By Ian Aikens | January 2, 2024
Should a person get fined or jailed for failing to obtain permission to work from the government? Does government licensing and certification actually keep the public safer? Should government officials or consumers decide who is allowed to serve the public?
I bring up these questions because of a bill that hit the State House this year. HB507 was a controversial bill that would have removed penalties for failing to get a license to practice in certain occupations. Contrary to claims made that it would have eliminated all licensing and turned New Hampshire into the Wild West, the bill would have simply removed the penalties but left the current licensing system in place without dismantling it.
This shouldn’t have been a big deal, but when it comes to “stakeholders” in the status quo, this was like a declaration of war. Players with vested interests—and lots of dollars at stake—weren’t about to allow other competitors into their coveted and protected occupations without a fight, so they descended upon the State House to lobby all the state reps to kill the bill. A Realtor friend of mine told me that he received numerous emails from his trade association for a “Call to Action” to bombard the state reps with emails to ensure defeat of the bill. It was laid on the table by a vote of 308 to 71, so it is history for the balance of this legislative session.
A little background on state licensing is helpful to understand the forces at work on this issue. If you want to see an area of public policy that makes no sense at all—and is truly a Wild West of its own—just take a look at state occupational licensing. It is a crazy patchwork of laws and rules that boggle the mind and vary drastically from state to state. Their only common feature is that the rules are completely arbitrary but are always framed as being necessary for “public health” and “safety.” Heaven forbid that the government might not keep us all “safe.”
To fully appreciate the absurdity of state licensing, here are some of the occupations currently licensed by some states: florists (Louisiana), social and human services assistants (Ohio), home entertainment installers (3 states), hypnotists (3 states), interior designers (3 states), travel agents (5 states), title examiners (7 states), furniture upholsterers (9 states), farm labor contractors (10 states), bartenders (12 states), locksmiths (12 states), and interpreters of sign language (22 states). Yes, an unlicensed florist might sell droopy flowers, and the sounds from your newly installed home entertainment system might not hit the perfect notes, but are these really matters of life and death? Obviously, if “public health” were really the issue, then all states would be licensing these occupations; rather it looks like certain “stakeholders” are more active in some states than others.
Let’s start with the not insignificant costs of licensing. Estimates are that consumers pay a premium of 15% extra to receive services licensed by the state. This translates to an annual loss of 2.8 million jobs and a cost of $203 billion. While states do the bulk of licensing, cities, counties, and the federal government sometimes require additional licenses in order to work as they want their “fair share” of the loot too.
Despite America having the reputation for being free-er, government licensing is actually a heavier burden here than in the European Union. Depending on the European country, licensing ensnares 9-24% of all jobs, whereas in the United States, it’s now 25-30% of all jobs, which is up significantly from less than 5% in the 1950’s. By field, it’s now more than 75% for healthcare, 67% for the law profession, and 50% for education. The way things are going, one may soon need a license and degree to work at McDonald’s!
So how does New Hampshire compare to other states when it comes to economic freedom to work? Generally a lot better than many other states, but there’s still plenty of room for improvement. It licenses 37 of 102 of the lower income occupations; that’s 36% for New Hampshire, while the national average is 53%. For burden rank, where first is the worst, New Hampshire ranks 19th in the country. For a combined ranking of the number of licenses times the average burden, New Hampshire does better at 42nd in the country. Our average licensing fees here are $209, while the national average is $284.
We do have 54 different licensing boards here under the Office of Professional Licensure and Certification. The roster doesn’t look as crazy as in some states, but right off the top, a few definitely are ridiculous if one is really concerned about “public health” and “safety”: CPA’s, architects, auctioneers, court reporters, engineers, family mediators, foresters, genetic counselors, geologists, land surveyors, natural scientists, real estate agents, real estate appraisers, recreational therapists, and septic system evaluators. Most of these professions are white-collar jobs, and of course everyone wants competent, ethical professionals, but can you really say with a straight face that, if a white- collar worker messes up, someone will expire? I don’t think so, but that hasn’t stopped vested interests from using the public health and safety cover for protectionism.
I went through all 54 boards to examine board actions taken against individuals or companies in violation of the law. Out of the 54 boards, a full 18 boards had taken not a single board action at all. That right there should be reason enough to thank them for their services—and disband them permanently. The boards of Barbering, Cosmetology, and Esthetics; Electricians; and Nursing had the most board actions. Pharmacy and Medicine had a modest number of actions taken, and all the rest of the boards had either few board actions taken or none at all.
Many of the actions taken by the bureaucrats on the various boards clearly were administrative violations. Common problems were lapsed licenses, not having your photo on your license, not completing all your continuing education hours, and supervising unlicensed contractors. Working without a license also popped up a lot, and that is considered an especially serious violation. As Milton Friedman noted, “Hell hath no fury like a bureaucrat scorned.” To government officials, there really is nothing more important than that magical piece of paper with an official government stamp to ensure safety. Unfortunately, it might actually make the public less safe by providing a false sense of security to the public that every licensed professional by the state has been completely vetted, and there is no need to do any further due diligence on the person or firm.
The next category of board actions contained more legitimate concerns but didn’t rise to the level of “public safety.” Often, they were complaints of not living up to the terms of a contract. One real estate broker didn’t pay commissions. A funeral director did not secure headstone engraving services that had already been paid for in advance. Complaints such as these could be handled by the courts as tort law is one of the few legitimate functions of government. Even a non-governmental organization such as the Better Business Bureau (BBB) could resolve such conflicts. I once had some work done around my home and was unhappy with how it turned out. When the contractor refused to return my calls, I filed an official complaint with the BBB, and I received a call from the contractor the very next day. Within a week, I had received a check as compensation for a less than satisfying job.
Let’s not forget the importance of reputation when it comes to serving the public. Customer satisfaction is the number one factor in determining the success or failure of a business. If word of mouth gets around that an individual or company is pleasing its customers, it will likely succeed and grow. Obviously, the reverse is also true: if it performs poorly, it will soon run out of customers. A golden reputation and happy customers—not government busybodies—are what drive best business practices.
Another category of board actions was directed at various forms of unprofessional conduct. A drug counselor told inappropriate jokes and used foul language. A recreational therapist “crossed boundaries” and smoked pot with a former client. A guardian ad litem didn’t maintain “professional boundaries.” These types of problems could and should be handled by professional trade associations, not government bureaucrats. I checked all 54 boards and found specific trade organizations for every single board category except Manufactured Housing, which is a special board created by the state legislature in 1994 to settle disputes between park owners and residents. (Arbitration, or the courts if necessary, could have handled such disputes.)
Professional trade organizations of every sort exist at the local, state, national, and even international levels. These professional associations do their own policing and maintain higher standards than those set by government licensing bureaucrats. Obviously, they aren’t doing this out of the goodness of their hearts, but rather because it makes good business sense. If they have rogue members of their trade out there serving the public poorly, that reflects negatively on all of their members, so they have every incentive to discipline (or banish if necessary) members who don’t live up to the standards of the association. My Realtor friend told me that his trade association has ethics and judicial committees to deal with unprofessional members. As always, reputation is key.
The downside to the trade associations is that they have gotten lazy over the years and are tending to rely on government licensing administrators to do some of their policing. And of course they don’t mind a little dose of good old-fashioned protectionism to keep out competitors—and charge higher prices—by lobbying for more licensing boards and raising the requirements for licensing. Trade associations operating almost like trade guilds in the past still serve an important purpose today, but they could be even more effective without the presence of government bureaucrats.
There were definitely some licensing board actions that actually dealt with “public health” issues. Nursing, pharmacy, and medicine all had a lot of substance abuse problems: stealing drugs, under the influence, found asleep in patient’s bed drunk, and mixed up prescriptions. Also, there were a fair number of complaints of sexual assault and “inappropriate touching.” Again, these kinds of complaints should be investigated by professional associations, and if found guilty, the culprits should be disciplined. The loss of professional standing would be a red flag to potential customers or employers. The sexual assault complaints could very easily lead to law enforcement involvement and possible civil suits.
The Barbering, Cosmetology, & Esthetics Board clearly had the most board activity of all 54 boards. Aside from the usual administrative problems like expired licenses, licenses without pictures, and licenses not displayed, most of the fines issued by the board were for sanitation problems: tables not cleaned properly, unopened pack of bladed rasp files, whirlpool/foot spa/spa not disinfected and covered as required, bowl not maintained or covered as required, and so forth. I’m not so sure that each of these violations really threatened anyone’s health to the point of actually getting sick or infected, but let’s be on the conservative side of sanitation and assume these problems threatened the public. If government inspections didn’t occur, how would the public be protected?
When it’s the facility, rather than the professional, with a problem, it should be the insurance company that checks up on the business. As with trade associations, the insurance company wouldn’t be doing inspections out of altruism, but rather out of pure business sense. If a nail shop, for instance, is unsanitary enough that a customer gets infected there and sues the business, it would be the insurance company that gets stuck with paying the claim. Therefore, it behooves the insurance company to ensure the sanitary standards of the business are high. Unfortunately, the downside to government bureaucrats doing the inspections is that the insurance companies have also gotten slack and rely on the bureaucrats to do their job. And if the bureaucrats miss a violation or two (due to sloppiness or even possible corruption), who will be held accountable?
I know for a fact that the market sometimes works this way—even with government busybodies—because I used to work in the bedding industry. Our facility was always inspected in person when we changed insurance companies because our employees tended to store samples in closets, and they would pile them up to the ceiling causing a possible fire hazard. The insurance company would always make a fuss about this, so our employees scrambled to “clean house” before an insurance company visit.
So, what can be done to rein in the licensing-industrial complex in New Hampshire? We can look to other states to see what has worked elsewhere. There are very few successful instances where de-licensing has worked, despite many attempts all over the country. Sunset committee reviews have often recommended de-licensing only to have legislators vote against the recommendations. Conversely, legislators have often sponsored bills for licensing reform only to have their bills die in committee.
Colorado provides as good an example as any for successful de-licensing. Per recommendations by its state auditor and sunset committee reviews, the legislature repealed the mandatory licensing of funeral directors in 1981 and abolished its 70-year-old licensing board. It did, however, keep a “title protection” requirement in place that does not allow anyone to advertise or present themselves as a “funeral director” unless they have practiced for 2,000 hours, interned as a “funeral director,” or handled at least 50 funerals or graveside services. This is a reasonable alternative to government licensing as those consumers in need of such services who are more comfortable with the government-sanctioned title can choose a “funeral director” and those consumers less concerned with titles—who just need the services performed—might choose the less glamorous “mortician” or “undertaker.” I say, let the consumer choose!
HB507, by the way, did include such a title protection clause with the wording, “Nothing in this section shall prevent an unlicensed person engaged in providing services of any profession regulated by the Office of Professional Licensure and Certification under this chapter as long as the person does not advertise or hold themselves out as being licensed.” So, it was a good first step—and actually a very tame one—to offer consumers more choices for services. This might have actually forced state-sanctioned licensees to provide or offer better services to their customers.
I hope in the near future a similar attempt to dismantle the licensing cartels materializes again. Not only do they keep the costs of goods and services higher for everyone than they would be otherwise; they also keep those on the lower end of the economic ladder on the bottom rung. Shamefully these are often the very same folks who profess to “help” the working poor. The hypocrisy is breath-taking. How about something novel like just letting the working poor … work?
(Editor: NH State Representatives Bailey, Burnham, and Granger, who represent Strafford District 2 (Milton and Rochester Ward 5), were among the 71 representatives that voted against tabling HB507. They may or may not have been in favor of it, but they voted against not voting on its issues).
References:
Flatten, Mark. (2016, December 6). Goldwater Institute. Protection Racket: Occupational Licensing Laws and the Right to Earn a Living. Retrieved from www.goldwaterinstitute.org/protection-racket-occupational-licensing-laws-and/
Institute for Justice. (2023). New Hampshire Occupational Licensing. Retrieved from ij.org/report/license-to-work-3/ltw-state-profile/new-hampshire/
LegiScan. (2023). HB507: Relative to unauthorized practice in occupational licensing and certification. Retrieved from legiscan.com/NH/text/HB507/id/2636197
NH OPLC. (2023). Find a Board. Retrieved from www.oplc.nh.gov/find-board
U.S. Bureau of Labor Statistics. (2015, May). The de-licensing of occupations in the United States. Retrieved from www.bls.gov/opub/mlr/2015/article/the-de-licensing-of-occupations-in-the-united-states.htm