Why does an interior designer need a license in only three states: Florida, Louisiana, and Nevada? Why do I need a high school diploma or GED to be an auctioneer in North Carolina? Should it really take five months to become a hairstylist in Wyoming? If I’ve been a licensed barber in Michigan for 20 years, how can I get licensed in Tennessee? These questions are just a sample of the oddities that drive discontent with our current professional licensing system.
Most of the existing academic research on professional licensing has been done by economists, who usually see the licensing process as the cause of higher prices for consumers and an example of unnecessary barriers to market entry, particularly for the poor. In The Licensing Racket: How We Decide Who Is Allowed to Work, and Why It Goes Wrong, Rebecca Haw Allensworth, associate dean of research at Vanderbilt Law, wrestles with the issue from a legal perspective.
Allensworth shows that the existing licensing system is broken, that the number of professions requiring licenses should be drastically reduced, and that the licensing process should be more closely regulated by disinterested government officials. Through meticulous research, she demonstrates that licensing is much better at protecting the interests of currently licensed professionals than serving the public good. In fact, she makes the case that the public seldom sees measurable improvements in quality and safety that the professional licensing system promises, even in critical professions like medicine and law.
As Allensworth defines it, “A professional license is a government-granted right to perform a service that can be obtained only through significant investment in human capital, usually in the form of education and examination.” This includes obvious professions like medicine and law. But it can also include shorthand reporters, florists, and alarm systems contractors, depending on the state. Yet professional licensing does not include, for example, car mechanics, for which certifications are available but not required by the state to work.
Although licensing is authorized by state legislatures, the regulatory functions—such as determining the requirements to earn a license—are usually delegated to licensing boards. These boards are generally composed of experienced professionals in the field. Board members are usually volunteers or modestly compensated for their time. This arrangement provides flexibility and expertise to the regulatory process, but it also creates an obvious conflict of interest.
Proponents of professional licensing typically argue that it’s an essential means to protect the public from bad practitioners. Allensworth argues, however, that licensing boards are much more effective at serving those who already have licenses by keeping competition out. The easiest way to do that is to ratchet up requirements for new licenses. And that’s what has happened historically.
According to Allensworth: “For many professions licensed today, elaborate educational and testing requirements and constant government surveillance is more than what’s necessary to protect the public. It was not always this way.” Historically, professional licensing started with fields like medicine, law, and architecture where there are serious risks to the public for substandard work. But now there are hundreds of professions that require licenses, including natural hair braiding, which poses little risk to public health. It has taken years of legal battles and lobbying to separate natural hair braiding from the cosmetology licensing regime, which usually requires thousands of hours of training.
Yet higher prices aren’t the only benefit to professional license holders. The challenge of earning a license gives a sense of pride to those who have made it over the hurdles into the profession. “A barber may never achieve the social status of a lawyer,” Allensworth notes, “but requiring the same number of classroom hours for both licenses, as Tennessee does, puts them in the same ballpark.” Thus, even those who fight hardest against licensing requirements from the outside have little incentive to lower them once they’ve reached the inside of the profession.
Along with keeping new practitioners out, professional licensing boards also protect the turf of professions. According to Allensworth, this has worked its way into debates between nurse practitioners and physicians about prescribing medications, and “between veterinarians and massage therapists over animal massage.” In some cases, like an attempt by veterinarian technicians to use their skills to provide high-end in-home pet sitting to high-maintenance animals, the licensing board squashed the market innovation to protect the supervisory role of veterinarians.
Proponents of professional licensing often raise the concern that, when there’s no regulation, it’s like the “Wild West.” Allensworth challenges this assumption: “For most consumer transactions, we rely primarily—although rarely exclusively—on market forces to protect the public.” Furthermore, “researchers have struggled to show definitively that licensing actually improves service quality and safety … it is far from obvious that all licensing restrictions always led to better and safer service.” In fact, beyond increased prices, professional licensing often directly harms consumers by creating a scarcity of service providers and fails to protect consumers owing to lax discipline of bad actors.
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In principle, many of us are happy to delegate quality control for doctors to a medical board. When I need surgery, I don’t want to have to wonder if my surgeon is competent. I’m personally unqualified to determine whether my doctor consistently follows best practices. But I hope the board keeps the public well-being in mind, not just its own professional interests. That’s not always the case.
One of the results of ever-increasing licensing requirements is that it creates scarcity, especially in rural areas. According to Allensworth, “Three quarters of all rural counties in the country are Healthcare Provider Shortage Areas.” Nationwide we have a substantial shortage of both nurses and doctors, which makes good care harder to come by.
One method of addressing shortages of medical personnel in rural areas is telemedicine. It took the COVID pandemic to break down many of the barriers erected by licensing boards against telemedicine.
The next battlefront in medical licensing is likely to be in the role of nurse practitioners and physician assistants in providing primary care. Although evidence indicates that nurse practitioners can provide primary care that is as safe as that from physicians, some states tightly restrict the number of nurse practitioners a doctor can supervise and limit the types of tasks a nurse practitioner can perform.
Personnel shortages and higher costs might be an acceptable tradeoff if we were guaranteed protection from bad actors. But when Allensworth turns her attention to the ineffectiveness of licensing board discipline, the stories are alarming.
To be clear, the number of bad actors is small. Their potential impact, however, is significant. In this section, understandably, Allensworth shifts from discussing data and trends to detailing some of the worst failures of the licensing system. As it turns out, licensing boards are much better at keeping potential workers out than kicking bad actors out, even in fields like medicine and law.
For example, Allensworth tells a surprising story of Dr. Michael LaPaglia, which would seem unbelievable if it weren’t a matter of public record. He lost his ability to prescribe narcotics in 2014 as a result of felony charges of selling opioids and marijuana out of his home. Yet he maintained his license to practice medicine despite his “no contest” pleas. Eventually, he partnered with another troubled physician to provide opioid-addiction services. Although LaPaglia couldn’t prescribe narcotics, he used the other doctor’s license to sell prescriptions for controlled substances in the parking lot of a McDonald’s, among other locations.
In 2018, the two were charged by law enforcement for distribution of controlled substances and fraud. After LaPaglia pleaded guilty, his license was revoked for seven months, until it was reinstated in August of 2019 with fewer restrictions than before. His license wouldn’t be finally revoked until July of 2021. The final revocation emphasizes LaPaglia’s performance of invalid COVID tests during the pandemic.
LaPaglia’s story is just one example of failures of licensing boards to protect consumers. Her research shows that most consumer complaints do not result in disciplinary action. And, as the LaPaglia case shows, even in cases where laws were violated, discipline is neither guaranteed nor severe.
Allensworth provides other examples. In 2021, the Louisiana state legislature criticized the state board of massage therapy for not regulating massage parlors that were functioning as brothels. In another infamous medical case, a Dallas-based neurosurgeon, Christopher Duntsch, dubbed “Dr. Death,” killed and maimed several patients before he was criminally charged. It was the legal system, not the licensing regime, that stopped his malpractice.
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Allensworth obviously highlights some of the most severe failures of the licensing system, but the evidence she provides is nevertheless damning. If licensing boards struggle to discipline these egregious cases, how can they be trusted to protect consumers from lesser problems?
The portrait of the professional licensing regime is a perfect picture of regulatory capture. The law is used to give existing professionals the power to lock out competition and protect their colleagues. The result is often unjust entry barriers to market participation and cronyism in discipline. As Allensworth shows, licensing boards are much more effective at prosecuting unlicensed hair stylists and handymen than excluding drug-dealing doctors. So the chief benefit to the public—increased safety—seems to be more hypothetical than real.
Allensworth’s proposed reform of the current licensing regime would be a substantial improvement over our current reality. She calls for drastic reductions in the number of professions that require licenses. She wants the licenses that remain to be more closely and tightly regulated by government agencies rather than by professional organizations. While her proposal is thin on specifics, the framework is encouraging. It’s clear from The Licensing Racket that our professional licensing regime needs improvement, and the sooner the better for both practitioners and the public.
