Alternatives to Licensing

Occupational regulation is often thought of as an either-or choice between licensing and no regulation. But there is, in fact, a whole range of alternatives that can keep the public safe without licensing’s high costs. Stretching back to the 1970s, states with sunrise programs have recognized that less restrictive alternatives should be preferred to licensing, often explicitly listing them in guiding statutes and regulations. ¹

Such alternatives can be thought of as an inverted pyramid with less restrictive alternatives at the top and more restrictive alternatives—culminating in the most restrictive option, licensing—at the bottom, as in Figure 23. ²  As it shows, the top four options are voluntary or “non-regulatory,” while the bottom seven options involve government interventions. Here, we highlight a few alternatives, using examples of unlicensed occupations from License to Work to illustrate how they can work in practice. After all, as we found, despite licensing’s prevalence, most occupations we study are unlicensed in at least one state.

Figure 23: A Hierarchy of Alternatives to Licensing

Market competition

Service providers who fail to deliver safe, quality service generally do not stay in business very long. Consumers will deny them repeat business and, often, tell others about their negative experiences. Thanks to social media and consumer review websites, consumers can share information more easily and more widely than ever before. And these reviews often offer far more detailed and useful information about service quality than a provider’s licensure status.

Recent research backs this up. In home improvement occupations—like painter and many of the other residential contractor occupations covered in this study—licensure plays little part in consumers’ decisions to hire tradespeople. Instead, consumers care more about hiring those who have received high praise from other consumers. ³

Michigan’s experience licensing residential painting contractors offers a helpful illustration. The state started requiring a license for the occupation purportedly to protect consumers from painting scams. But it eliminated the license in 2019 after it became clear the license was not doing anything: Most consumers and even painters did not even realize a license was required. ⁴ Something else must have been working to protect consumers and keep quality high—and that something was likely consumer reviews. In fact, while noting that delicensure would not change much in the state, the Better Business Bureau said, “The best way to make sure you’re dealing with somebody that’s trustworthy and a good painter is to look them up and do your research. . . . See what kind of reviews do they have.” ⁵

Voluntary certification

Service providers can also take various actions, as shown in the pyramid, to signal to consumers that they take safety and quality seriously. Among those actions is obtaining and maintaining voluntary certifications. For example, as this study documents, tree trimmers are licensed by just eight states, including Connecticut, Maine and Rhode Island. New Hampshire, New York and Vermont, also in the Northeast, do not license tree trimmers even though they are among the top 10 most forested states in the country. ⁶  Instead, these states rely on voluntary certification. ⁷  Voluntary certification is also widespread for various other occupations not covered in this study, including lactation consultants, ⁸ music therapists ⁹  and perfusionists, who operate heart-lung machines during surgeries. ¹⁰

Inspections

When an occupation poses risks that voluntary options alone cannot mitigate, less restrictive government interventions may be able to protect consumers effectively. Inspections, for example, are a more tailored solution when sanitation, fire safety, and certain other health and safety issues are concerned. Inspections are already common in settings like food preparation as well as construction trades and personal care services, including those covered in this study. Indeed, for years, Connecticut was the only state that did not license manicurists or skin care specialists. ¹¹  Instead, it relied on salon inspections to keep the public safe. ¹²

Registration and mandatory bonding/insurance

Depending on the risks associated with an occupation, mandatory bonding or insurance or registration may be appropriate. For example, while most states impose onerous licensing requirements on contractors, Alaska and Washington generally just require contractors to be bonded and insured as well as registered with the state. ¹³  Consumers who have problems with registered contractors can file a complaint and potentially claim against the contractors’ bond or insurance.

State certification

Finally, restricting the use of a particular occupational title to workers with certain credentials is a possibility. Called state certification, though states sometimes outsource certifications to private providers, this option is more burdensome than the others we have discussed, including voluntary certification. However, it is still less burdensome than licensing because it restricts only the use of a title, not the practice of the occupation. Another advantage of state certification over licensing is that it can provide evidence of credentials to public and private health insurers for reimbursement purposes without restricting practice by those not seeking payment through third parties.

State certification is in place for a number of the occupations in this report, including interior designer. The most difficult of the 102 occupations to enter, it is licensed by just two states and the District of Columbia. Meanwhile, other states offer state certification instead. ¹⁴ In another example, while 48 states and the District license athletic trainers, New York allows anyone to work in the occupation but permits only state-certified workers to use the title. However, even this may go too far as the remaining state, California, does not regulate the occupation at all. ¹⁵

As these examples show, occupational regulation is hardly a binary choice between licensing or no regulation. And even when the government is not involved, this does not mean occupations are “unregulated.” Instead, ordinary market forces create strong incentives for practitioners to provide safe, quality service.