Roughly 20% of American workers require a government license to work—ranging from barbers, alarm-system installers, and interior decorators to nurses, doctors, and dentists. While governments enact laws that determine which professions merit occupational licensing, regulation is almost always managed by licensing boards, typically comprised of members of the profession. It’s often called “the grand bargain,” on in which certain professions avoid governmental interference and enjoy a high degree of trust and esteem, in exchange for regulating themselves in the interest of public safety.
This method of self-regulation, however, comes with easily identifiable risks, including poor enforcement mechanisms and marketplace constriction, while imposing additional costs on the goods and services.
The Licensing Racket, by Rebecca Haw Allensworth, meticulously details the real impact that our system of occupational licensing has on consumers and the workforce. Allensworth embedded herself in the world of professional licensing, attending hundreds of hours of licensing board meetings and interviewing more than 180 people involved in the regulation of 28 professions. What she found was a two-sided phenomenon – being “locked out” and “locked in” – that limits licensing boards from fulfilling their end of the grand bargain.
Licensing boards lock out competition
The Licensing Racket details how professional licensing boards, influenced by the related associations from which most board members come, increase barriers to entry over time and resist competitive incursions on their professional turf.
In one example, she chronicles efforts by cosmetology boards to subsume African-style hair braiding under their purview as the practice grew in popularity, ultimately limiting the number of licensed hair braiders and increasing the cost of the service. This behavior extends well beyond hairdressing, to critical services like healthcare.
Through her research, Allensworth found that while reform to licensed professions, especially lower-income ones, would offer substantial benefits to practitioners and consumers alike, the prestige and exclusivity afforded by the current structure make it difficult to achieve.
“Licensing does leave too many marginalized workers… out of the American Dream,” she writes. “But for members of those same marginalized groups who do make into a profession, the fact that the profession is licensed … is a big part of what makes it part of their American Dream in the first place.”
Licensing boards fail to hold bad actors accountable
In the second part of The Licensing Racket – “Locked In” — Allensworth reveals how boards, under-resourced and comprised largely of fellow practitioners, make limited efforts to discover misconduct among its licensed members and, when they do, frequently protect the careers of “manifestly dangerous and incompetent providers.”
“The professional disciplinary system uses board members primed to see the humanity in their fallen colleagues, gives them too little information, and asks them to go with their gut,” she writes.
From well-known cases of misconduct like Dr. Death to less-publicized instances of doctors trading sexual favors for narcotics, The Licensing Racket illustrates the profound cost of these regulatory shortcomings. The consequences stretch even further: Allensworth reveals how medical licensing boards bear substantial blame for the opioid crisis and staffing shortages during the COVID pandemic.
The cycle has another wide-ranging effect. Bad doctors and lawyers allowed to stay in their professions after disciplinary hearings often lose their ability to work for high-end hospitals or firms, or to take private insurance, relegating them to work exclusively with the most vulnerable members of the public — including the uninsured, addicted, poor, and incarcerated.
How to improve professional licensing
Allensworth argues that a “coherent, defensible theory” is needed to determine when professional licensing is required. “Licensing makes sense when a job is dangerous and requires professional judgement to be done right,” she writes.
She also advocates for a board structure that’s more “governmental” in nature, with more resources, expertise, and outside members, along with stricter decision-making procedures. Noting that “this may not be enough,” she encourages state governments to consider eliminating the board system altogether and vest the decision-making authority in themselves, as they do in many other areas of regulation.
“Although the spirit of altruism is alive and well in the professions, it is folly to believe goodwill alone leads to reasonable and safe professional regulation,” she writes.
The Licensing Racket: How We Decide Who is Allowed to Work, and Why it Goes Wrong is published by Harvard University Press. Rebecca Haw Allensworth is the Associate Dean for Research and David Daniels Allen Distinguished Chair of Law at Vanderbilt Law School.
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