The 1889 Institute offers major changes in their 2021 white paper.

Clipped for length; the sample bill is available at the link.

https://1889institute.org/a-win-win-for-consumers-and-professionals-alike-an-alternative-to-occupational-licensing/

A Win-Win for Consumers and Professionals Alike: An Alternative to Occupational Licensing

 

 

By Byron Schlomach, PhD, Christina Sandefur, JD, and Murray Feldstein, MD

Introduction

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... government plays a legitimate role in preventing fraud and minimizing other inefficiencies. Occupational licensing is supposed to fulfill this role by providing shorthand information or signals of quality and competence, but unfortunately its negatives largely outweigh its positives. This paper proposes an alternative.^[3]

The Role of Shorthand Market Information

Consumers have an interest in getting accurate shorthand information about sellers and products. At the same time, high-quality, reliable sellers in pursuit of a market advantage have an interest in minimizing the costs of conveying shorthand information that accurately reflects who is likely to produce and sell the best products and services.

The reason shorthand information is valuable is that while consumers and producers alike benefit from information, too much information can be overwhelming. Consumers simply cannot fully process large volumes of information. Some information is of higher quality than other information, and too much can cause bad or deceptive information to drown out good, which can be worse than having no information at all. Ask any good conscientious legislator about information overload, and most will admit they specialize and vote with others whom they trust to know more regarding issues on which they are not educated.

Quality sellers arguably deserve a way to convey what consumers can depend on to be accurate, shorthand information that differentiates quality sellers from others, and consumers obviously want this too. This is the one truly good thing occupational licensing is supposed to provide—accurate shorthand information regarding seller quality. As discussed below, however, that does not always happen without other costs overwhelming the positive effects of signals from licensing.

Consumers often purchase goods and services only occasionally. One reason car dealers favor restrictive rules on who can act as intermediaries in auto sales is that dealers have a decided advantage over consumers who buy a car only once every five years or so.^[4] Most car shoppers have neither the time, nor the resources, nor even the inclination, to fully educate themselves to get the sort of deal a truly experienced buyer could accomplish.

Consequently, shorthand tools have been developed to aid consumers in a market context, including Kelley’s Blue Book and car magazines that specialize in monitoring and analyzing consumer choices and presenting them in a shorthand fashion that busy consumers can digest quickly. For other products and services, resources include Angie’s List, Yelp, Consumer Reports, and a host of specialized publications.

Why Licensing Has Proved Ineffective

Unfortunately, occupational licensing accomplishes its one important and beneficial market task in a costly, heavy-handed manner. It is monopolistic, blending all the bad characteristics of monopolies, with government thrown into the mix.^[5] Licensing requirements theoretically offset a monopoly’s tendency toward low quality, but the stories of how licensing boards fail to discipline licensees are legion.^[6] In the same way monopolistic, cartel-like institutions operate, licensing reduces supply, drives up prices, and compromises quality—great for licensees, but not for consumers. And the licensing cartel has the power of government behind it.

Enter Fraud-Protected Private Certification

Fortunately, there is a solution. Private certification keeps licensing’s benefit of market signaling but does so without its monopoly. Fraud-protected certification, which meets the transparency criteria in the model below, serves to encourage the creation of reliable sources of shorthand information for both sellers and consumers. Privately certified sellers have an incentive to defend their credential from fraud and also an incentive to maintain their credential’s credibility by enforcing high quality. Certifying organizations can compete with one another to provide better, more thorough, and more conveniently-expressed information to consumers.

The accompanying model bill does not propose wholesale replacement of traditional occupational licensing, however. In fact, it does not repeal any existing license.

Instead, the model proposes a voluntary system that complements existing licenses. Specifically, it allows for private certifying organizations to (1) register with the state, (2) privately certify individuals to practice an occupation according to the organization’s performance criteria, and (3) employ modern technology, including consumer-rating systems using smartphone applications, to protect consumers. The privately certified individual would be free to work in the state regardless of other occupational regulations. Multiple certifying organizations could occupy the same occupational “space,” competing to provide the highest-quality credential.

While private certification organizations already perform this service in some ways, this proposal would expand and strengthen their ability to do so by creating an incentive to provide a quality credential in exchange for fraud protection. Currently, the only recourse for a private organization to protect its credibility is to sue anyone who illegitimately claim certification. Our model proposes extending criminal fraud protection to certifying organizations that follow certain practices, mainly having to do with transparency to consumers.

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Conclusion

Private certification provides the benefits of shorthand information for consumers and producers just like licensing does—and better—without creating monopolistic power under the umbrella of government. With private certification as proposed here, sellers have a property interest in their certification, which is protected against fraud by the state’s trade practices act (or however a legislature might frame the statute). That means certification organizations do not have to sue in civil court to enforce their rights, a costly and uncertain proposition. Fraud protection is not granted lightly, but at the same time, both sellers and consumers are protected through its power.

The private certification model also has the benefit of not relying on future legislatures to understand and implement a vision of proper regulation the way sunrise and sunset laws do. Nor does it rely on attorneys and statutory causes of action to create a litigation-fertile environment where judges might or might not decide in favor of markets and free enterprise.

Private certification takes care of itself. When new professions arise with practitioners who want to set themselves apart, they can form associations and certify themselves (recall the size threshold in the model). They can practice alongside licensed professions without fear of government interference as long as they follow a set of specified criteria, which are focused on transparency for consumers.

Consumers are already used to looking up reviews and credentials online. Companies are increasingly ignoring college degrees and relying on certificates of course completion from private online education services. Over time, with private certification in place, licensing in many occupations would likely disappear, both for lack of need and by consensus. So there is no real need for the political battles involved with licensing repeals if private certification is put in place. And there would be no need for legislatures to mediate disputes between licensed professions in the future.

The ultimate result, compared to licensing, is that private certification will increase quality, increase opportunity, and lower prices.

And Speaking of Medicine …

Murray Feldstein, MD

Today, occupational licensure is primarily a political tool to restrict competition rather than to assure competence, including in the medical field. The origins of this system lie in the medieval guild system, resurrected and promoted by organized medicine and successfully enacted over a century ago. Since then, this system has infected one service industry after another. The politics of licensure do more to block competition than to ensure competence and safety, with professional entry controlled by the profession itself through a series of interlocked private institutions.

A certified nurse practitioner, who has a bachelor’s in nursing, an RN license, and a masters or doctorate in nursing, can do a vasectomy in Washington State. But in most states, that same individual must either fight a scope-of-practice battle in the legislature or go to medical school in order to perform a vasectomy. I am a board-certified urologist who has performed thousands of vasectomies. I am confident I could train an experienced, competent physician’s assistant or nurse practitioner to do the procedure within a few weeks, and feel comfortable letting them do it independently.

Defining or changing a scope of practice for a profession is a political power struggle. Legislators, largely laymen, depend on affected regulated professions for their information, and special interests and political considerations are often prioritized over the public interest. Anyone who has been through a scope-of-practice battle knows how vicious, time-consuming, and demeaning they can be. Privileged, incumbent professionals argue that potential competitors lack competence, though no real evidence is provided to support that claim. The case of nurse practitioners performing vasectomies is one blatant example.

In medicine, although graduates from medical schools are granted an unlimited license to practice medicine, potential competitors are restricted by broad scope-of-practice regulations. There is no statutory restriction on licensed physicians performing vasectomies, even though they may never have seen one performed. The reason most non-urologist MD’s avoid doing the procedure is not because it is illegal, but because of market conditions, their own moral compass, and nongovernmental mechanisms such as board certification, hospital credentialing, and liability concerns, which truly assure professional competence.

The proposed form of private certification outlined in this paper would likely see private entities creating certification tracks that are not unlike pilot certification, a truly competency-based system: The pilot profession does not control the student level leading to professional entry. The prerequisites and competencies required for any certificate—from day-flight only, to instrument rating, to commercial and airline pilot—are clearly specified. No politicians are making decisions about matters they know little about, and market forces largely determine the efficient distribution of piloting skills within the industry.

Under a certification system, many motivated, capable individuals unable to enter a highly restricted licensing regime could use their skills to provide themselves with greater opportunity and help those in need of their skills. In medicine, for instance, perhaps a military corpsman, an international medical graduate, or an emergency room aide who became an EMT could find a place in a healthcare industry that, quite frankly, needs them and the important, useful skills they have acquired. Under today’s laws, licensing prevents this—and we all lose, not just those who yearn to realize their dreams by helping others through medicine, but also patients who need access to medical care.

An advantage of the private certification proposal in medicine is that the system gains additional healthcare professionals, but no new mandates are imposed upon existing institutions. Licensing boards will still have to verify credentials and decide which programs they are willing to accredit. The market mechanisms that truly assure public safety remain intact.

Regardless of policies enacted in Washington, states that reform medical licensing can improve medical access, lower medical costs, streamline the adoption of 21st-century technologies, facilitate modern teaching methods, provide opportunity for self-advancement to segments of our population who have been falling behind, and empower patients by reforming medical licensing. Part of that reformation, of course, can include private certification. And if this is true for medicine, it is true for every other licensed occupation.

Many are concerned that the private certification model does not contain carve-outs for medicine or law. However, the model explicitly acknowledges government’s right to regulate substances, including prescription medicines. This alone will continue to require licensing for many medical professions, alleviating the most common objections related to public health and safety. And in the case of surgery, hospitals and private board certifications regulate who does surgery now, not licensing boards.

As for law, Great Britain, which has two levels of attorneys, barristers and solicitors, suggests a helpful alternative. Britain’s barristers, who litigate before courts and all attorneys in the U.S. face similar requirements to practice. Britain’s solicitors, who are more numerous, practice only what might be called office law, drawing up contracts, carrying out legal negotiations, and advising clients, but not litigating. Solicitors only face requirements to practice that are akin to certification. In American terms, litigators (Britain’s barristers, who argue before judges) are licensed, but attorneys in general (Britain’s solicitors, who do not litigate) are not.^[7] The model bill stipulates that those privately certified but not licensed must post a sign stating they are not regulated by the state. Bar-licensed attorneys would continue to have an advantage for this reason alone. Plus, judges would still determine if an attorney is qualified to litigate in front of them, a power set in common law and one this model explicitly allows to continue.

Private certification has the potential of doing a better job of protecting consumers than occupational licensing while also generating benefits for those certified under its provisions. Consumers want the shorthand information. Producers want to give it. Government need only create the setting for this to occur.