Good News on Occupational Licensing Reform in Arizona and Elsewhere

While it seems that occupational licensing regulation is ever-increasing, there have been some recent victories in this area that have struck a blow for economic liberty. Occupational licensing laws require people to satisfy certain (often arbitrary) education and examination requirements, pay various fees, or otherwise obtain government permission before they can work in the occupation of their choosing. While often sold as a means of protecting the public from negligent or unscrupulous practitioners, numerous economic studies on licensing in various professions have shown that licensing laws do not enhance public safety, and sometimes even reduce the quality of services provided, but they do lead to higher prices for consumers. This is because regulation raises the costs of entering a particular occupation, and, thus, reduces competition. It should not be surprising, then, that licensing laws are nearly always proposed by existing business interests, not because of any spate of consumer complaints, and that when new or stricter licensing laws are passed, existing practitioners are typically “grandfathered in” so that they do not have to meet the stricter standards imposed on their future competitors. Thus, occupational licensing laws are laws born of special interests, not the public interest. One field that has seen a number of licensing battles fought in numerous states in recent years is that of interior design. Fortunately, according to the Interior Design Protection Council (IDPC), a group opposed to the regulation of interior designers, 24 attempts to regulate the profession were thwarted last year, and at least 21 licensing bills have been defeated or sidetracked so far this year. Just this summer, interior designer licensing bills were vetoed in Massachusetts and New York. In his veto message, New York Governor David Paterson wrote:

The proponents of this bill seek to encourage more interior designers to seek state licenses. However, courts have found similar legislation restricting the use of the title “interior designer” in other states to be overly broad, unreasonable, and vague. This bill could also limit new entrants into the field of interior design and, thus, restrain competition. Moreover, no evidence has been presented to suggest that harm is occurring to the public as a result of the unregulated practice of interior design.

In other positive licensing news, a law was recently passed in Arizona that reforms the state’s occupational licensing laws by implementing a sunrise process for the consideration of any new licensing laws. An article (see pages 30-31) in Reason Foundation’s Annual Privatization Report 2008 discusses the provisions and implications of the new law.

In Arizona, there is good news and bad news on the occupational licensing front. The good news is that the state is less heavily regulated than most. According to a recent Reason Foundation study, Arizona requires licenses for 72 occupations, below the national average of 92 and similar to neighboring Colorado (69) and Utah (84). California topped the list with a whopping 177 licensed occupations. The bad news is that Arizona is still overregulated, as evidenced by the licenses required for occupations such as acupuncturist, hunting or fishing guide, landscape architect, manufactured housing salesperson, money transmitter, prearranged funeral salesperson, and well driller. There is even government registration for geologists. To address this problem, State Sen. Pamela Gordon sponsored SB 1502, a bill to reform the state’s occupational licensing structure by requiring a sunrise process for all potential new licensing laws. The bill restricts new licensing laws by forcing government to consider the costs of new regulation to consumers, businesses and individuals, rather than just the supposed benefits. In addition, the legislation:

  • Requires the state to look for evidence of actual harm to the public;
  • Prohibits regulation for the purpose of protecting an interest group from economic competition;
  • Requires that any regulation deemed necessary be in the least restrictive manner; and
  • Requires that the government evaluate alternatives like private (voluntary) certification before imposing new licensing laws.
  • S.B. 1502 sailed through the legislature and was signed into law by Governor Janet Napolitano on April 29, 2008. The law’s provisions represent a solid first step in preventing future abuses of economic freedom, but additional measures will have to be taken to roll back the occupational regulations that are already on the books. Nevertheless, it may serve as useful model legislation for other states seeking to curb the growth of their occupational regulations.

For more information on occupational licensing regulations and reforms, see the Reason Foundation study “Occupational Licensing: Ranking the States and Exploring Alternatives” by policy analyst Adam B. Summers. A policy summary of the study is also available online here.