In the News

In the News

ICYMI: Issa Presses For Job Licensing Reform To Help More Americans Find Jobs

In The News
Aug 24, 2017

Licensing Cartels Targeted By DC Lawmakers
Forbes | By: Jared Meyer
http://bit.ly/2g8v0jg

There is growing realization in Washington, D.C. and state capitol buildings that today’s level of occupational licensing has grown too large in both scope and scale. About three in every ten Americans need a license—or government permission slip—to earn a living. This is substantially higher than the 5% of workers who needed a license in the 1950s. Now everyone from locksmiths and interior designers, to tree trimmers and pet sitters, needs a license to work.
 
In light of this, Representative Darrell Issa (R-CA) recently introduced the Restoring Board Immunity Act to push state-level licensing reform. Companion legislation is sponsored in the Senate by Senators Ted Cruz (R-TX), Mike Lee (R-UT), and Ben Sasse (R-NE). In the following interview, Rep. Issa discusses how federalism, cronyism, and technology relate to the debate over occupational licensing’s effect on economic opportunity.
 
Jared Meyer: Most occupational licenses come from state-level laws and regulations. I know you are a dedicated supporter of federalism, so why get the federal government involved in this issue?
 
Rep. Darrell Issa: I’ve gotten that question before from some of my colleagues, so I am glad that you asked. You’re correct that occupational licensing requirements are typically governed by the states, but when the U.S. Supreme Court decided in 2015 that state licensing boards can be held legally liable under federal antitrust law if they unfairly prohibit competition, it created uncertainty that needed to be resolved at the federal level.
 
It helps to take a look at this issue from an antitrust perspective.  To ensure fair competition, federal antitrust law contains strong protections against collusion by firms in the marketplace. In the private sector, companies cannot sit around a table and decide what prices should be, or work together to keep their competitors from getting a foothold in the marketplace. State governments, however, have traditionally been exempt from antitrust liability.
 
For example, if Nebraska’s legislature decides to pass a law requiring dog walkers to complete a two-year apprenticeship and register with the state to legally work, that might be completely unnecessary, but doing so is legal at least as far as antitrust law is concerned. Legally speaking, it is up to Nebraskans—who would likely see higher costs and fewer options for dog walking—to decide that their legislators made poor decisions and vote them out of office. The Supreme Court upheld this kind of behavior in my home state of California in 1943 when an arm of the state sought to protect raisin growers through blatantly anti-competitive legislation.
 
Take this to occupational licensing boards now, and you can see the problem. For decades, it was argued that because these boards were recognized by states, they should be considered arms of the state government and allowed to engage in behavior that would otherwise be illegal.
 
But in 2015, the Supreme Court essentially turned this on its head, saying that since many state licensing boards are made up almost entirely of industry insiders and are run with minimal supervision from actual state government officials, some state boards look less like a government entity and more like a private cartel.
 
In that case, the North Carolina Board of Dental Examiners—the state's occupational licensing board for dentists—sent cease-and-desist letters demanding that companies that had set up in-mall teeth whitening services be shut down because they weren’t run by licensed dentists. The problem, of course, is that teeth whitening doesn’t really need to be done by a licensed dentist—it’s done at home by countless people every day. Dentists just didn’t want competition for the more expensive services that they offered.
 
A suit was brought against the board by the Federal Trade Commission alleging that this attempt to regulate teeth whiteners was about keeping competitors out of the market, rather than truly protecting the public. The Supreme Court looked at this case and said that certain licensing boards that are not “actively supervised” by the state can be held liable under federal antitrust law for working illegally to prohibit competition.
 
The question then became what does “actively supervised” mean and how can state boards retain immunity from antitrust law? That’s the question our bill hopes to resolve in a way that restores accountability and incentivizes the states to roll back these regimes that have clearly run amok.
 
JM: The Supreme Court’s decision clearly injects some level of democratic accountability into occupational licensing. How does your legislation encourage and take advantage of this change?
 
DI: The North Carolina decision creates uncertainty that Congress needs to fix by providing clarification and guidance. The Supreme Court has set up a litmus test of "active supervision" of licensing boards by state governments for boards to be immune from antitrust laws. The problem is that many state policymakers and licensing board members are unsure about what constitutes active supervision. I fear that without congressional action, states will try to get away with the bare minimum levels of board accountability while labeling it "active supervision."
 
The Restoring Board Immunity Act fixes this problem by giving states options. When our bill is law, states can ensure immunity for their occupational licensing boards by opting to enact one of two accountability mechanisms. The first is essentially a review process that would give citizens the right to challenge regulations to ensure they are actually necessary for public safety. Judges would be required to review these claims to ensure there’s a “rational basis” for the requirement.
 
The second option would be for states to institute a series of prescribed oversight measures—including stringent supervision mechanisms and input from the state legislature. As such, our bill essentially boils down to this: if you don't want prospective members of your board to fear damages from a lawsuit, then you must implement one of these two options. This pushes state occupational licensing boards to truly operate in the public’s interest and roll back a lot of the unnecessary requirements that have become more about picking winners and losers than about protecting the public.
 
And it’s worth clarifying that not all occupational licensing requirements are bad. The government does have a job to play in protecting the marketplace from unscrupulous or incompetent actors, but when nearly one in three Americans needs a license just to do their job, it’s clear that at least some types of licensing have gotten out of hand.
 
I came to Congress from the private sector and I can tell you that building a business or starting a new occupation is hard work. Our federal and state governments already subject job creators to far more regulations than are necessary. We certainly do not need occupational licensing boards creating further barriers to entry, and they especially shouldn’t be able to do that when they are unaccountable to the people. If state governments want to subject entrepreneurs to growth-killing administrative rules, they should be held accountable at the ballot box—that is a fundamental principle in a democracy.
 
Jared Meyer is a senior research fellow at the Foundation for Government Accountability and a senior fellow for the new economy at the Beacon Center of Tennessee. Follow him on Twitter here.

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