When Businesses Welcome Regulations

by Richard W. Hall-Sizemore

The recent news that the General Assembly may not confirm Governor Ralph Northam’s appointment for director of the Department of Professional and Occupational Regulation (DPOR) triggered one of my longstanding complaints. It is not about Jay DeBoer, the beleaguered appointee; I know nothing about his record as director of this agency. My beef is with the agency itself and its role.

The legislative battles over occupational licensing are carried out largely out of view of the public; they do not generate headlines. Furthermore, after the legislative battles are over, the battles over the details, i.e. the regulations, are carried out even further removed from public scrutiny, although they are open to anyone in the public who is willing to put in the time to participate. As arcane as these activities are, they can affect the public greatly.

The licensing of occupations has grown significantly over the past few decades. According to a recent report of the National Conference of State Legislatures, “licensed workers now comprise nearly 25 percent of all employed Americans.”

The website of DPOR lists 20 regulatory boards that come under its umbrella. These boards regulate at least 45 professions and occupations, including, just to name a few, architects, barbers, nail technicians, professional wrestlers, and real estate salesmen. Then there is the Department of Health Professions, which oversees 13 regulatory boards, covering 80 professions, including, among others, doctors, nurses, counselors, pharmacists, and funeral directors. To practice law, one must be licensed by the Virginia State Bar and, to teach in public schools, one needs to be licensed by the Department of Education. There is one agency devoted solely to regulating people who sell cars and other motor vehicles, named, appropriately, the Motor Vehicle Dealer Board. Finally, to be employed in the private security industry or to be a locksmith, a bail bondsman, a tow truck driver, or a private investigator, a person must be licensed by the Department of Criminal Justice Services (DCJS). I have probably overlooked some.

My first encounter with this world of occupational licensing occurred many years ago, when I was staffing legislative committees. I was assigned to a public hearing on proposed legislation to license social workers (chaired by the late, delightful Del. Mary Marshall). This struck me as a boring topic and I anticipated very low interest and attendance. I was astonished when I entered the hearing room to find a roomful of animated people. As the hearing got underway, the main issue quickly became obvious. Social workers wanted to be licensed (i.e. regulated) so they could hang out a shingle and charge fees for their counseling skills. On the other hand, psychologists did not want this competition. Both groups claimed they were on the side of the public good.

A case can be made that these various boards and agencies do protect the health and safety of consumers and the public (e.g. the qualifications of doctors and gas fitters), as well as their finances (e.g. shady funeral lot or used car salesmen). But, the case of the need for state licensure varies considerably. After all, if I get a bad haircut, there is no real harm done and I can go to another barber the next time. The same is true for interior decorators and landscape architects, although the cost will be higher than it was for a haircut if the job is done by someone unqualified. On the other hand, work by a nonqualified contractor can prove to be very costly to rectify or even cause physical harm. (Of course, possession of a state license does not guarantee that a contractor will do a good job.)

The real problem is, as is often the case, in the details. The regulations enacted by these governing boards can have consequences that go beyond protecting the public. The NCSL report cites numerous studies which have found that occupation licensing has erected barriers to entry into occupations, decreased mobility of workers, disproportionately affected persons trying to move up “lower and middle rungs of the economic ladder,” and increased costs to consumers. Those results are not surprising when one realizes that the boards making these regulations are often comprised almost entirely of practitioners. For example, of the nine members appointed to the Real Estate Board, seven must be real estate brokers or salesmen, while the other two are “citizen” members.

Conservatives complain vociferously about all the governmental regulations that “liberals” have imposed on society and vow to get rid of them when in office. But, from my experience, many private occupational groups want to be regulated. Their lobbyists appear before General Assembly committees supporting bills to do so (legislation they likely drafted). The reason is simple: control of entry into those professions and occupations.

The Department of Planning and Budget is directed by Virginia law to prepare a cost/benefit analysis for most proposed regulations. That analysis is part of the official record of the regulatory process and is available to the public. Unfortunately, much of the public is likely unaware of the existence of these analyses or where to find them.

The 2018 General Assembly directed DPB to embark on a three-year regulatory reduction pilot program, focusing on DPOR and DCJS, with a goal of reducing “regulatory requirements, compliance costs, and regulatory burden across both agencies by 25 percent.”

However, the underlying problem (if there is any) is not with these agencies. It is not as if they decided out of the blue to regulate the various occupations. On the contrary, they were responding to legislation enacted by the General Assembly directing that the occupations be regulated. Therefore, if the General Assembly wants the “regulatory burden” to be reduced, perhaps it needs to look in the mirror and examine its own actions more critically.

Richard W. Hall-Sizemore recently retired from a position in the Department of Planning and Budget.

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5 responses to “When Businesses Welcome Regulations

  1. Remembering Mary Marshall does bring a smile….very tough, though. Underestimate her at your peril.

    Yes, regulate me = bad. Regulate my competitor = good. And this field is the real bread and butter for lobbyists and the government affairs law firms.

  2. I personally think most folks want their bridge engineers licensed, the restaurants inspected and their x-ray techs certified, etc.

    There is this Conservative thing that sorta is part of who they are and it’s certainly true there can be excess but all in all most folks, not just in Va but most everywhere want more than 3rd world standards.

    Just for the record – I think once in the last 3 years, I did not walk into the barber shop and immediately sit in the chair – had my choice of barbers and paid less than $15… AND the guy used sanitized equipment, etc. I guess when I have to wait to see a barber and pay hefty fees I’ll be convinced that licensing them is not a good thing!!!

  3. Certification is different from licensing. Bridge engineers are different than tour guides and hair braiders. (see below) Your appeal to the extreme example does not advance your argument.

    No discussion of licensing is complete without noting the role of the Institute for Justice in Arlington. They’ve been fighting this stuff for years. The requirement that hair braiders have full cosmetology licenses; the requirement that monks in Louisiana who only want to make wood caskets must maintain the embalming rooms found at mortuaries; the requirement that people who file the teeth of horses (done forever by ordinary folks ) must have veterinary licenses; the requirement that tour guides in Charleston and Washington DC must pass lengthy exams, etc. etc.

    We do it in our own little State of Virginia:
    https://ij.org/case/virginia-teaching/

    But see what Ohio has done: https://ij.org/press-release/ohio-governor-signs-landmark-reform-of-occupational-licenses/

    IJ has more generally taken on exactly what Richard complains of: https://ij.org/pillar/economic-liberty/?post_type=case

    • For the most part, I tried to stay from certification, although sometimes the lines between the two are blurred. Also, I think the extreme examples, some of which you gave, constitute the case I was trying to make: sometimes there is a legitimate public interest for requiring licensing, but, even in those cases, the regulations can be excessive and result in blocking or creating unnecessary hurdles to entry.

      By the way, I am familiar with the Institute of Justice. One of the economists at DPB who prepared cost/benefit analyses for regulations recently left there to work at the Institute.

  4. re: ” Your appeal to the extreme example does not advance your argument.”

    both sides!

    I have no doubt what-so-ever that regulations sometimes go too far and/or become outmoded but the basic concept of licensing is valid and legitimate and has merit.

    The problem I have with organizations like the Institute of Justice is that they tend to be ideologically driven – supporting Conservative “causes” as opposed to a middle-of-the-ground group that goes after left and right issues. They basically function as the legal arm of the Conservative movement for SOME things.

    For instance, they claim to be involved in eminent domain but where are they on the Dominion pipeline issue which is very much like Kelo that they claim is one of their core issues?

    I also would like to know who funds them. That’s important and relevant in my view.

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