Under the radar: the impact of licensing regulations on employment

The Star Tribune is reporting that Eden Prairie is one of an increasing number of cities moving towards requiring massage therapists (who don’t already work at salons with cosmetology licenses) to obtain a license from the city.  Non-salons will have to pay a one-time $500 fee plus an annual $300 fee to be licensed while individuals who work on their own will have a $100 one-time fee and an annual $50 fee.

This sounds fairly innocuous, and even some of the impacted massage therapists interviewed in the article seemed OK with it.  Some even would like to see such licensing expanded to the state level.  But in reality, it’s not OK, and just part of a larger trend that makes it more difficult for people to get employed across a number of professions that tend to employ folks with low incomes and less than a college education.

A study by the Institute for Justice last year looked at the expansion of licensing occupations across states.  In 1950, about 5% of American workers were subject to licensing requirements for their jobs — be they paying a fee, taking required education or taking licensing exams.  Today, those estimates range from 20% to 33%.  Now, certainly, not all of these licensing requirements are invalid.  We already regulate driving, so having folks do additional testing to become a bus driver isn’t an unreasonable request.

Other licensing requirements, though, have questionable value.  Three states (not Minnesota, luckily) license interior designers.  Some requirements seem out of line with the sort of responsibility invested in those jobs.  In Minnesota, cosmetologists have to pass two exams, take 1,550 hours of training and pay $139 initially (with an $81 annual renewal) to gain their license.  Meanwhile, emergency medical technicians take an EMT Basic course that has fewer than 100 hours of training, pass two exams, and pay a $70 fee.  And, by the way, cosmetologists have to have a high school diploma, while EMTs do not.

And the licensing for such occupations is haphazard and different across states.  The Institute for Justice study looked at 102 occupations, and found wide variances between the state.  Louisiana licenses 71 of the 102 occupations, while Wyoming only licenses 24 (Minnesota lands in the middle with 36).  What this indicates is that many of these occupations — licensed in some states, unlicensed in others — may not really need to be licensed after all.

For instance, Minnesota licenses crane operators ($165 fee and three exams), making us one of 18 states to do so.  Wisconsin does not.  Do you feel more afraid being near a crane in Milwaukee than in Minneapolis?  Likely not.  Construction companies have significant incentives to make sure only qualified folks are operating their cranes, and it’s not as if Minnesota had experienced a rash of crane-related accidents that prompted such licensing.

Why has licensing expanded so dramatically over recent decades?  For starters, it’s been seen as way for government to be seen as protecting consumers from substandard work and shoddy operators. And while the intentions may have been good and even produced some results, one need only review the news weeks after a major storm to see the inevitable stories about the scam artist contractors preying on those with damaged homes.  In some cases, licensing serves as protection for existing practitioners of a service or trade by raising barriers of entry.

In many of these professions, though, there are alternative ways for consumers to be able to determine if their provider has the necessary skills — such as professional certifications.  We don’t license automotive service technicians, but we instead we frequently rely on certifications like the ASE to assess the experience of those who are working on our vehicles.

Many of these trades and services provide a pathway to entrepreneurship for their practitioners. When we’re considering ways to keep our recovery going, we should be careful not to add additional unnecessary licensing regulations and look to peel away overly burdensome existing requirements.


24 Responses to “Under the radar: the impact of licensing regulations on employment”

  1. Investigate the reason why the Minnesota magically passed a requirement for a Low Power electrician’s license. You even have to pay the state $39 for being a “Registered Non-Licensed Low Power Technician”. What’s next? All non-drivers in the state will be required to pay $39 for being a “Registered Unlicensed Driver”?

  2. good post. At the same time, i am hopeful that we will establish a state registry (not license) for PCAs as it is becoming more and more of a fraud magnet due to lack of proper oversight and appreciation of the positions worth. Did you know that, in the name of “choice,” families hire their own PCA and are responsible for their training and supervision? They also determine how much to pay the PCA. Many families will “hire” a for-profit administration company to adminster their “business.” They do the background checks, payroll; provide a nurse QUARTERLY to observe the PCA. Such observation can be as simple as prompting the patient to wash their hands. I spoke with a parent of an adult child who gets 40+ hours per week of PCA services through the county program (state/fed $). The parent reviewed applications of friends and relatives and hired 2 of them. He also hired one of these administrators who gets the $15/hour reimbursement (tax dollars) from the state and the parent could decide what wage to pay the PCA…with the $15/hour reimbursement, the highest wage he was allowed to pay was $11.22/hour. Even though the hours are set by the county case worker based on an assessment, he was told by the administrator that if he paid the PCA less per hour, he could get more hours. Think of the the special needs children and adults who are not getting appropriate care because cuts and “choice” have become the great buzz words for human services? This is how Medicare Advantage started…not a good sign for more public dollars being siphoned off of direct care services, creating private sector profit. Disgusting.

    Leanne Kunze

  3. Good post. At some point we have to rely on ourselves to be good consumers and make sure the people we hire are qualified.

  4. The state has to add licensing fees to increase revenue. With a 42 billion dollar budget target, they are going to have to scrape for every penny they can find.

    But may I be the first to welcome Sean to the republican party for finally recognizing at least some unnecessary government regulations. See, now that wasn’t so hard, was it?

    Queue Drew in 5… 4… 3…

    • Cue, not queue… and I agree that this degree of regulation is needless in many cases. I suspect that the real source of the over-expansion is special interests trying to protect against undesired competition through restrictive licensing, and an overzealous approach to consumer protection that fails to step back to see if certain professions (like EMT’s, as cited above) merit greater certification than a cosmetologist or someone similar.

      It’s also worth noting that this has nothing to do with the current state budget under development (and as Sean noted elsewhere, the phantom number of $42 billion, without any credible source attached). Most of the examples cited above were from other states (and the wide discrepancies therein), or from cities, and none were cited as new proposals being offered as part of any budget proposal at the state level. Strange that, in a case where everybody was coming together to agree on the need for less governance and more common sense in this area, someone had to introduce a toxic element into the discussion, without any foundation in facts.

      How unfortunate.

      • Toxic, because we’re going to have a 42 billion dollar budget proposal, or because I pointed out that this is a very GOP-like stance?

        As to cue versus queue, that’s what I get for posting BEFORE coffee. My mistake. See I can admit when I’m wrong. Pretty rare, I know.

        • Being able to admit that you are wrong? Yes, very rare indeed… (said in good humor, of course).

          Toxic because it takes a common-sense application of a position, and turns it into a discussion about political parties. Toxic because it tried to link this post to the state budget, when there was no link at all. So instead of turning the conversation into an opportunity to discuss deregulation and free-market controls on the availability of work, which would have resonated well with others from all parties, you turned it into a party slogan hollow of any deeper meaning. If nothing else, that’s a lost opportunity to present conservative ideals, traded in for a punch line.

          As for your “42 billion” claim, a couple weeks ago it was 45 billion, along with the coming of the apocalypse. Now it’s 42 billion, from some phantom source yet to be named. If your source is fluctuating that wildly in the projections, then maybe you should reconsider the accuracy and reliability of your source, Mr. Brunette.

          • The 45 billion was a rumor coming out of the DFL. Now it’s down to 42 billion. You’ll have to ask the Governor and the DFL leaders why none of them will go on record. Hopefully this is a sign that they are working to pare it down from an all encompassing wish list of some sort.

            As to the merits of Sean’s post, I did state that I was happy to welcome him to our side of the aisle for a change. If that’s toxic, than so be it.

            • The reality, John, is that both parties love to flex the over-regulating muscle (it’s just that they tend to do it in different areas).

              The GOP, for instance, has been a key supporter of the ban on Sunday liquor sales. What’s the purpose of that regulation?

              • Beats me. Never understood the blue laws. Or what makes them blue, other than when you want to buy something and you can’t might give you the blues… especially if you’re a drunk.

                I see that some owners like the laws because they get a true day of rest. I think it should be up to the owner of the establishment. In this day and age, I’m not even sure why we have laws that state you can’t sell liquor 24 hours a day. Most store owners wouldn’t do it anyway. I like that in other states you can get wine any day, and even at a gas station, although the variety isn’t great, if you have a surprise guest, you can least have something to offer if your personal stores are low.

                If it’s to prevent binge drinking, it doesn’t work anyway. And it might end up cleaning up the gene pool a bit. Other states and other countries aren’t so up tight about these things, and have fewer problems. I think the government should get out of the way on a lot of regulations. They rarely have the intended consequence, hence the reason most of us are against many regulations.

                We try to engineer results through tax codes. And it fails. We try to engineer healthcare rates through mandates, and it fails. Government just isn’t very successful in many of it’s goals. But when our side gripes about it, people say we are against all government, which is absurd. There are all sorts of opportunities for retraction of government that would be extremely beneficial for the country, but no one seems to be willing to sunset a program. even if it’s completely ineffective.

                • Does it fail because it failure is inherent to government, or does it fail because of how government tries to achieve the result, though?

                  For instance, you say regulation of health care has been a failure. Well, maybe it’s because we haven’t regulated it the right way. Other countries have different regulations on health care, and they produce better health care metrics and spend less than we do. The Romneycare plan in Mass. has been very effective in getting people to take responsibility for their health care costs versus free riding on the taxpayer dime.

                  • Government in this country fails for all sorts of reasons. Take health care for example. We are a big diverse country, with state regulations which vary greatly. Trying to make a one size fits all program at the federal level is never going to be efficient. Too many state with special needs that, whoi then call in special favors to optout of portions, forcing other to pick up the tab,

                    The more we turn in over to the feds, the less likely the results will work for our state. the more we turn over to the state, the less likely the results will work for our county.

                    And the biggest difference between market solutions and government solutions, is market solutions adjust. Government programs take far too long to adjust to conditions, and even more so at the federal level.

                    Why do regulations work in other countries that don’t work here? Simple dynamics. We are different. We are the most diverse nation in the world. We have the highest levels of illegal immigration, which causes all sorts of issues. We all also have some of the highest levels of legal immigration, and naturally, we want to keep that if conditions warrant. Along with that, we have by far the greatest number of new citizenships granted. Which means more people want to come here than any other place in the world.

                    It’s for freedom, not the government thumb. Every federal level program that is initiated slighltly reduces some freedom at some level. Well meaning programs often have unintended results, and yet with government, instead of scrapping failure, we try to adjust, and adjust, and adjust, which would be fine if A: it didn’;t take so long for the change to occur, and B: results were finally acheived.

                    When I look at the affordable care act, I assume they named it that to make health care more affordable. So far, that hasn’t happened. In fact, health care costs go up each year in response to mandates within the program. With no savings to date, only increased costs, this really needs to be looked at again, and potentially scrapped, since it fails to even live up to it’s name.

                    And finally, as the countries issues get more and more complex, expecting 50 politicians to have any chance to understand the complexities of it all, when no such track record exists, no experience in these fields, is absurd. Why anyone thinks these politicians have the answers is beyond me. They cannot even speak one sentence without it being parsed for every possible sensitivity, and therefore waste more energy on PC nonsense over speaking the truth, however unpopular, makes them ineffective.

                    • What’s so different about health care from place to place? You don’t treat cancer differently in Oregon than you do in Florida. Sure, there may be some demographic differences, but that doesn’t fundamentally alter the dynamics of providing health care.

                      Health care insurers have had decades to crack the market solution for health care, and it hasn’t happened yet. And the reason for that is very simple. They can never make money on certain types of patients. The only way to ensure that those people can get health care is through a government solution. Your party would leave them out in the cold (and did, when they were in charge of Congress and the Presidency).

                      The facts, John, are that health care inflation has been at its lowest levels in decades since the passage of the ACA (which, by the way was what was promised — a bending of the cost curve). And that’s before all of the provisions have kicked in. Yes, the law is far from perfect, but it’s a huge improvement over the situation before.

                    • What is so different is state regulations. And yes the dynamics do alter the costs of health care. The more specialized the treatment, the more expensive it can get to acheive in more rural areas of the nation.

                      Health care insurers are currently the only effective cost control structure to date. If you doubt that, I suggest you forgo an insurance plan for routine visits and just get catastrophic insurance.

                    • Since when do Republicans care about state regulations? The Republican answer to state regulations is to get rid of them, while the ACA insists on a minimum federal standard.

                      Actually, if you want to talk cost control, the group that’s been most effective at it is the VA. And to a lesser extent, Medicare. Expenses in those two groups have been growing at a slower rate than in the private insurance market.

                    • No you’re missing the point. The state regulations is what makes insurance plans more difficult and more expensive to administer, but combining all of these into one monster set of regulations is even worse. It’s not workable.

                      Republicans aren’t anti-regulation, but we are anti regulations that do not work, or are not cost effective.

                      For example, let’s say one state mandates insurance coverage for cosmetic coverage like wine-stain removal. Everyone’s insurance is going to go up, because the state mandates that this is necessary, and must be added to all coverage plans that operate in the state.

                      Another state maybe mandates coverage for a specific mental disorder, that’s maybe rare and expensive to treat or deal with.

                      the federal response is to force this coverage across the whole nation, exponentially raising rates.

                      A market solution would be to offer a plan that covers these things, no matter what state, but not force that plan onto someone who doesn’t need it. So costs are distributed across those who need the coverage, rather than every single person. Everyone needs coverage say for cancer treatment, because it could pop up anytime in anyone’s life.

                      This would be like having auto insurance being regulated by the federal goverment, and forcing everyone to pay for full coverage with glass and comp, even those who drive beaters, who never want this coverage. It would make costs go up because even beaters would qualify for full replacement and repair, and would be very costly.

                    • Well, no, the federal response is not to force coverage across the whole nation. Heck, you can see what the baseline plan for the state is:


                      Things like cosmetic surgery are not covered. It’s all great to say that all these sorts of fantasy-land things are going to be covered, except for the fact that it isn’t true!

                    • I didn’t mean to infer that that they were covered here or in the national plan. But it is an example of past proposed regulation that affects prices. Another example is coverage for scans. You can’t hardly get an MRI through the VA. In the past you couldn’t get them through MN Care either, (and my son was on it and needed one, so I paid for it so we could be proactive about his lymphoma issue). And I’ve heard perhaps other states either had regulations to add these things or had them in proposed legislation. You’re getting lost in anecdotal examples from other areas. The point however reamins. Government reduces costs by limiting services but then mandates prviate insurers must cover those things that they themselves will not.

                      Private insurance is continually adapting by offering new wide and varied plans that allow for creative cost distribution, and are always working with providers to lower rates. It’d be a great system if the market was less regulated, and if insurance became insurance once again, instead of a Sam’s club for regular visits.

                      For example, would you spend $300 to get a throat culture done everytime you had a sore throat? Or would only get one when it’s severe, or persistent if you paid for this type of visit out of pocket?

                      It’s just like car insurance in that regard. Would you really give a darn what an oil change cost if your car insurance covered maintenance? Would bother to find a cheaper provider for this service, or purchase a group punch card, or bother with some sort of loyalty benefit if you weren’t footing the bill? Most would not. Most wouldn’t give it a second thought, because it’s covered no matter what, so why should they care about the cost to the insurance comapny?

                    • Buying health care isn’t like buying an oil change, though. That’s where it all breaks down. Health care is not a regular market good/service.

                    • Why do you say that? It is a service that you purchase. Just because most of us don’t get it that way anymore doesn’t change the analogy. In my analogy, you bought car insurance that includes maintenance. Just like for healthcare most of us buy insurance for health maintenance. We even have HMO’s where the the M stand for Maintenance.

                      The auto insurance model has gone through a huge competitive effort that has brought costs down tremendously. Safer cars help with that as well, but the cars also cost a lot more to repair. Imagine if break downs and maintenance were covered, how much more insurance would cost, and how much it would go up as people stoppped caring about the costs for maintenance, because the “insurance pays for that”.

                      Jiffy Lube and rapid Oil are the minute clinics of the auto industry. The only difference is when you choose to go to a minute clinic, you don’t pay, directly. So when do you go to a minute clinic? When it’s something small, and quick and can’t see the your regular mechanic. Do you choose the minute clinic because they are having a sale on throat cultures? Nope, but you would if you were paying for it. If I could save $50 on a small procedure that nearly anyone can do, I’d certainly do it, if I were footing the bill. But since it’s not direct, no one looks at the cost of health care on per visit basis, as a consumer. But I bet most of do on oil changes, brakes, tires, shocks, etc.

                      In America, because we have health insurance, we feel we are entitled to certain benefits. But in reality, we’ve only purchased a contract, and we have to live within the limitations of said contract.

                      Pre-existing conditions are like people who’ve wrecked thier car, without insurance. then they want to get insurance, after the crash. That’s not insurance at all. that’s not even a price club. It’s ripping off everyone else on your gamble. SO now we pick up that tab, and expect costs to fall? It’s nuts!

                    • There are a number of reasons why buying health care isn’t like your typical product/service, but the most important is because we have decided, as a society, that we’re not going turn away people who show up bleeding on the doorstep of an emergency room. That’s part of our social compact, and as a result, we all have some very, very basic guarantee of health care.

                      Our health care system, pre-ACA, allowed people to free ride on that guarantee, however. Not only does it create costs in terms of additional government spending, but it also increases costs for people who do have insurance. Those effects don’t exist for auto repair or buying cereal.

                      When he was Governor of Massachusetts, Mitt Romney understood that, and he built a plan for his state that was designed to remedy many of those problems. It was centered on an idea that came out of the Heritage Foundation, was first introduced at the federal level by Republican Senators in 1994, and was endorsed by many prominent Republicans at various times, including Newt Gingrich. It was only when Democrats embraced the notion that said idea became tyranny and take you pick of socialism, communism, and fascism.

                      I take real exception to your description of pre-existing conditions. My wife has a condition, acquired through no fault of her own, that makes it prohibitively expensive for us to acquire health care in the direct market. She didn’t “wreck the car” or “gamble”. This condition forces at least one of us to work for a large corporation that has a health plan that accepts folks with pre-existing conditions.

                      You want to talk about markets? It’s this sort of nonsense that distorts markets. We’ve thought about starting a business, but we can’t do it today because we won’t be able to afford health insurance for our family. How many people do you know that have made job-related decisions where health insurance was a key factor in the decision? That’s not the kind of factor that should be driving labor markets.

                    • if your wife had insurance when she got sick, then its not considered pre-existing. It’s only considered pre-existing when you don’t have insurance. I can trasnfer my insurance from place to place with my existing conditions without any penalty or problem. I’ve transferred coverage many times and never had a prob lem with my coverage.

                    • No, that’s not true. It’s pre-existing when you change insurers. Now, depending on your policy, some insurers accept pre-existing conditions. For instance, every corporation I have worked for has had health plans that accept pre-existing conditions.

                      On the private market, though, that’s not the case. They were willing to issue us a policy, but the cost on it was too high for us to afford.

                    • Pretty sure corporate plans only cover pre-existing if you kept coverage under another plan. So if you transfer from one job to another, you’ve been covered all along, and that is why they don’t block pre-existing conditions. They only reason any insurance company doesn’t allow for pre-existing is if you’ve not been covered, and suddenly want coverage AFTER you’ve discovered a problem.

                      Look into COBRA. If you want to keep pre-existing out of the equation, you just have to maintain coverage between jobs.

                      If you’ve never had coverage, and then get a new job with a pre-existing condition, you wont have coverage for the condition, which is how insurance is supposed to work. I can’t apply for life insurance after I die now can I? Just like I can’t get get auto insurance after I crash. Insurance is purchased before hand the problem, and is transferable if you’ve had coverage.

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