Counterpoint: Why bother with occupational licenses? There's a better way

  • Article by: LEE MCGRATH
  • Updated: January 7, 2014 - 5:58 PM

To protect consumers, the state should seek alternatives to professional boards.

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Gov. Mark Dayton declared recently that the Minnesota Board of Nursing was “asleep at the switch” for failing to revoke some nurses’ occupational licenses, as documented in a Star Tribune series “When Nurses Fail” (periodically, October through December 2013). In response, the board is considering ratcheting up its enforcement, including gaining access to records of some nurses’ personal use of prescription drugs.

Incompetent nurses who are repeatedly fired and rehired elsewhere should certainly prompt a review of the board’s effectiveness. But the governor and legislators shouldn’t stop there — they should also inquire into the law’s effectiveness. They’ll find occupational licensing laws don’t work.

Research by both the Institute for Justice and Prof. Morris Kleiner, the AFL-CIO chair of labor policy at the University of Minnesota’s Humphrey Institute, shows that occupational licensing laws don’t protect consumers, but rather that they protect license holders from competition.

This is, in part, because licensing boards have conflicts of interest. In Minnesota, they comprise mostly members of the profession they oversee, and they depend on license holders’ fees to pay the salaries of board members, inspectors and other employees.

But a second cause is underappreciated by elected officials.

Licensing boards rarely revoke licenses. The Minnesota Board of Nursing’s failure to revoke licenses is the rule, not the exception.

This is because constitutional law recognizes the hard work that goes into obtaining a license and requires extensive hearings and proceedings before revocation, which may include going before a judge and appealing to higher courts. This process can cost boards hundreds of thousands of dollars in litigation expenses — far more than their revenue. To avoid these costs, boards give license holders multiple chances. This respects license holders’ rights and saves boards’ money, but it does not protect consumers who rely on licensing as a signal of quality, which it is not.

State leaders need to consider alternatives to occupational licensing that give consumers better information.

Certification is one such alternative. Under certification, anyone can work in an occupation, but only those who meet the state’s qualifications can use the title. In Minnesota, there are certified interior designers, certified financial planners and certified mechanics who can show potential customers and employers that they meet the requirements of their certifying boards and organizations.

Certification better protects consumers because it gives consumers better information. Legislators can create higher standards for certification than for licenses, and boards can more easily revoke certification without extensive administrative hearings or litigation because such actions don’t take away a person’s rights, only the use of a title. This means consumers and employers, such as hospitals and nursing homes, know about problem workers quicker with fewer costs for boards.

A second, more general, alternative is competition. Defenders of occupational licensing claim that licensing is the only way to protect consumers from incompetent workers. But today, regulation may not be needed at all. Information about quality and price spreads at lightning speed as consumers have access to Internet rankings, reports and opinions. Thanks to social media, advice blogs and websites such as Angie’s List and Yelp, consumers easily can find recommendations as well as tips on whom to avoid. A provider’s reputation — increasingly at the end of fingertips hitting smartphones — is far more effective at protecting consumers than is occupational licensing.

Dayton and the Legislature have a historic opportunity to turn the problems identified in the Star Tribune’s reports into something positive for all Minnesotans.

As part of the upcoming “unsession,” state leaders should scrutinize occupational licensing across the board and determine what benefits consumers gain when nurses and other workers require the state’s permission to work.

They won’t find many, but they will find opportunities to adopt policies to give consumers better information.

 

Lee McGrath is the executive director of the Minnesota chapter of the Institute for Justice (www.ij.org).

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