Emerging Occupations Seeking Regulation

1. Expect the Unexpected: Are We Clearly Prepared? Emerging Occupations Seeking Regulation Morris M. Kleiner University of Minnesota Council on Licensure, Enforcement and Regulation 2006 Annual Conference Alexandria, Virginia

2. Reviewed in the NY Times and the Wall Street Journal Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

3. Comparisons in the Trends of Two Labor Market Institutions: Licensing and Unionization Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

4. Why Are States Regulating More and More Occupations? The “Perfect Storm” • Incentives for Members of the Occupations • Incentives for “Professional Associations” • Incentives for Legislators • Incentives for the Governor’s Office Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

5. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

6. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

7. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

8. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

9. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

10. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

11. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

12. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

13. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

14. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

15. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

16. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

17. Prices + – Regulation – Flow of Licensed Practitioners Net Quality to Consumers Quality + + Other Factors Regulation’s Impact on Net Quality* Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

18. Occupational Licensing and Quality There were no differences in the Changes in Complaints in Certified (Minnesota) versus Licensed (Wisconsin) Occupations during the period1994 -2001 for Physicians Assistants, Physical Therapists, and Respiratory Therapists Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

19. Occupational Licensing and Quality: Evidence from Malpractice Insurance Rates • pastoral counselors (licensed in 3 states), marriage and family therapists ( licensed in 40 states )and professional counselors (licensed in 42 states) . • occupational therapists (licensed in 26 states) • Practical and Vocational nurses (licensed in 46 states) • In none of the occupations were malpractice insurance rates significantly lower for similar persons ( by age and experience) in states that required licensing Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

20. Influence of Licensing on Prices The impact of licensing on prices to consumers ranges from 4 to 35 percent, depending on the type of commercial practice and location. Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

21. Estimates of reallocations and lost output • Compared to total wage income in the U.S. of 5.8 trillion dollars in 2000 the estimated reallocation of earnings from consumers to licensed practitioners is between 116 billion and 139 billion in 2000 dollars using this approach. Using economy-wide medium estimates of the elasticity of labor demand of .3 the economic loss to society of licensing is between 34.8 and 41.7 billion dollars per year (Hammermesh, 1993). However, the estimate is less than one-tenth of one percent of total national consumption expenditures annually. Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

22. Newly Emerging Licensed Occupations: Examples • Mortgage Brokers: Almost no home mortgages thirty years ago went through brokers, now 60 percent of all home mortgages or refinancing are originated through brokers • Little regulation in the 1970s now all states except Alaska regulates either the establishment or the employees • Little evidence that quality has improved Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

23. Child Care Centers • Impact of minimum quality restrictions on the market for child care • Influence of tougher legal standards reduces competition among Child Care Providers and raises profits Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

24. Interior Designers • Four states with full licensing and 18 additional ones have lesser forms of occupational regulation • During the past two years interior design coalitions lobbied for additional regulations in 10 states • No evidence that more regulation results in fewer complaints to monitoring agencies Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

25. Forestry • The number of states licensing Foresters increased from 3 to 7 from 1978 to 2001, and the number regulated in all forms from 12 to 16. • In Maine there was a 10 percent decline in the number of persons in the occupation following licensing. • Net state revenues for forestry regulatory body that monitors the occupation more doubled following tougher regulation. Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

26. A Licensing Fable… “Not long ago the Governor of a Midwestern state was approached by a representative of a particular trade anxious to enlist the Governor’s support in securing passage of legislation to license their occupation. “Governor,” they said, “passage of this licensing act will ensure that only qualified people will practice this occupation; it will eliminate charlatans, incompetents or frauds: and it will thereby protect the safety of the people of this state” The Governor, from long experience, was somewhat skeptical. “My distinguished guests,” he asked, “are you concerned with advancing the health, safety and welfare of the people under the police powers of this state or are primarily interested in creating a monopoly situation and eliminate competition and raise prices?” The spokesman for the occupational group smiled and said, “Governor, we’re interested in a little of each.”—adapted from Council of State Governments Report, 1952. Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia

27. Speaker Contact Information Morris M. Kleiner University of Minnesota 260 Humphrey Center University of Minnesota Minneapolis MN. 55455 Phone: 612-625-2089 kleiner@umn.edu Presented at the 2006 CLEAR Annual Conference September 14-16 Alexandria, Virginia