There’s Too Much Industry Influence on Occupational Licensing Boards. But There’s a Solution.

July 14, 2020
By Jenna Bentley

The need to acquire a state license to practice certain occupations can be a significant hurdle for many. Licensing boards carry enormous sway over the board’s rules over licensees, how they interpret and apply statutes, and even disciplinary proceedings against licensees. Many appear before these boards expecting a fair and neutral authority. But frequently, they are forced to face their competitors. That’s because occupational licensing boards are predominately comprised of industry members—many with pecuniary interests in keeping the job markets closed and stifling competition.

Proponents of such board compositions claim that only industry members have the knowledge needed to sit on an occupational licensing board, but that simply is not the case. Board members in their capacity do not serve clients; they do not personally draw architectural plans, nor do they give medical advice. Judges are not experts in every type of case they hear, yet we recognize their ability to make informed decisions over their cases. The same can be true of public members on occupational licensing boards.

Changing occupational licensing board composition is not a new idea. However, we’re only recently beginning to see these reforms gain traction. In 2020, Arizona passed SB1274, which increases the number of public members in a handful of particularly troublesome occupational licensing boards. Adding more public members is the first step in ensuring that the boards are acting in a fair and unbiased manner while ensuring public safety.

However, states can do more to protect their own licensed work force by instituting a limited pecuniary interest rule. As shown in a recent study by Arizona State University’s Center for the Study of Economic Liberty, there is a link between boards with a majority of membership having pecuniary interests to industry education facilities and the cost of calendar days spent on training for a state license.

The states in which the incumbent license holders or school-affiliated members have the least dominance on licensing boards corresponds to licensing requirements that amount to around 340 days of training on average. The states that have the boards on which those with pecuniary interest have complete dominance require training amounting to an average of 435 days. That’s a difference of over 90 days.

As a policy matter, reforms that mandate more public seats on licensing boards and that include “no pecuniary interest” rules may have a positive influence on the overall occupational licensing system. At the very least, it might minimize the one-sided nature of regulatory actions. Moving away from the “incumbent’s veto” is a healthy direction to travel.

Increasing public members and rules against majority pecuniary interest rules are simple steps that should be taken to ensure occupational licensing boards are working properly. Boards should serve as educational resources to ensure the public’s health and safety, not as instruments of a protectionist industry.

Jenna Bentley is the Director of Government Affairs at the Goldwater Institute.