Upjohn Institute Visiting Scholar Morris Kleiner, of the University of Minnesota and the Federal Reserve Bank of Minneapolis, presented a seminar titled “Occupational Licensing, Labor Supply and Human Capital” at the Institute Aug. 23. We spoke with Kleiner following the seminar on his research and the recent “Occupational Licensing Over Time and Across Countries” conference in Chicago, co-sponsored by the Upjohn Institute. Our conversation has been edited for length and clarity.
UPJOHN INSTITUTE: How did research and awareness on occupational licensing get to the point where it warrants its own two-day conference Sept. 13-14?
MORRIS KLEINER: When I first proposed a book on occupational licensing, people said “why do you want a book? there’s not even enough there for an article. [Upjohn Institute President Randall Eberts] saw this as an area that had been neglected, and that got me involved in the work that led to one book, which led to a second and third. The work here provided the basic theoretical underpinnings for how licensing may work in the U.S. economy and beyond, and the conference is focused on what’s going on beyond the U.S. as well. This conference gets researchers and policymakers to talk to each other, to meld the research that’s been done over the last 20 years with people who are faced with problems occupational licensing presents to them.
Is the research in line with the policy?
There are questions policymakers want to know that the research hasn’t addressed. That’s why it’s important to have people who deal with this issue on a day-to-day basis, who are faced with individuals applying for a license, individuals who’ve been incarcerated—what happens when they get out if 20 to 30 percent of the workforce requires permission from government and they say if you’ve committed a felony you can’t work? Or individuals getting out of the military: they’ve been a medic and the work they did in the military doesn’t count toward becoming an EMT.
Between 0 and 100 percent of occupations should be licensed, but how do we set that bar?
Certainly, zero isn’t optimal, but if you’re having this dramatic growth in licensing—over 800 occupations are licensed in the U.S.—everyone being licensed isn’t optimal. Should reporters be licensed? It would be a real problem if you had to get a license from the government and you wrote something that was against the government. There’s an organization called CLEAR that’s developed a set of questions legislators should ask: largely, what are the costs and benefits. Are there significant harms to the public that will be alleviated because the occupation is licensed?
You showed a graph (see Figure 1) with declining union membership and increasing licensed occupations. Will licensed occupations have the policy influence of unions, or would they need to band together?
It depends on the issue. There was a push to deregulate 56 occupations in Florida, and the licensed occupations coalesced and none of them were deregulated. The cosmetologists, if you’re sitting in their chair, they’ll tell you how important it is that cosmetologists get proper training.
These personal care occupations: tattoo artist, personal trainer, eyebrow threader, are ones that could have potentially big public health effects …
There are consequences for interior designers, they say, because they design hospital rooms. You can turn any occupation into, there’s some harm to the public.
That doesn’t make policymaking easier if you draw the line I’ve done at, say, decreasing the risk of infection and someone comes along …
… with florists, there’s the spread of bugs or diseases that could infect lots of flowers being grown in Louisiana …
For someone hoping to reform occupational licensing, it sounds like an impossible job.
There are occupations that have been deregulated: funeral directors in Colorado, auctioneers in Michigan. There are governors and legislators asking, in part because of the research that’s come out of this place, what are the benefits and what are the economic costs.
Did you see what you would have expected from deregulation?
Yes, in Colorado, the funeral directors’ wages went down but also prices for funeral services went down. Funeral directors were against cremation, but when they were deregulated, funeral parlors said it’s lot cheaper to cremate, and as a result prices went down.
As the conference approaches, what are you most excited about?
Having the secretary of labor taking a day out of a busy schedule to talk about occupational licensing. And it’s bipartisan; the Obama administration had a very impressive white paper on occupational licensing. But you’re swimming against the tide because these occupations care a lot about regulation and a lot have increased the requirements to enter the occupation, like physical therapists and accountants.
I’ve testified in the House and Senate; in both cases it was a nonpartisan issue. Sen. Klobuchar on the Democratic side has been huge mover in trying to rationalize occupational licensing policies, and there are a number of Republicans—Sen. Lee of Utah is a huge proponent of reducing regulations. It really has had individuals from both sides working on the issue.