New Book Uncovers Massive Failures At Licensing Boards

Nearly 1 in 4 Americans needs a government license to do their job. The consequences for working without a license can include fines and even jail time. Licensing boards have a lot of power, but the public rarely sees their work or thinks about how it affects their lives. But a new book takes a deep look into the work of licensing boards and reveals quite an ugly picture.

Vanderbilt University Law Professor Rebecca Haw Allensworth’s The Licensing Racket was recently published by Harvard University Press. Allensworth spent years watching licensing boards at work. She attended meetings where she was sometimes the only member of the public, she spoke with board members thrown into the deep end with little idea of their role, and she interviewed people whose livelihoods were at stake.

“Neither reasonable nor safe”

Near the beginning of the book, Allensworth lays out her thesis, which is that licensing, as most states practice it today, is “a regulatory system that is by and for professionals, and neither reasonable nor safe from a public protection point of view.”

To back that up, she dove into existing research (some of it from the Institute for Justice, where I work) but also did groundbreaking work by closely observing the boards in her home state of Tennessee. Since the boards are a part of state government, they are subject to the public disclosure rules of their states, meaning that most of what they do is on the record.

The idea behind licensing is to ensure that people practicing an occupation have a sufficient level of training and knowledge to do their job safely. The licensing boards exist to enforce the rules and hand out punishment to people violating the standards of the occupation or operating without a license.

Boards Protect Their Turf

Those boards are usually composed of people in the occupation. So nurses serve on the nursing board, hairdressers on the cosmetology board, and so forth. But while there is a certain logic to having experienced professionals running the boards, there are major problems with people policing their colleagues and punishing those whom they perceive as operating on their “turf.”

This turf-defending instinct leads boards to define their power as broadly as possible. Allensworth writes about Fatou Diouf, a Nashville-area braider who ran into the cosmetology board. She put her braiding skills to work after immigrating from Senegal, not realizing that what she had been safely doing most of her life required a license to do in the United States.

The board insisted that Diouf and others get 300 hours of training, pay an application fee, and take an exam. In her interactions with the board, members with little knowledge of braiding insisted over and over again that there was value in setting the bar high and limiting practice to people who could afford schooling. After years of fighting in the legislature, Diouf and fellow braiders were eventually able to persuade lawmakers to reduce the requirement to a two-day health and safety course.

Such a reversal is rare, and Allensworth points to addiction counseling in Tennessee as an example of the “ratchet effect” of licensing requirements growing over time. When addiction counselors were first required to get licenses in the 1990s, 1,500 hours of training was required. A few years later, that doubled to 3,000 and has since doubled again to 6,000 hours.

She also finds that boards were far more vigorous in going after people practicing without a license than they were license holders who had done real harm. Most complaints to the board governing alarm installation came from consumers, but the board took action on those complaints less than 20% of the time. But when a fellow licensee filed a complaint, the board took action 60% of the time.

In one case, a handyman was punished for letting a homeowner pay him to install a camera system purchased from a Sam’s Club. The auctioneers board investigated a firefighter who ran a charity auction benefiting his department. Neither person was charged with any sort of fraud or incompetence. This kind of turf defending simply doesn’t defend the general public, but it does ensure customers for licensees.

Boards Fail to Punish Even the Worst Offenders

Various boards’ inability to confront the opioid crisis is a running theme of the book. The stated mission of licensing is to protect the public, but Allensworth finds that medical boards were almost completely incapable of stopping doctors and nurses from practicing bad medicine.

One doctor featured throughout the book over-prescribed opioids, even selling from a McDonald’s parking lot at one point. The physician board’s light punishments failed to stop him from concocting new schemes while he was on probation. Only federal drug charges finally stopped the doctor from using his license to peddle addictive substances.

As Allensworth attests, boards were reluctant to stop bad practitioners from seeing patients because of shortages of professionals. One board member estimated that it took $1.5 million in public funds to train a single physician. But the boards’ ratcheting up of the requirements to become licensed and expanding definitions of what requires a license feed the scarcity and expense.

Solutions for Better Regulation and Better Boards

Allensworth offers solutions that should be considered by state lawmakers looking to protect the public and free people in their states to earn a living. First, she encourages states to eliminate licenses for many lower-skill occupations. This could be accomplished through stronger “sunrise” reviews before licenses are created or “sunset” reviews that periodically consider the need for an existing license (I wrote about the effectiveness of sunrise review several years ago.) For occupations where health and safety risks are low, inspections may be sufficient.

For occupations where the risks to the public are high and the knowledge needed for effective practice is great, Allensworth thinks that more neutral regulators are needed. In her view, there may be a role for practitioners to contribute their expertise, but they shouldn’t be the driving power behind government regulation.

Her example of a better way of doing things is the British system that has separate boards for setting standards and for meting out punishment, neither of which is controlled by physicians. She uses a stunning statistic to make the case: “The UK suspended or revoked a license in 95 percent of cases where the board found that the doctor had engaged in sexual misconduct. In Tennessee, that number is just 33 percent.”

Put simply, Allensworth demonstrates that licensing isn’t performing as advertised. It is overused, it contributes to scarcity in critical jobs, and it doesn’t protect the public from the worst practitioners. This legislative season, state lawmakers across the country will consider many ways to reform licensing rules, but perhaps they should be looking to do much more than just smooth the rough edges.