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Reducing Needless Professional Licensing

arm curling a dumbbell
photo by Richard Giles

Most Americans would expect the list of topics President Obama and senior executives at Koch Industries agree upon to be relatively short, but not very many would expect that list to include the status of CrossFit trainers.

Yet CrossFit Inc. has become a rallying point in the broad-based push to bring the number of occupations that require government licenses down to something approaching a reasonable level. A recent effort to require fitness trainers in the District of Columbia to abide by a new set of regulations failed after CrossFit led the opposition. As critics pointed out, one of the major problems with the proposal was that it would have put the regulation of personal trainers in the hands of a board of physical therapists - who, in some instances, can potentially compete with fitness trainers for clients. CrossFit spokesman Russell Berger called the rules “anticompetitive,” according to The Wall Street Journal.

The issue is not limited to competition among fitness instructors. The number of jobs that require a professional license has ballooned over the past few decades. According to a White House report released this summer, more than a quarter of U.S. workers now hold jobs that require professional licensing in their state or municipality. And evidence suggests that licensing requirements restrict employment opportunities and make it harder for workers who wish to move from one state to another to transfer their skills.

Mark Holden, a senior vice president at Koch Industries, recently wrote an op-ed for The Wall Street Journal supporting the resistance to D.C.’s attempt to license fitness trainers, and reaffirming several of the objections to rampant licensing that the Obama administration cited several months earlier in its study. And Charles Koch has taken the lead on a partnership between the White House and organizations allied with his company in an effort to ease licensing requirements across the country.

Professional licensing should ideally maintain the smallest possible footprint: Not only should occupations only be licensed to the extent necessary to protect the public (particularly in matters of health and safety), but the definition of what constitutes the practice of a licensed profession should be as narrow as possible. For example, if physical therapists must be licensed, then the practice of physical therapy should be defined as the application of such therapy to treat illness and injury or to restore physical functioning. This would be distinguished from what a personal trainer does to maintain or improve overall physical fitness.

The difficulty and expense involved in obtaining a license currently varies widely from profession to profession and state to state. Holden noted that the average time required to obtain a cosmetology license is 372 days; the average time to become an emergency medical technician is 33 days. A 2012 report from the Institute for Justice estimated that low- and middle-income occupations with licensing requirements required an average of nine months of education or training and over $200 in fees. In some states, these figures can be much higher.

While few, if any, licensing critics suggest people should be able to practice law or medicine without sufficient education, it is harder to justify the need for states to regulate professions like interior design and landscaping, both of which require licenses in some places. And license requirements have a real impact on the wider economy in the form of higher consumer costs, as well as reduced job opportunities for those without the means to obtain licenses.

Some critics have also observed that licensing requirements are disproportionally punitive to workers with any sort of criminal record. In 25 states and the District of Columbia, licensing boards can deny a license due to a criminal conviction, regardless of when the conviction occurred, whether the crime was relevant to the particular trade for which licensing is sought, or any extenuating circumstances. It is hard to see how, for instance, possession of a small amount of marijuana should disqualify a person from shampooing hair, but in some places it can do just that.

It is worth noting - as both the Obama administration and Holden did in their respective discussion of the issue - that some compromises already exist. State-issued certifications, for instance, do not bar outsiders from offering the same services as certified professionals do, but offer something like the “seal of approval” those pushing for licensing say they want. Certification also offers the advantage of typically costing less than licensing. Another alternative is simple registration, where a worker need only file basic information with a regulatory agency to practice the profession in question. And many of these jobs realistically do not need to be regulated at all, considering practitioners manage without licenses in many other states with no resulting public safety crises.

History suggests it is much harder to get rid of license requirements that already exist than to prevent new requirements from taking hold. The Bureau of Labor Statistics found that only eight occupations have been completely “de-licensed” in the past 40 years. That means that cases like those of D.C.’s fitness instructors are doubly important. While lawmakers and organizations focus on occupational licensing reform, the easiest place to begin is to stop enacting unnecessary requirements in the first place.

Some state-level groups are also pushing state legislatures to perform cost-benefit analyses on existing licensing rules and to consider what public safety concerns, if any, are at issue. For example the Buckeye Institute, a conservative think tank based in Ohio, recently cited 31 professional licenses it believes the state can scale down or eliminate outright, including those for travel guides and dietitians.

Trade groups that benefit from reduced competition are likely to fight this trend, but ultimately, we are overdue for a course correction. When the Kochs and the president find themselves on the same side of an issue, there is a pretty good chance it is the right side to be on.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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