Cox & experts agree: State's licensing laws need review

By Brice Wallace

Gov. Spencer Cox’s push for state agencies to review occupational licensing rules and procedures is the right approach, according to some experts who have studied licensing.

During a recent online symposium, they contended that while some licensing requirements are necessary to protect the public’s health and safety, others lead to higher costs of services for consumers, do not necessarily lead to better quality of those services, and install barriers for people — especially poor people — wanting to join certain job fields.

Estimates indicate that 16 percent of Utah workers are subject to occupational licensing from state government.

Utah “has already made itself largely a leader in the occupational licensing reform space,” according to Josh Smith, research manager at the Center for Growth and Opportunity (CGO) at Utah State University.

“It’s about making sure that these occupational licensing laws work as guardrails rather than closing down entire roads for people to go down to find economic prosperity. Too often, our laws just become cluttered messes. They work not like guardrails but they close down those opportunities.”

The CGO and the Marriner S. Eccles Institute for Economics and Quantitative Analysis at the University of Utah co-hosted the symposium, which coincided with the release of several essays on licensing reform from experts in Utah and throughout the country.

Edward Timmons, director of the Knee Center for the Study of Occupational
Regulation at Saint Francis University, said Cox’s executive order calling for licensing review is “refreshing.”

Economists realize that occupational licensing raises consumer prices for services and creates inefficiencies in the labor market, he said. “And as the economy rebounds from COVID-19, I think the labor market is going to need flexibility to make sure that all of these displaced workers are able to reconnect with the workforce, and unfortunately occupational licensing presents significant barriers to workers that … perhaps are thinking about moving into a new field.”

Only about 5 percent of the nation’s workers faced occupational licensing requirements in the 1950s, he said. Once appliable primarily to doctors, dentists and lawyers, it has spread to more occupations, “where the traditional benefits that are received by occupational licensing, I think, are hard to justify relative to the costs that we know are borne on the labor market for having occupational licensing in effect,” he said.

Licensing is required in Utah for barbers, massage therapists and genetic counselors, “and it’s not necessarily clear that the benefits that consumers receive from licensing justify the costs,” Timmons said.

Evidence that licensing leads to better quality of service “is quite mixed,” he said. “But for the most part, there’s just not a lot of good evidence that licensing is delivering on its intended purpose, and we have lots and lots of evidence that licensing results in significant costs.”

Complicating matters further is that licensing boards often face conflicts of interests, with members and the people they represent standing to lose financially if licensing is curtailed or eliminated, the speakers said. Timmons said cosmetology schools could lose business if such scenarios became reality.

Michael Bednarczuk, senior research analyst at the Institute for Justice, said cosmetology licensing in Utah “doesn’t appear to help students or the public. If anything, it’s only helping cosmetology schools.”

Students seeking licenses at cosmetology schools face at least 1,600 hours of education, the costs of enrollment and the burden of taking exams. Students have said those schools typically are poor at graduating them or doing it on time, and students rarely see the benefits in terms of improved future earnings, he said.

“Mandating that aspiring beauty workers complete costly and lengthy schooling might make sense if it were essential for public safety, but there are good reasons to think it isn’t,” Bednarczuk said. State law does not specify a certain amount of time be focused on health and safety, some schools spend as little as 2 percent of their program on it and some think it can be addressed “in just a few hours,” he said.

“Our findings suggest that the current system of state cosmetology licensing is a failed model of professional development,” Bednarczuk said.

Several speakers said the costs of obtaining an occupational license simply is out of each for many people, including those who are poor or those whose first language is not English.

But what to do about licensing reform? Timmons suggested legislators always should consider the least-costly way to protect consumers. Utah should see what other states are doing, establish an independent entity to review licensing in Utah and develop recommendations for legislators, and legislators should ensure that any new licensing requirements be closely studied before implementation.

“Once licensing is on the books, it’s extraordinarily difficult to remove,” Timmons said. About 35 professions in Utah have been delicensed in the past five years, but before that, the figure was only eight in the previous 40 years. “So, licensing has remarkable staying power once it gets initiated.”

Speakers broached other ideas, including having more members of the public on licensing boards, conducting brief training on health and safety basics rather than making it a small part of long educational programs, and perhaps mandating certification rather than licensing.

Timmons noted that auto mechanics are subject to private certification and the public now cares more about a service provider’s online reviews than about whether that provider is licensed.

“The market itself, particularly supplemented with online reviews, is a significant regulator,” he said.

“The one hang-up or pet peeve, if you will, of mine is [the belief] that licensing is the same thing as regulation,” he said. “Just because a profession is not licensed does not mean that there will be no regulation. There are a number of other regulatory alternatives that don’t impose the same costs of occupational licensing and I think can still make sure that consumers get adequate protection in the marketplace.”