The Licensing Racket

The need for occupational licensing reform has emerged as one of the few topics where one can read a statement from former President Obama and current President Trump on the subject and not be 100 percent sure who authored the comment. The Bureau of Labor Statistics using Current Population Survey data now produces regular estimates of the fraction of the U.S. workforce that has an occupational license, and we now know that more than 21 percent of U.S. workers have an occupational license. We also have excellent new historical data on occupational licensing restrictions provided by Nicholas Carollo that should only further advance the stylized fact that the costs of occupational licensing outweigh any of its benefits.

Despite all of these advancements, reform efforts remain slow and minor. Arguments continue to be put forth that we need occupational licensing to keep people safe. Research on how licensing impacts quality produces mixed outcomes at best (see Morris M. Kleiner and Maria Koumenta, eds., Grease or Grit?: International Case Studies of Occupational Licensing and Its Effects on Efficiency and Quality [W. E. Upjohn Institute for Employment Research, 2022]) and part of the challenge is properly quantifying quality.

Rebecca Haw Allensworth tackles this question head on and spends most of her time in the book talking about doctors and lawyers, not hair braiders and interior designers. Unlike previous books that focus more on data and empirical analysis, Allensworth regularly attended licensing board meetings and actually talked to people “interviewing more than 180 people involved in the regulation of twenty-eight professions” (p. 14). Her book is mostly focused on her home state of Tennessee, but it is clear that her findings and recommendations have clear policy implications nationally. The book is also carefully and diligently researched and it is very clear that she has an outstanding grasp of the existing academic literature on the effects of occupational licensing.

Similar to great work that I admire by groups like the Institute for Justice and Pacific Legal Foundation, Allensworth shares compelling stories of licensing creating unnecessary barriers to human flourishing: a licensed barber from Michigan who could not pass Tennessee’s licensing exam without an interpreter and was thus barred from working and a hair braider who had to work underground as a result of the state’s costly licensing regime. But the most significant contribution of this work is its diligent reporting on occupational licensing repeatedly failing to live up to its stated purpose of protecting public welfare. Even more compelling is the book’s focus on the professions where arguments surrounding the public safety benefits for occupational licensing are the easiest to make and believe.

The COVID-19 pandemic presents an interesting test case where demand for healthcare professionals surged in hotspots across the country. New York City was the initial hotspot and occupational licensing blocked out-of-state providers from providing care in the city. Labor supply and its elasticity was further reduced by barriers for foreign-trained doctors to work, rising education requirements for nurses, and scope of practice restrictions on health providers besides doctors.  Doctors as first movers in the healthcare market exert significant control over what tasks other clinicians like nurse practitioners, pharmacists, physician assistants, and optometrists are permitted to do. These turf battles, as Allensworth points out, have much more to do with restricting competition than promoting public health and safety.

Allensworth also uses the opioid epidemic as a backdrop for shedding light on how licensing boards discipline bad actors in the profession. Presumably this is the benefit that the public receives from costly licensing—licensing boards will weed out unscrupulous providers that regularly harm consumers. Time and time again though, Allensworth documents licensing board members protecting their own instead of the public.

From 2016 to 2020, Allensworth finds that the Tennessee Board of Medical Examiners revoked physician licenses in only a third of cases involving sexual misconduct and overprescribing. Instead of disciplining bad actors, there is an ingrained culture of opportunity for rehabilitation. One member of the Tennessee Medical Board is described as having the goal to “always save a doctor” as a result of the large public investment in training the professionals (p. 130).

And this is not just confined to physicians. A similar protective culture is documented for several other health professionals as well as lawyers.

I also found her discussion of the role of professional health programs or PHPs to be enlightening. This is an understudied special interest that is clearly deserving of new attention by researchers and reformers alike. Allensworth documents the transfer of more than $7 million from the Florida medical board to the physician PHP in the state. It is not clear why all physicians and aspiring physicians should be subsidizing the mental health counseling of other professionals. Clearly these PHPs deserve more scrutiny and attention.

And what happens to board-disciplined professionals if they do not lose their license? The answer is that they practice in the least desirable settings. Allensworth carefully documents many examples of doctors with disciplinary records practicing at facilities with very high percentages of Medicaid patients, VA hospitals, jails, and American Indian reservations.

In short, occupational licensing as it currently operates helps perpetuate differences in health outcomes for these groups. Progressives should certainly read this book. All of these carefully documented harms associated with occupational licensing to these select groups should further bolster the broad bipartisan support that occupational licensing reform receives.

Reformers will also enjoy the policy recommendations provided at the end of the book. Allensworth has little faith for universal recognition reforms. I see important merits from the reform. The barber with a valid Michigan license facing barriers to work in Tennessee would be helped if policymakers in the state enacted universal recognition. Universal recognition reforms allow individuals with a license in good standing to more easily continue working when they move from one state to another. In a conversation with an Arizona psychology board member, Allensworth notes that the board member interpreted the state’s universal recognition law to accept only licenses whose qualifications perfectly aligned with Arizona’s requirements. Arizona, thanks to the efforts of the Goldwater Institute in the state, has been tracking and reporting on licenses issued by universal recognition (see Heather Curry, “9,000 Arizonans and Counting Free to Work Thanks to Goldwater-Led Universal Recognition,” Goldwater Institute, 2024).  Since passage of the law in 2019, more than 100 psychologists have successfully received licenses. More importantly, none of the applications were denied.

Although the law in Arizona does seem to be working, Allensworth raises an important point. For reforms like universal recognition to be successful, it is critical for the state to require licensing boards to report on compliance with the law. If licensing boards are left to their own devices, they will interpret the law the way that they like and continue to present unnecessary barriers to qualified and licensed workers from other states.

Allensworth also provides a framework for more fundamental licensing reform—moving licensing boards to an advisory capacity by moving more rulemaking and oversight to a government bureaucrat and out of the hands of self-serving licensing boards.  I still worry about the possibility of regulatory capture although it is true that Vermont, a state that emulates some of what Allensworth describes, has lighter-touch licensing than many other states including the bordering state of New Hampshire that is well known for its libertarian leanings (see Noah Trudeau, Edward Timmons and Benjamin Seevers, “State Occupational Licensing Index 2025,” Archbridge Institute, 2025).

Of course, eliminating a lot of occupational licensing as both Allensworth and many other like-minded researchers support remains outside of the Overton Window. Allensworth’s contributions and careful documentation of the fact that occupational licensing does not protect us, as many believe that it does, will hopefully begin to shift the Window to greater acceptance of the need for significant occupational licensing reform.