There is good reason for workers in licensed fields to push for the laws. Jobs in a service-oriented economy are more likely to be licensed, which raises wages by about 15 percent, as I found in research with the Princeton economist Alan B. Krueger, the former head of President Obama’s Council of Economic Advisers. This is largely because of the ability of regulated professions working through state legislators and regulatory boards to limit the supply of practitioners and to drive up costs to consumers.
What can the Federal government do about this? Some options:
1. Require states to accept licenses from other states unless there is a compelling case that other states’ qualifications are not relevant (might be the case with lawyers, for example, because you need to know a different set of laws).
2. Strong-arm states by making federal aid for worker training, unemployment benefits, and other programs conditional on a state getting rid of anti-competitive licensing laws.
3. Pass a “right to provide service” law that permits any firm to provide a service, regardless of whether it uses licensed personnel. For services that potentially endanger consumers, require providers to undergo periodic audits to ensure that their safety practices are state of the art. Also, require service providers to obtain insurance against lawsuits for fraud or malpractice. This would lead the insurance companies regulate the service providers. Perhaps such a law could only apply to firms that do business in more than one state (I am really fuzzy on how the Commerce Clause separates state from federal power these days. My sense is that it doesn’t.)
Or require all licensing must be via an exam that everyone, including current practitioners, must periodically take. This way incumbents have less incentives to create difficult exams.
For services that potentially endanger consumers, require providers to undergo periodic audits to ensure that their safety practices are state of the art….
…and we’re right back to where we are today. Spend some time at the Statehouse: the place is filled with people clamoring for more regulation. Everything endangers consumers. I’m surprised we have so little as it is.
And I thought you wanted more choice in government.
Jobs in a service-oriented economy are more likely to be licensed, which raises wages by about 15 percent,
Feature or bug? I’m not so sure.
Every job, it seems to me, comes with some kind of license, even a tacit one: your license could be your work ethic; your contacts; your support group; your physical ability; etc. I’m not sure about the utility of a world where everything is constantly subject to bid.
Your question assumes that we want the Federal Government to do anything. Leave the states alone. They’ll figure it out. Or they won’t. It’s not a national-level issue. If you think it is, please ‘splain why?
I’ve wondered the same thing. What is the argument for federal intervention when it is the states which do licensing? There are a few possibilities.
1. States are more susceptible to rent-seeking lobbying. Only the feds could act without facing the same pressure from nationwide trade groups.
2. It’s a coordination / free-rider problem. No state is going to act first without the guarantee of reciprocity from every other state, and only the feds can provide the leadership to ensure that occurs fairly.
3. There are economies of scale of open, cross-border competition that would provide the best net social welfare, but which are unlikely to be captured within every state proportionally. So there will be winners and losers without offsetting compensation. Most states wouldn’t host the headquarters of the newly consolidated major industry, and so have little incentive to play ball and forgo the smaller HQ’s within their jurisdiction. One saw this with regards to banking charters once upon a time, and the subject came up with regards to health insurance during the Obamacare debates.
4. State governments overvalue the option value of their jurisdiction and legal control over an industry and its membership. You can’t convince them to give that up, so you have to coerce them.
My version of #1 and #3:
a. The department of commerce decide which licenses are equivalents and publishes it.
b. If a state licensing agency adopts a rule applying its rules of professional conduct — whatever they are — to activities of its licensees both in and out of its own state, then that license entitles the holder to practice the licensed profession in every other state where the department of commerce has decided it is an equivalent.
c. Holding that license would be a defense, under federal law, to any charge of unauthorized practicing of the profession. For individuals, the defense would only apply if the licensing state is the individual’s residence state. (This would prevent excessive forum shopping.)
Max
4: If a service is provided to an in-state client by an out-of-state service provider, that service provider doesn’t have to have the requisite licence. (yes, this will mostly apply to services where the service can be rendered over the Internet, phone, or USPS)
Why the right will like it: Argue (correctly) that this is within the realm of the CC as the founders saw it – ensuring smooth commerce over state lines.
Why the left will like it: Encourages low-income customers in high cost of living areas (aka poor in cities) to access low-cost service providers in low-cost parts of the country.
Why an economist would like it: in addition to expanding the size of the market, this will create an environment in which the credential holding in-state providers will be incentivized to get rid of their own licencing system
I’m sure there are huge unintended consequences here, but it’s a fun idea.