of Board State Carolina North decision, Trade Examiners However, in a recent Commission the Supreme Court held that State licensing boards are not automatically exempted from , 1 scrutiny. the antitrust Under the sta ndard articulated by Court, if a controlling number of board members are themselves “active market participants,” then the licensing board’s conduct is only immune from State. the antitrust scrutiny if it is by (1) clearly articulated State policy, and (2) actively supervised extent to which the Court’s decision will The in practice increase State licensing boards’ exposure to antitrust actions and constrain occupational regulation is unclear. However, States may respond to the of the membership Court’s decision by incr easing their supervision requirements or by reconstituting the public more include to boards example. for members, 118 Swankin (2012); Shimberg (1980); Pew Health Pr ofessions Committee (1995). 119 Shimberg (1980). 120 Citizen Advocacy Center. 1995. Public Representation on HealthCare Regulatory, Governing, and Oversight Bodies: . Strategies for Success 52

54 Work to educe L icensing’s B arriers to M obility R Interstate Compacts authorities and industry groups have moved to In a number of different areas, regulatory Interstate compacts construct interstate compacts to further facilitate the free flow of workers. ith some may be constructed in several ways. They may be based on reciprocity agreements, w State ized in other States . For example, many States have reciprocity agreements licenses recogn that allow the open practice of law by lawyers who have been admitted to the bar of another State . A different approach , taken by the N urse Licensure Compact , is for States to const ruct a separate, multi State license that installs a common set of qualifications for all compact - members. States are free to maintain single - State licensure requirements, but must consent to a separate standard that pertains to workers from other States . States must both acknowledge and bridge the gaps that exist in In devising these agreements, their licensing requirements. This is obviously easier to do when the licensing requirements are already relatively similar across States to begin with. However, even in such circumstances, there are logistical and financial barriers to constructing a compact. For instance, States must share information about complaints against practitioners as well as deal with loss of potentially revenue . When qualifications are States from practitioners who previously paid fees in multiple dissimilar across States , then some may be concerned about substantially the prospect of States allowing other States ’ licensees to practice. One danger is that when States are harmonizing their licensing requirements or creating an or may interstate compact , they may settle on a level of licensing that is inappropriately stringent all worke rs favor the lowest common denominator . For example , r egulators may decide to bar with criminal records from obtaining a license or participating in the compact , even when the criminal record is not specifically relevant to practice in an occupation. In general, States should avoid simply adopting the licensing requirements of the mo st stringent States . However, if States , then with more stringent requirements will not agree to accept workers from other States States should consider - tiered” structure that allows States with more flexible adopting a “two requirements to retain their ru les while restricting interstate reciprocity to workers who satisfy a higher bar. Such agreements also should avoid creating a “race to the bottom” and instead seek to strike the appropriate balance in establishing requirements. 53

55 OMPACT C ICENSURE L URSE N HE T United Compact Licensure Nurse the 2000, in States the in Introduced aims (NLC) to lower barriers to nurses, practical licensed for mobility geographic March of As nurses. registered and nurses, vocational 1 an which in recognition,” “mutual of system a uses NLC The the Compact. in 2015, 25 States participate that has adopted the NLC may acquire a single State multi - State license that RN or a LPN/VN located in a person — in any other Stat e that has adopted the NLC. to them allows — electronically either or in practice Stange and DePasquale move. permanent a after license (2014) new a obtain to Nurses required still are 1 commuting interstate of probability the increase does adoption NLC that find nurses. among A key The NLC illustrates the challen ges of coming to agreement across States with different standards. criminal with how and whether in States across variation the was NLC the forming in difficulty workers were licensed. While individual States are free to histories set their licensing requirements as they see fit (for only currently is license State - multi the apply), to records criminal with nurses allowing by instance, convictions felony with (nurses standard restrictive more a satisfy who nurses to available may not apply). tuned the Compact would use a more finely - approach that accounted for details of workers’ Ideally, would extend to the and are, they approach this recent how and relevance their including records, criminal not multi - State license. (For example, a separate compact under development for physical therapy will when exclude workers with felony convictions.) But categorically States fail to reach agreement, a - two preferable is system tiered all. at reciprocity no achieving to Federal Reform Efforts State level, but Federal resources can help to incentivize State Licensing reform takes place at the States to use when making their own reforms. collaboration and expand resources for The President’s FY2016 Budget includes $15 million in new discretionary funding at the Department of Labor to identify, explore, and address areas where licensing requirements create barriers to labor market entry or labor mobility. The first round of grants fund a consorti um of States, would managed by an intermediary or lea ding State , to conduct analyses of licensing requirements and develop ways to make licenses portable across States , including cross - State licensing reciprocity agreements to accept each other’s licenses. The Department use a portion of the funding would fo r research to identify measurable criteria that identify occupations for which licensing is not justified. This research would inform the second round of grants that will fund individual States that are working to reduce licensing barriers , and support their work in reviewing whether , as appropriate State licensing requirements should be modified, as well as developing voluntary certification and credentialing frameworks to replace unnecessary licensing. Grants could also provide resources to to build coalitions across education, business, and consumer groups to reduce States licensing burdens. to make reforms that , t he Federal government has also called on States As described previously The frequent interstate movement of military families benefit military spouses and veterans. particular presents a hardship for civilian spouses who must continually seek new employment. 54

56 Compounding this difficulty is the necessity of becoming licensed in each new . If licensing State e high enough, then military spouses may be deterred from participating in the labor burdens ar market altogether. Following publication of a joint Treasury and Defense Department report in early 2012, many passed legislation to enhance reciprocity for spous es of active military service members. States Expediting the application process and providing temporary licenses, as the Treasury/Defense report recommended, will help military spouses working in a licensed occupation to more easily 121 and remain part of the labor force. transition to a new State Relatedly, the Joining Forces initiative has worked to help veterans transition to civilian employment. Frequently, service members develop skills relevant to civilian occupations that nonetheless do not conform to the t ypical pattern (e.g., classroom instruction, internship, etc.) Showing licensing authorities that veterans have obtained relevant skills and establishing based pathways to licensure are vital to re integrating veterans into the civilian - competency - labor ma rket. 121 U.S. Department of Treasury and U.S. Department of Defense (2012). 55

57 Conclusion In many fields, occupational licensing plays an important role in protecting consumers and ensuring quality. Licensing can also encourage practitioners to invest in and maintain their skills. These benefits are important to both consumers and licensed practitioners. However, as detailed in this report, the practice of licensing can impose substantial costs on job seekers, consumers, and the economy more generally. This is particularly true when licensing regulations are poorly aligned toward consumer protection and when they are not updated to reflect a changing economy. This report hese costs and benefits by providing a informs future discussions of t rough overview of the research on licensing, as well as a picture of how licensing has o th expanded within a changing economy. It also identifies several potential reforms that would help to ease burdens on workers and consumers, while still ensuring quality and protecting the public. In doing so, it builds on the Obama Administration’s goals of promoting the most innovative and 122 effective, and least burdensome, tools to achieve regulatory ends. Yet there is more work to be done. Congress and the Federal government should do their part by providing information and resources to policymakers, and identifying ways to optimize Federal licensing requirements. Researchers must continue to assess and identify promising policy reforms. Ultimately, however, most of the power is in the hands of the States. State legislators and policymakers should adopt institutional reforms that promote a more careful and individualized approach to occupational regulation that takes into account its costs and benefits, and harmonizes requirements across States. If they are successful, the collective effect of their efforts could be substantial: making it easier for qualified workers to find jobs and move where they choose, increasing access to ess ential goods and services, and lessening heavy burdens on certain populations, such as military families, immigrants, and individuals with criminal records. Instituting a more rational approach to occupational regulation would improve economic opportunity and allow American workers to take advantage of new developments in today’s economy. 122 Executive Order 13563. January 18, 2011. Federal Register 76(14). 56

58 Resources for Policymakers on Licensing Reform There are a number of resources available online that can provide information to policymakers working to reform occupational licensing. You can find out which States require sunrise or sunset audits on the Council on Licensure, can Enforcement & Regulation’s (CLEAR) “Sunrise, Sunset and State Agency Audits” page. You sunrise, sunset, and performance audit reports . also view each state’s published “ To find specific occupational regulation statutes by State , use the Occupational Regulation Statutes” page on CLEAR’s website. Legislators questioning whether or not an occupation should be licensed can refer to, “Questions written by CLEAR, which includes detailed considerations to take into A Legislator Should Ask,” account. upational regulation in other nations for comparison, CLEAR has a If you want to look at occ “Regulatory Models” page with summaries of the regulatory models of Canada, Mexico, and the United Kingdom. rs sponso an online database The Department of Labor in which one can search by occupation, license name, or licensing agency to see the occupational regulation requirements in different Stat es . is an interactive tool that allows The National Inventory of Collateral Consequences of Conviction users to see what automatic penalties, disabilities, or disadvantages (collateral consequ ences) are imposed on a person who has committed a crime in a specific . Policymakers can use State this tool to see how a conviction will affect someone’s long - term ability to work in a regulated occupation in their area. If you have additional questions about the subject matter of this report, please contact the Office of Economic Policy at the U.S. Department of the T reasury. 57

59 Research Appendix V. Impacts on Quality, Health, and S afety A wide range of studies have examined the question of whether licensing improves the quality of goods and services, as would be the case if licensing successfully limited the practice of an occupation to high - quality practitioners. The studies we reviewed on quality, health and safety research does not find large Research Appendix Table 1 are summarized in empirical . Overall , the improvements in quality or health and safety from more stringent licensing . In fact, in only two r licensing associated with quality improvements. out of the 12 studies was greate Research Appendix Table 1. Studies on the Effects of Licensing on Quality, Health, and Safety Licensed Measurement of Type of Licensing Paper Impact Restriction Studied Occupation Quality/Health/Safety Increas e i n qual i ty Stri cter l i cens i ng requi rements Student tes t s cores and teacher Lars en (2015) Teachi ng qual i fi cati ons i n both meas ures i n hi gh-i ncome di s tri cts Student tes t s cores and teacher Lars en (2015) Stri cter l i cens i ng requi rements Teachi ng No effect qual i fi cati ons i n l ow-i ncome di s tri cts Teachi ng Li cens i ng vers us al ternati ve Student tes t s cores No effect Kane, Rockoff, and Stai ger (2008) certi fi cati on or no l i cens e No effect Teacher educati onal background Teachi ng Mandated teacher tes ti ng to Angri s t and Guryan obtai n l i cens e (2007) Student tes t s cores Certi fi cati on requi rement Teachi ng Kane and Stai ger No effect (2005) Uncl ear effect Student tes t s cores Stri cter l i cens i ng requi rements Teachi ng Kl ei ner and Petree (1988) Compl ai nts to the real es tate Real es tate No effect Powel l and Conti nui ng educati on component l i cens i ng board Vorotni kov (2012) Kl ei ner and Kudrl e Denti s try No effect Ti ghter requi rements Dental heal th (dental (2000) deteri orati on and amount of repai r needed) Advers e outcomes s uch as Stri ngency of entry Denti s try Hol en (1978) Increas e i n qual i ty cavi ti es and broken or chi pped requi rements teeth; general dental heal th Stri cter l i cens i ng requi rements Legal , Accounti ng, Kl ee (2013) No effect or modes t Vocati onal trai ni ng enrol l ment Cos metol ogy, i ncreas e i n qual i ty Teachi ng No effect Li cens i ng requi rement Rati ng of fl oral arrangement by Carpenter (2012) Fl ori s try fl ori s t-j udges Heal ey (1973) Res tri cti ons on as s i s tance i n Qual i ty of output (as meas ured No effect Lab techni ci ans cl i ni cal l abs by profi ci ency tes ti ng) Bui l di ng Mauri zi (1980) Modes t reducti on Cons umer compl ai nts about Increas es i n number of l i cens ees i n qual i ty s chool s offeri ng cours es to Contracti ng hel p contractors pas s thei r exam (proxy for hi gher pas s rate) The variety of occupations, range of quality and outcome measures, and duration over which this Most subject has been studied are apparent from scanning the rows of the table. empirical ot find that stricter licensing requirements improve quality, public safety or evidence does n are more stringent entry requirements While older research suggests that associated with health. 58

60 123 lower ra more recent studies that control for p otentially tes of untreated dental disease, ighter dentistry licensing requirements lead to better confounding factors find no evidence that t 124 , though they do lead to higher prices . dental health Studying quality in a newly - licensed area, floral design, Carpenter (2012) recruit ed a random ly selected sample of florist - judges to compare floral arrangements produced licensed retail florists from Louisiana and unlicensed florists by from Texas . He found that licensing appears not to result in a statistically significant difference in 125 ty of floral arrangements. the quali Other resear ch finds that i mposing licensing requirements or stricter regulations (such as performance examinations or education requirements) did not 126 significantly affect the severity of injuries suffered among electricians. Other research suggests that licensing is not always adequate to address quality concerns, but may be complementary with other forms of regulation. For example, Phelan (1974) distributed televisions with known defects in areas with and without licensing re quirements for television repair workers . He found that fraud was not lower in areas with licensing alone, but was lower 127 State agency that investigated fraud allegations. when licensing was coupled with a Much research on the impact of licensing restric tions on quality and public safety focuses on the impact ing the range of services tha t some of scope of practice restrictions (laws limit practitioners can legally provide). There is evidence that Advanced Practice Registered Nurses can provide a range of primary care services to patients at least as effectively as physicians, including wellness and prevention services, diagnosis and management of uncomplicated acute 128 A systematic review of the literature foun conditions, and management of chronic diseases. d that outcomes for nurse practitioners (NPs) compared to physicians (or teams without NPs) are comparable or better for all 11 outcomes reviewed, including blood glucose, blood pressure, 129 epartment visits. mortality, patient satisfaction with care, and number of emergency d One important channel through which licensing might affect quality is through increasing the accountants, attorneys, cosmetologists, and teachers training of licensed practitioners. Data on suggests that while s tricter licensing requirements are not associated with higher rates of vocational , such restrictions are associated with additional training since class enrollment 130 workers began their most recent job. One possible explanation for the latter finding is that 123 Holen, Arlene. 1978. “The Economics of Dental Licensing.” Department of Health, Education and Welfare. 124 Kleiner, Morris M. and Robert T. Kudrle. 2000. “Does Regulation Affect Economic O utcomes? The Case of Dentistry.” 43, no. 2: 547 Journal of Law and Economics - 582. The University of Chicago Press. 125 Carpenter II, Dick M. 2012. “Testing the Utility of Licensing: Evidence from a Field Experiment on Occupational 41. Journal of Ap 13, no. 2: 28 Regulation.” plied Business and Economics - 126 Kleiner, Morris M. and Kyong Won Park. 2014. “Life, Limbs and Licensing: Occupational Regulation, Wages, and Workplace Safety of Electricians, 1992 - 2007.” Monthly Labor Review . U.S. Bureau of Labor Statisti cs. 127 Phelan, John J. 1974. “Economic Report [on the] Regulation of the Television Repair Industry in Louisiana and California: A Case Study: Staff Report to the Federal Trade Commission.” 23. U.S. Government Printing Office. 128 Fairman et al. (2011); Institute of Medicine (2010) ; Cassidy (2012). 129 Stanik - Hutt et al. (2013). 130 Klee, Mark A. 2013. “How Do Professional Licensing Regulations Affect Practitioners? New Evidence.” U.S. Bureau - 30. of Labor Statistics, SEHSD Working Paper 2013 59

61 many States require licensed workers to accumulate work experience before they become licensed. and occupations, H owever, occupational licensing requirements vary considerably across States most of the empirical evidence on licensing comes from looking at very specific examples . and While the aforementioned studies indicate that occupational licensing does not guarantee quality improvements, they likewise do not indicate that all licensing frameworks fail to increase service quality. Impact on P rices While quality can be defined in many ways and is often difficult to measure, the evidence on licensing’s effects on prices is unequivocal: many studies find that more restrictive licensing laws lead to higher prices for consumers As before, we summarize the studies we’ ve reviewed in the . table below. In 9 of the 11 studies we reviewed, significantly higher prices accompanied stricter licensing. In addition to the studies listed below, Kleiner and Todd (2009) find that two particular , financial bonding and minimum net worth mortgage broker licensing requirements requirements, are associated with a higher percentage of high - priced loans originated and lower volumes of loans processed, but that overall indices of the tightness of mortgage broker licensing 131 ly associated with market outcomes. are not significant 131 Morris M. Kleiner and Richard M. Todd. 2009. “Mortgage Broker Regulations that Matter: Ana lyzing Earnin g s, , David H. Autor, ed. Studies of Labor Market Intermediation Employment, and Outcomes for Conusmers.” 60

62 Research Appendix Table 2. Studies on the Price Effects of Licensing Percent Impact Type of Price Studied Type of Licensing Licensed Paper Restriction Studied Occupation 6.0 Pri ce of wel l -chi l d medi cal exams Medi um l evel of regul ati on Nurs i ng Kl ei ner et al . (2014) Nurs i ng 16.0 Pri ce of wel l -chi l d medi cal exams Hi gh l evel of regul ati on Kl ei ner et al . (2014) Probabi l i ty that a mortgage i s hi gh- An addi ti onal $100,000 i n Mortgage Kl ei ner and Todd 5.4pp (2009) pri ced s tate broker bondi ng/net Brokers worth requi rement No effect Mortgage Kl ei ner and Todd Index of other s tate broker Probabi l i ty that a mortgage i s hi gh- l i cens i ng requi rements pri ced (2009) Brokers Kl ei ner and Kudrl e -1.0 Denti s try Pas s rate of dental exam Pri ce of fi l l i ng a cavi ty (2000) Kl ei ner and Kudrl e Denti s try Hi gh l evel of regul ati on (no Pri ce of fi l l i ng a cavi ty 11.0 (2000) reci proci ty or endors ement) Kl ei ner and Kudrl e Pri ce of fi l l i ng a cavi ty Denti s try Res tri cti on i ndex bas ed on No effect regul ati on and pas s rate (2000) l evel s rel ati ve to average Li ang and Ogur Res tri cti ons on number of Denti s try Pri ce of dental vi s i t i n 1970 5.0 hygi eni s ts and as s i s tants or (1987) thei r functi ons 7.0 Denti s try Res tri cti ons on number of Li ang and Ogur Pri ce of dental vi s i t i n 1982 (1987) hygi eni s ts and as s i s tants or thei r functi ons Conrad and Shel don Denti s try Li mi ted reci proci ty Pri ce i ndex of dental s ervi ces 3.3 (1982) 4.0 Pri ce i ndex of s ervi ces Conrad and Shel don Res tri cti ons on the number of Denti s try (1982) branch offi ces Pri ce i ndex of s ervi ces Res tri cti ons on the number of Denti s try Conrad and Shel don 4.0 hygi eni s ts (1982) Shepard (1978) Ranges from -0.2 Denti s try Pri ces of 12 di fferent dental s ervi ces No reci proci ty (abi l i ty to to 17.9, average have one s tate's l i cens e recogni zed by another s tate) of 6.5 ages Impact on Employment and W While credibly estimating employment effects is difficult given available data, t here is some directly evidence indicating that licensing ofessions. restricts the supply of workers in licensed pr Kleiner (2006) but not in others, and States examines three professions that are licensed in some finds that employment growth was higher in the unlicensed States relative to the licensed ones compares employment growth rates in several occupations that have from 1990 to 2000. He also States , licensed in some States , and not licensed in any different levels of licensing (licensed in all 132 ) , and there too finds that licensing is associated with slower employment growth . States Fed erman et al. (2006) find that State greater licensing laws that require English proficiency or the number of Vietnamese suppress training manicurists, as well as the overall number American - 133 of manicurists. Similarly, Cathles et al. (2010) find that licens ing laws which require funeral 132 Kleiner, Morris. 2006. Licensing occupations: Enhancing quality or restricting competition? Kalamazoo, MI: Upjohn Institute. 133 Maya N. Federman, David E. Harrington, and Kathy J. Krynski. 2006. “The Impact of State Licensing Regulations on Low Skilled Immigrants: The Case of Vietnamese Manicurists.” American Economic Review , 96(2): 237 - 241. - 61

63 directors to also be embalmers reduce the proportion of female funeral directors, and that the States overall number of funeral directors per capita is lower on average in that have these 134 laws. As previously referenced, States with the least restrictive regulations of nurse research finds that had more licensed NPs and practitioners (NPs) States were 2.5 times more that patients in these . likely to receive their primary care from NPs than the most restrictive Other factors, such States as demographic variables and , the availability of primary care physicians and physician assistants may partly explain this variation. However, when these factors were controlled for, States ’ 135 State variation in NP care. degree of regulation explained 16.8 percent of the In addition, other research finds that State licensing laws requiring that electricians pass an oral examination or 136 fewer per capita electricians. However, meet experience requirements were associated with research on the Nurse Licensure Compact, which was designed to ease licensure portability among nurses but not reduce overall licensing requirements at the State level, showed no effect 137 of the Compact nurses’ employment or labor force participa tion. on As described in Section I, the effect of restricting entry to licensed occupations has proved easier to study in terms of wages: restrictions are expected to raise the wages of those who manage to 138 other workers, leading to a wage gap. enter licensed occupations, and lower the wages of Basic empirical evidence points clearly to a wage gap between licensed and unlicensed workers , though this research provides little insight as to how much of the gap is attributable to wage gains for licensed worker s and how much is attributable to wage losses for workers who are shut 139 or example, that certain licensing provisions increase out of the sector. F research finds barbers’ earnings by between 11 and 22 percent relative to unlicensed workers with similar cation States with licensing receive an earnings edu , and that massage therapists working in 140 compared to massage therapists in States without licensing premium of as much as 16 percent . Kleiner and Krueger (2013) note that most of the estimates of cross - secti onal studies of licensing on wages find that licensing results in 10 percent to 15 percent higher wages for licensed workers 134 , Alison Cathles David E. Harrington, and Kat hy Krynski. 2010. “ The Gender Gap in Funeral Directors: Burying Women with Ready - to - Embalm Laws?” British Journal of Industrial Relations 48(4). 135 Kuo, Yong - Fang, et al. 2013. “States with the Least Restrictive Regulations Experienced the Largest Increase in Patients Seen By Nurse Practitioners.” Health Affairs 32 (7): 1236 - 1243. 136 Carroll, S. and Gaston, R. “Occupational Restrictions and the Quality of Service Received: Some Evidence.” Southern Economic Journal 47(4) (1981): 959. 137 DePasquale and Stange ( 2014 ). 138 Kleiner, Morris and Kyoung Won Park. 2010. “Battles Among Licensed Occupations: Analyzing Government Regulations on Labor Market Outcomes for Dentists and Hygienists.” NBER Working Paper # 16560. 139 ; Morris Mark A. Klee. 2013. “How Do Professional Licensing Regulations Affect Practitioners? New evidence” Kleiner and Alan Krueger. 2010. “The Prevalence and Effects of Occupational Licensing.” British Journal of Industrial Relations , 48 (4). 140 Robert J. Thornton and Edward J. Timmons. 2010. “The Licensing of Barbers in the USA.” British Journal of Industrial Relations , 48(4): 740 - 757; Robert J.Thornton and Edward J. Timmo ns. 2013. “Licensing One of the 388. - World’s Oldest Professions: Massage.” Journal of L aw and Economics , 56(2): 371 62

64 141 relative to unlicensed workers with similar characteristics Using their Westat survey, Kleiner . sing at the level confers a wage premium of around 17 and Krueger (2013) find that licen State combination of State and either Federal percent, whereas the or local licensing has an estimate effect of around 25 percent. Local licenses by themselves are not associated with higher wages, 142 and certification has a much smaller effect on wages. However, because licensed workers generally have more training than unlicensed workers, and because they may differ in other important ways, these wage gaps may reflect educational or other differences a cross workers. More careful estimates of the wage gap between licensed and unlicensed workers try to account for these differences in one of two ways. First, they may compare workers licensed occupations. Many occupations are licensed in some States but within Also, States may only require that only some workers in a field be licensed, such as not others. architects who sign off on plans, but not other workers who perform similar tasks, such as sketchers, modelers, or construction managers. By comparing lic ensed and unlicensed workers who perform very similar work functions, researchers may get a better picture of the true wage 143 benefits from licensing per se. Second, researchers can sometimes observe wages for workers as they transition in or out of a licen sed occupation. By comparing earnings for the same worker both with and without a license, researchers know that any fixed characteristic of the worker cannot explain the earnings changes. Again, this can give them more confidence that they have isolated t he impact of a license per se, rather than the impact of being one kind of worker and not another. Using these methods, the wage premium from licensing is more modest, and is often estimated as zero. Gittleman, Kleiner and Klee (2015) find that workers with a license earn around 8.4 144 Researchers have also percent higher wages on average controlling for detailed occupation. examined the earnings of workers who switched from unlicensed to licensed occupations and ( ). Gittleman and Kleiner (2013) moving to a licensed occupation from an vice versa found that occupation unlicensed conferred no wage gain . When they control for occupations using broad occupational controls, they find that licensing has an effect of around 8 percent. However, this 145 effect disappear . Klee (2013) discovers limited evidence s when they use more detailed controls of a licensing wage premium , and even finds that in some cases more stringent licensing 146 regulations are actually associated with a wage discount. 141 British Journal of Morris Kleiner and Alan Krueger. 2010. “The Prevalence and Effects of Occupational Licensing.” , 48 (4). Industrial Relations 142 Morris M. Kleiner and Alan B. Krueger. 2013. “Analyzing the Extent and Inf luence of Occupational Licensing on Journal of Labor Economics , 31(2). the Labor Market.” 143 Holderness, Richard A., Stephen G. Valker, and Stephen D. Butler. “State - By - State Guide to Architect, Engineer, and Contractor Licensing.” Aspen Publishers Online, 1995. 144 Gittleman, Klee, and Kleiner (2015). 145 Gittleman and Kleiner (2013). 146 Klee (2013). 63

65 Moreover, not all licensed o ccupations experience the same wage boosts. The figure below shows the difference in hourly earnings between licensed and unlicensed workers by occupation. Wage premia are highest in some of the occupations that have the proportions of greatest licensed wo rkers , such as health care support and practice, education, and legal occupations. In these occupations, unlicensed workers are rare and for that reason are likely to be quite different from the licensed workers who dominate the profession. However, even i n occupations with large numbers of both licensed and unlicensed workers – like installation and repair, sales, and 147 – licensed workers still earn 5 to 10 percent higher wages. grounds keeping Research Appendix Wage Effect of Licensing by Occupation Figure 1: Arts, Entertainment, Media Computer and Mathematical Farming, Fishing, Forestry Architecture and Engineering Food Preparation Office and Admin Support Production Social Service Management Installation, Maintenance, Repair Transportation Life, Physical, Social Science Sales Construction and Extraction Protective Service Personal Care Legal Building and Grounds Cleaning Health Care Practitioner Education Business and Financial Health Care Support -10.0 20.0 15.0 10.0 5.0 0.0 -5.0 Wage Premium (Percent) Source: Survey of Income and Program Participation 2008 Panel; UST calculations. obility Impact on Geographic M State level, licensed practitioners typically have to Since many occupations are licensed at the States . This alone entails various procedural acquire a new license when they move across hurdles, such as paying fees , fillin g out administrative paperwork, a nd submitting an application sets its own licensing and waiting for it to be processed . State ince each Moreover, s often vary across these requirements, licensed lines, and individuals seeking to move to State another State often discover that they must me et new qualifications (such as education, The experience, training, testing, etc.) if they want to continue working in their occupation. 147 government employment, business Estimates reflect controls for certification, detailed occupation, region, ownership, union membership, years of education, work e xperience, gender, race, and ethnicity.” 64

66 resulting costs in both time and money can discourage people from moving. This system is populations, such as military spouses, who are very likely to especially burdensome for some 148 s Diminished mobility move across lines. inefficiency in the labor market, with State generate workers unable to migrate easily to the jobs in which they are most productive. In times of econom ic distress, this reduced mobility would be especially harmful, as workers would have a – or for some practitioners, delivering services to difficult time leaving hard - hit areas. – State licensing As described in Section I, there has been relatively little research on the impact of on interstate mobility. examine s In addition to the research described in Section I, other research the impacts of the Nurse Licensure Compact (NLC), an interstate compact that allows registered nurses and licensed practical and vocational nurses to practice across State lines in participating States authors find mod est positive effects of NLC adoption without acquiring a new license. The State on travel time to work (which indicates more mobility) and likelihood of working across 149 lines, especially among nurses living close to State borders. There is reason to think that this estimate may understate the impact of State restrictions on mobility, given that the NLC did not 150 fully eliminate barriers to licensure portability in participating . States 151 Although Several older studies also find that more restrictive licensing depresses mobility. these studies employ more limited statistical techniques, they make an effort to allow for the fact that different types of people choose licensed occupations over unlicensed ones, and therefore it is uninformative to simply compare mobility between licensed and unlicen sed occupations without accounting for other workers differences. Survey of Income the To add to this literature, we have carried out our own analysis using both and Program Participation ( SIPP compare ) and the American Community Survey (ACS). We first he inter in the SIPP . To account for the facts t state mobility of licensed and unlicensed workers that licensed workers are typically more educated than unlicensed workers, and more educated workers are more mobile, we compare the inter state mobility of lice nsed workers and certified workers. Certified workers are likely comparable to licensed workers, yet they can often take their certification with them across lines. State Over the eight - month period starting in late 2012 , licensed workers were about 20 percent less likely and certified workers in the SIPP were about 60 percent more likely than non - licensed, non - certified workers to change States . These patterns are broadly similar when we control for available demographic variables , ing that licen sing may indeed limit inter state mobility suggest 152 certifications when compared to similar workers who hold . 148 U.S. Department of the Treasury and U.S. Department of Defense (2012). 149 DePasquale, and Stange (2014). 150 U.S. Department of Treasury and U.S. Department of Defense (2012). 151 Pashigian, B. Peter. 1979. “Occupati onal Licensing and the Interstate Mobility of Professionals.” Journal of Law and Economics 22, no. 1: 1 - 25; Holen (1965). 152 Survey of Income and Program Participation, 2008 Panel; UST Calculations. 65

67 Using the ACS, we compare the likelihood of moving over longer versus shorter distances for tions. This is an alternative test to workers in licensed occupations to those in unlicensed occupa - license poses a barrier to mobility, then the biggest differences that in the SIPP. If the need to re between workers in licensed and unlicensed occupations should show up for moves that require a change of license. As discussed already, licensing predominantly occurs at the State - level, so moves across State lines would be more difficult for workers in licensed occupations than those in other occupations if licensing posed a true barrier. On the other hand, if the type of person who enters licensed work is simply less likely to move than individuals who go into other lines of work, then licensed workers should be less likely to move than other workers regardless of distance. Our analysis is similar to forthcoming work b y Kleiner and Johnson. As shown in Figure 1 in Section I, there are substantial differences in the likelihood of moving across State lines between workers in licensed occupations versus other workers, while there are . The State only modest differences between the t wo groups in the likelihood of moving within a figure shows that interstate migration rates for workers in the most licensed occupations are compared to those lower by an amount equal to nearly 15 percent of the average migration rate in the lea st licensed occupations. But the difference between these workers in within - State migration is much smaller, only about 3 percent of the average rate. These impacts are also much larger for younger licensed workers: this difference is 21 percent of the ave rage interstate migration rate for those under 35 compared to an impact of about 12 percent for workers over 35. 66

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