EconVersations: Occupational Licensing Across the States (episode 218)

Dr. Dan Sutter, of the Manuel Johnson Center for Political Economy, hosts EconVersations, a program that explores the role of free markets in promoting prosperity through conversations with Manuel Johnson Center faculty and guests. In this episode, Dr. Sutter interviews “Dr. Noah Trudeau of Troy University, as they discuss Occupational Licensing Across the States.

Episode Transcript

(00:01):
The opinions expressed on
this programrepresent the viewpoints
of individual authorsor contributors
and do not necessarily reflectthose of Troy University.
This is, in conversations
a joint production of TroyTrojan Vision and Emmanuel H.
Johnson Centerfor Political Economy.

(00:21):
Now here's your host, Dr.
Dan Sutter.
Helloand welcome to Conversations.
I'm your host, Dr.
Dan Sarah of the Johnson Center
for Political Economyat Troy University.
No one wants to be operated on
by a surgeonwho didn't go to medical school
or have their two teethdrilled by an amateur dentist.

(00:41):
We need to take in
the expertise of specialistsin our daily lives.
But by definition, peopleare going to lack the knowledge
to evaluate for ourselves
whether alleged expertsare truly competent.
Occupational licensingis the means by which we turn
to government to ensurethe expertise of professionals.
But licensing
today extends far beyond fieldslike medicine or dentistry

(01:05):
and it's estimated that onefifth of the American workforce
now requires licensing,
which has also been called
the government permissionslip to work.
How do economistsmeasure the extent of licensing
in the modern workplace
and what states licensethe most occupations?
Joining me on the conversationstoday is an alum of the Johnson
Center, Dr. Noah Trudeau.

(01:26):
Noah majored in economicsat Jacksonville State before
earning a master'sdegree here at Troy
and then going on to get a Ph.D.
from West Virginia University,where he was the first of our
Masters alumsto actually earn a Ph.D..
Dr. Trudeau then returned to
Troy, is a professor of dataanalytics and 2023
todaywill be talking about his work

(01:46):
with the Arch Bridge Institute
on their StateOccupational Licensing Index,
which was coauthoredwith Edward Timmons.
Welcome back to the show.
No thanks to him.
And so let's talka little bit about this project
that you have,just a very broad terms,
and then we'll get into some of
the detailsby occupational licensing

(02:07):
for you and tell us how you gotinto being interested
in occupational licensingin the first place.
Yeah, so my interestin occupational licensing
actually startedwhen I was a student here, Troy.
I believe we did an EConversations episode on it.
I was talking about licensingof funeral directors.
That was my first forayinto the occupational
licensing environment.
I coauthored a paper withthen Professor Dan Smith,

(02:31):
who is now on Middle Tennessee,and that was
that was my introinto occupational licensing
while I was a studentat West Virginia.
That paper that I coauthoredwas under went under review
and then was eventuallypublished.
And I later found outthat one of the reviewers
was Professor Ed Timmons,who is I'd call me.

(02:52):
He's like the Godfather
of the occupational licensingenvironment.
Ed is Ed
is a wonderful, prolific authorin the occupational
licensing space.
Now he is the directorof the new Center,
the new RegulatoryResearch Center.
They've recently rebranded.
They focus onoccupational licensing,
scope of practiceand certificate of need laws.
So they work in occupationalregulation

(03:12):
across all environments.
As I was studying at WestVirginia, I was looking to have
a advisor and outside committeemember for my dissertation.
So having met Edand becoming friends with him,
he was he was outside of
he was working at SaintFrancis University at the time.
And I said, Ed, you know,
I need an outsideand an outside committee member.

(03:33):
You are the guy.
Would you would you be willingto sit on my committee?
And I said, absolutely.
You know, I'd be happyto have you do advise on this.
That ledto us working more together.
And then as I was a seniorat West Virginia or a fifth year
grad student
looking at the job market,I guess the center that he
he is the director of movedto West Virginia University.

(03:55):
So we started to worka lot more in tandem.
And he got to know a little bitmore of my my interest.
And one of those intereststhat I have
is with occupational licensing.
Unlike thingslike a driver's license,
which is very standardizedacross states,
you can take your driver'slicense to another state,
you can drive your carin other states.
Occupational licensesare not that simple.

(04:16):
So sometimes becoming a plumberin Alabama means
that you can't be a plumberin Georgia
or you can't be a plumber
in Florida or Mississippior Tennessee.
Some states have what we callreciprocity.
Some states have universal recognition.
But one of the other thingsthat that kind of runs into this
is states define occupationsslightly differently.

(04:36):
So there there'sno standard definition
for what is an electrician,what is a
what is a physician,what is a dentist.
And technically,
there are some colloquiallyunderstood definitions.
But one of the complicationswe run into is
it's kind of left up to each state how they define
these occupations.

(04:56):
And one questionthat I've always had
and Ed agreed with mewas if you were to look
at every stateand try to kind of
put them on a scale togetherof who is the strictest
about licensing in general,how would you go about it and
what ultimatelywould be the results.
So we have ideas.
A lot of people will compare

(05:17):
very like strict definition
of occupations across,and we can look at like
different barriersfor an occupation.
But we wanted a general ideaof occupation, occupational
licensing as a whole acrossall of the states.
And so that's what we've triedto answer with this index.
And so we start with

(05:38):
the case of peoplelike dentists or doctors.
And clearly, you know,I mean, it's a matter of life
and death.
If your doctoractually knows what they did
or if they is,as the commercial suggests,
they just stayed at a HolidayInn Express last night.
But we've seen occupationallicensing
spread to a lot of other occupations that are not nearly
as intense professionalor the kind of thing

(06:01):
that you need to go to graduateor professional school for
and things like even likebeing a florist, as is licensed
at least I think, in one state.
Right. So
tell us a little bit about this,this spread to these other
occupationswhere you think like, well,
maybe you need to knowsomething about hair
cutting hair, but I don't know.
Do you really need to go to

(06:21):
a lot of trainingto try and become a barber?
Right.
So the rationalefor occupational licensing
is it's exclusively thought ofin the service aspect.
You can't verifythe quality of a service
until you've receivedthat service.
And so you'd really like to knowthat your brain surgeon
is going to performa really good job

(06:42):
because you don't want to wait
until after you've
had brain surgery to find outthat the brain surgeon
did not knowexactly what they were doing.
In that case,
it is very much life or deathor similar. This is spread
it's spread throughthe medical profession. So
in theearly 20th century, early
1900s, occupational licensingwas about 5% of occupations.
It was mostlyin the medical fields.

(07:04):
One of the first placesthat it was spread was actually
talked aboutby Milton Friedman in the paper.
It was the spreadfrom physicians to dentists.
And Friedman arguedthat dentists are not as are
needing of that verificationas potentially your
your cardiac doctor oryour brain surgeon or whomever,

(07:25):
and then begin tojust proliferate and do kind of
we kind of see occupationswith similar scope
spreador we see it as a reaction
to not necessarily tragedy,but possible accidents.
We see things like barbersbecome licensed after outbreaks
of what they call barber's itch,which is an infection

(07:47):
that you can get from poorlycleaned barber instruments.
One of our other Johnson Centeralums,
Shawn Alvarez, has donea paper on the barber's itch
and how that is spread throughwhy we see barber licensure.
But that
that occupational licensepresence spreads and spreads

(08:08):
and some of attributed itto special interests.
So if you have a collected groupof individuals
who want to extract rentsfrom the people around them,
if you can get the governmentto issue a license,
then you are going to restrictcompetition.
Some people think of itas just a miss
misinterpretedpublic safety issue.

(08:30):
So things like barbers,
you don't want your barberto accidentally cut you
and you actually getan infection.
Things like funeral directors,
you don't want someoneto accidentally
mistakenly embalm someone orcause an accident in that space.
And then in the case of florist,Louisiana has actually has
a florist license
and that is that has comethrough generations

(08:53):
and generations of reasoning.
So the Louisiana Foreign floristlicense goes back,
I believe, to the late 1800s,
and it has a little bitof special interest background,
but that is currently going to a district court.
So we'll see if Louisiana'sflorist license
makes itthrough the end of 2024.
And then there isanother element.
If you're one of the

(09:13):
practitioners in a fieldlike this,
reputationis necessarily collective.
And so if there are some peoplecalling themselves, you know,
massage therapists,but they're actually sort of
like sexual predatorsor something like that,
you know, anybut a handful of of bad actors
could cast a really bad light on others working in this space.

(09:36):
And so, you know,you can sort of understand like
there is some collective interest in this
and trying to make surethat people don't
bring disgrace or disreputeto your your field,
even though you yourselfare a respected practitioner.
Right. Absolutely.
So most people would see meas somebody who is anti
occupational

(09:56):
just based onon working on things like this
index, working on some paperswhere I try to point out the
overreaching ofofficial licensing occasionally.
But I see myself as someonewho is just advocating for
a little bitmore of a rational approach to
what needs to be licensed iswhat is the extent of harm

(10:18):
that can be done,
What is
what is the cost of actuallyputting this barrier in place?
Because occupational licensingis what we call a barrier to
barrier to entry.
If you want to become a barber,you have to become licensed.
I mean, you have to goto barbers,
barbers, collegeor a barber school.
You have todo an apprenticeship.
You have to be able to pay thelegitimate cost of the license.

(10:39):
You have to pay for your fee.
You have to pay,you know, every year
to have that license renewed.
Those are allsome very incredible costs
in terms of time.
So what ends up happeningis with a lot of this licensing,
the unseen cost
is the cost of peoplethat do not pursue these jobs
because they don't have thattime or the money or the ability

(11:02):
to go to college to take out a loan to do these
these specific requirementsfor this license.
And that really hinderseconomic mobility,
occasionally hindersphysical mobility.
People people choose
not to move
to a new state or somethingbecause they can't
take their license with them.

(11:22):
So we worry about those.
And there are also other ways,
and that's somethingwe're going to talk about.
There are also someother alternatives to licensing.
And you mentioned in the study,but you're not tracking them
with a certificationregistration.
So, you know,
there might be some less onerousalternatives
that could still help

(11:43):
assure members of thepublic that somebody who says
that they're like, for instance,
a CPA is certainlya certified public accountant.
Right.
And so there are
things like certificationthat that could be alternatives.
Right.
We say that
licensing is the most onerousor the most strict
form of regulationor verification of quality.
And the consequencesof practicing

(12:05):
without a licenseare the harshest you can.
You can serve actual jailtime for practicing
without a license.
So it is it is incredibly onerous in terms of the cost of
what happens if you do not havethat verification.
And then the way that these standards get developed
usually is that the state allows a board of practitioners

(12:28):
to be formed
and then they're goingto actually set like,
okay, why do you have toactually do to become a barber?
And that's one of the areas
where, well, onceyou're empowering that board,
they can always sort of increasethose barriers.
You actually create a barrieras opposed to simply something
that would berationally connected to, okay,

(12:49):
if you're going to perform as a professional in this field,
what do you actually needto know? Right.
So we have we have professionalswho already have that license
choosing the bar.
You have to jump over, right,to obtain that license.
And so that that becomesan ethical question as well.
And we've seen cases go to the Supreme Court
where professionalshave extended

(13:10):
the scope of their licenses.
North Carolina,
the North Carolina dentistsdecided in 2013
that teeth whiteningcounted as dentistry.
So where everything from these like strip mall teeth whitening
companies to they sent cease and desist
letters to the companieswhere you could do the teeth
whitening yourselfwith the teeth whitening strips.

(13:30):
So we see overreach sometimesbad actors in that case.
All right. So
you've put together this indexalong with the ad champions.
And so let's just talkto a little bit
of what you had to do toto do this.
And you looked at hundredsof occupations.

(13:51):
But, you know, let's startwith what exactly
you do to construct this indexThat could be used by economists
and other researchersto help study this phenomenon.
Right.
So as I mentioned before, statesdon't necessarily
define occupations.
Similarly,
we all colloquiallyas individuals,

(14:13):
we have an idea of what it meansto be a dentist,
what it means to be a doctor,what it means to be a barber,
a massage therapist,florist, etc.
The Regulatory Research centerkeeps a database on commonly
used and occasionally notso commonly licensed occupations
by the occupation title.
So everything
from general contractorto fighter timekeeper

(14:37):
for for for a boxing match.
Using that database,
we looked at approximately 330
occupations that are licensedin at least one state.
And we wanted to see
if a statehad a specific license for that,
like a named licensefor that occupation,

(15:00):
or if a state had a licensethat would bar
the practice of that occupationsomehow,
which is best illustratedby Alabama, in my opinion,
acupuncturists in some states.
So if you want to getthe needling done
for medical purposes, traditional, it is a descendant
of traditional Chinese medicinein Alabama.

(15:21):
You cannot havean acupuncturist license.
You cannot practice acupuncture
without being a doctor,without being a physician.
So you have to go to medicalschool,
you have to become a doctor,
and then you canpractice acupuncture.
So any acupuncturistthat you see in Alabama
doing true acupunctureadvertises as acupuncture.

(15:41):
You can rest assuredthat they are doctors
in some statessuch as South Carolina, though
they actually havean acupuncture license.
So instead of goingand becoming a doctor,
you can get a bachelor's
degreein physical therapy physiology.
A little bit of continuing education credits,
maybe a special training,
and you could becomean acupuncturist.
So in this case, we see whereoccupational licensing,

(16:04):
another licenseisn't necessarily a bad thing.
So if someone wants to becomean acupuncturist
in Alabama,it's incredibly costly,
but it's a little less costlyto do so in South Carolina.
So we look at
just whether or not stateshave this license specifically
and whether or not they havewhat we call a barrier.
So that would beis is barred by something

(16:27):
that is not that title.
We see this happen withsome electrical occupations.
So some states have just
an electrician licenseand that means that you can do
any any electric in electricianbased things.
You can even run wires,you could do
residential,you could do commercial,
you can do like heavy machinery,electrical, electrical work.

(16:47):
There are sign electricians.
So some states actually have
a specific signelectrician license
and some states divvy upmore than just electrician.
They have a list of differenttypes of electricians.
And if you want to be morethan one type of electrician,
you have to get additionallicense also.
So in that case, so a statewhere they would just have
an electrician

(17:08):
license would only have onenamed license for electrician.
But that's going to bara lot of these different
occupational titlesthat we that we have.
So we wanted to get an ideaof not necessarily
just how many title licensesyou have,
but how many occupational titlesdoes that stop
you from getting into.
And so we created this

(17:28):
nomenclature of barriersversus licenses.
So barriers is a measureof how difficult it is
to just get into one of theselike, license occupations.
Gives a general overview of how
how many wallsyou were putting up
or how many how many spaces ineach of these 300 occupations.

(17:48):
How many
are you trying to stop peoplefrom just easily getting into?
I, I mean, licensesgives us an idea of kind
of the bureaucraticaspect of it.
So more licenses means moreboards, means more paperwork.
It could meanmore just money involved.
So you talk about feesand processing.

(18:11):
You talk aboutjust like steps of approval.
So sothe number of total licenses
gives us an idea in that space.
And so ultimately, we rank
the statesbased on our distribution.
30 occupations.
How many do you havea barrier for
and how many total licenses doyou have for that?

(18:32):
Many various.
And these were some of the onesdown at the bottom of the list.
So these are some professionslicensed in just one state.
So you get into somepretty specific things
that get rolled out.
Everybody give me a senseof just exactly how far.
I mean,
you might
already have a license,over 300 different occupation.

(18:53):
It's you're extending prettybroad and pretty far across
the economy. Right.
So we we get into some
what we call uniquely licenseoccupations.
One of the features of the indexis for every state we talk
about their most uniquelylicense occupation,
which is the occupation thatthat state has a license for.
That is the fewest
that or the fewest the

(19:14):
the farthest down the list interms of total total licenses.
So things like the lightningprotection contractor
is licensed in Rhode Island.
Rhode Island has a specificelectrician ish license
whereif you were going to install
lightningrods or lightning protection,
you must have a license.
In a lot of statesthat may fall under
an unlicensed profession.

(19:34):
But RhodeIsland has it. Specifically.
We also have thingslike nutritionist, assistant,
which is licensedin New Mexico,
I believe we're going to renamethat one this year.
I think they renamed it recentlyto nutritionist, associate.
New Mexico Care is very muchabout their nutrition
based occupations.
They have dietitians,nutritionist,
dietitian, nutritionistand nutritionist, associates.

(19:55):
They have four different
occupations in that space
where some statesjust have nutritionists.
So we we try to illustrate.
And the point of theseis to show
at leastthe legislators in those states,
hey, this is something you'redoing that no one else is.
And if that's the case,maybe you aren't in the right
like you're likeyou go with the flow.

(20:16):
You know, 50, 50 other statesare like to do this as well.
That's that's not the worst.
Like everybodyhas the expectation
that you might have a license.
But if you're Louisianaand you license florists,
that's a littlethat's a little odd. So.
Well, now
then you have to createa numerical index, right?
So it could be, especiallysince we as economists

(20:36):
like to do statistical analysisor regression analysis.
And so you need to have an index was what you did here.
So we just dida simple normalization.
We took the statethat is the worst at that thing,
quote unquote worst.
Those statewith the most barriers
or the most licenses,we do it for each.
And then we look at the statethat had the least.
And so we say on a scale of 0to 10 or 1 to 10, 1 to 10,

(21:01):
your your
if you are the one
who has the most licensesor the most barriers,
we're going to write you a ten.
And if you're the one that isthe the least,
we're going to rate you a one.
And then
everybody fits on that scalesomewhere between one and ten.
And that way it also easilycommunicates kind of

(21:22):
what you fall on the pack.
So if you'refollowing it to five,
that means you'reright in the middle,
in four and close to ten.
That means that you'reyou're one of the worse
If you're followingreally close to one,
that meansyou're one of the best.
So the idea is just the higheryour number, the more barriers
or the more licenses.
And then just you havesome numbers there to illustrate
and you happen to have Alabamaso we can show this here.

(21:44):
So Alabama is actually prettynear the top in terms of
having the most variance.
And the two mentioned youmentioned
is like 330 different things.
Not all, fortunately.
No state, no licenses.
Three means all to all 330.
I believeArkansas is our first place.

(22:04):
As of last year,it was Arkansas, Texas
and then Alabama,I believe, in terms of barriers.
So I think Arkansas, of the 330,
we have somewhere around230, 240 barriers.
So even in the 330, we're noone's getting close to like 300.
And in the other hand,nobody's less than 147, right?

(22:24):
So yeah,
there'snobody that isn't licensing
and there's nobodythat's licensing all of these.
So we're really talkingabout on a scale of 147 to 247,
there's about 100 200 barriersof flexibility in there. And
so now we can take
take a look at which are the
the statesthat score the highest,

(22:45):
which in this casewould be worse if you think or
or let's face it.
Yes they they liethey license the most Yes.
In the statesthat license the lease. Yes.
So what we found was Arkansas,Texas
and Alabamahave the most barriers.
So out of all of thesedifferent occupations,
there is something stopping youfrom practicing.
Our friends in Arkansas,
the Arkansas Centerfor Research

(23:07):
and Economics, took a really,really big interest in this.
And they've helped us
delve into what some of thesethese barriers are looking like
and why Arkansas is listedas number one.
One thing that we found
interesting aboutthis is these are states,
these top five, Arkansas, Texas,Alabama, Oklahoma
and Washington.
Well, at least like those top 40we think of these is like
very like economicallyliberal states.

(23:30):
These are these are promotinglike personal freedoms.
These are traditionally moreeconomically liberal states.
These are
these are placesthat you wouldn't
necessarily expectthis this type of behavior.
Whereasstates that when I asked people
they think New York, California,like more or more regulatory
heavy states generally,

(23:51):
which end up I thinkCalifornia falls in number 11.
New York falls a lot closerto the middle of the pack,
somewhere between 25 and 30.
It's a little unusualbecause these are kind of like
unseen costs.
So these are things that people
don't usually activelythink about when we say,
you know, 20more than 20% of the US
workforcehas an occupational license,

(24:13):
that means that someone you know
has a licensefor their occupation.
I did a of a tripwith some students yesterday
and they were talking to someinsurance insurance brokers.
They are licensed,
Your barber is licensed,your massage
therapist is licensed,Your dentist is licensed.
If you are going intoa professional work environment,
chances are there is a licensesomewhere in that building.

(24:35):
So they tend to be unseen.
And so we were a littlesurprised
to find that statesthat we think of
as as a lot more personalfreedom based
have have kindof these high barriers
and these states that have lowscores.
Kansas being our lowest scoring,
our 50th or 51st placewe include Washington D.C.
are these places that they'rethey're not necessarily

(24:56):
extend out in termsof their political environments
or necessarilytheir regulatory environment.
These are places that just kindof show up as more neutral
in areas.
Talk a little bit about yourselfstate profiles.
And so we're already seeing thatthe Alabama ranks third,
we are the third in terms ofmost licensed, licensed state.

(25:19):
But tell us a little bitmore about
our licensing.
Right?
So we have state profilesfor every state.
The the key to that is
we want a one pagepiece of paper
that anyone could taketo their state legislature
and say
this is what our occupational
and licensing environmentlooks like
compared to our region comparednationally.

(25:39):
How how aboutare we on a scale of 1 to 10,
who is our competitorsin this space?
Who can we do better than?
How are we comparedto our neighbors?
And Alabamais kind of an interesting one.
So we are the worst in the EastSouth-Central Census region.
We are third overall
competing with Arkansas,Texas, Oklahoma and Washington.

(26:01):
So Oklahoma and Washington aredoing slightly better than us.
Texas and Arkansasare doing slightly worse
and doing the worstin terms of most barriers.
But Alabama'soccupational licensing
environmentis a little interesting
becausewe have so many barriers,
but not necessarilythat many licenses.
Our licensing scorebeing close to eight is high.

(26:22):
But what
happens is
we have very broad scope of allof these different places.
Like I said,you can't be an acupuncturist
in Alabamawithout being a doctor.
So that
physician license is barringa lot of different occupations.
And that's kind ofwhat we're seeing in
Alabama is not necessarilymany, many unique licenses.
We're just seeing really broadscope to them.

(26:42):
So one idea of havingthis kind of deviation is
we can get an idea of
if there was a new occupationto come up for licensing.
So they started licensingsomething new.
One thing we've seenin this most recent addition
that we were looking atfor the 2020 for publication is
states are starting to licensesign language, interpreters are

(27:04):
with this difference in barriersand licenses.
It's likelythat we can kind of predict
whether or not a stateis going to issue a new license
or just kind of coverthose actions
or those those processesof that job
under an alreadyexisting license.
So perhaps movie sign languageinterpreter
is more likelyto be incorporated

(27:24):
into a licensethat we already have,
and we're just goingto put a barrier to it.
And so thenwhat's our most unusual?
Okay, so our most unusual is awhat we call a drama movement
therapistand a level led led abatement.
Okay,So that one always gets me.
So the drug movement therapistoccupation is a more recent

(27:48):
addition to the occupationallicensing environment in the US.
These are people who are
working through therapy, throughkind of a physical aspect.
These aren'tphysical therapists.
These arethese are more counselors
like the mental, physical side.
And it's about play therapy.

(28:09):
It's about it's about moving.
It's not
your traditional Freudiansit on the couch
and talk about your feelings,that kind of therapy.
It is it is a little bitmore about movement.
And what we suspect isthis is pushed us into a space
where the word therapist is is
the thing that gets us in thatin that like licensing space.

(28:32):
So we think medical.
Well,
thanks so much for coming onand talking to us
about this here today.
And thank you allfor joining us.
Join us again next timefor another E conversations.
This has been e conversations,
a joint production of TroyChurch of Vision and the H.

(28:52):
Johnson Center for PoliticalEconomy at Troy University.