Why No One Can Fix the Broken Licensing System
www.theatlantic.com › ideas › archive › 2025 › 02 › government-licensing-schemes-failure › 681654
The most important intervention in the United States labor market is not unionization or the minimum wage. It is professional licensing—government-required permission to work in a particular profession, earned after significant education and testing—that covers twice as many workers as unionization and federal wage laws combined. And the system that oversees it is broken.
Researchers have known for decades that professional licensing is a bad deal for consumers and workers. High-profile critiques of licensing go back to at least 1945, when Milton Friedman’s Ph.D. thesis presented some of the earliest evidence that licensing costs consumers dearly. In the decades since, economists and journalists have developed a body of evidence supporting these critics’ views. The idea that licensing raises barriers to professions that are far higher than necessary to protect the public has remained a focus of “libertarian” and “liberaltarian” causes alike, giving rise to a bipartisan reform movement that aimed at reducing barriers to work for people with criminal records, lowering the price for health care, and making starting a new business easier.
But despite these efforts—and despite the clarity of the problem—very little has been done to meaningfully roll back licensing. In fact, the institution of professional licensing has only grown in its reach and outlandishness. More and more new professions are becoming licensed, such as art therapists and, most recently and most absurdly, fortune tellers.
[Jerusalem Demsas: Permission-slip culture is hurting America]
Reform efforts haven’t worked because none of them addresses the center of the problem: the regulatory boards that control professional licensing. When a state makes a licensing law—a rule that only practitioners who have jumped through certain hoops can practice—it usually also creates a board to interpret and implement the law. Each state has dozens of these boards; almost 1,800 have been established nationwide. They are powerful engines of professional regulation, deciding who is in and who is out, setting the terms of what you can do as a provider and, ostensibly, disciplining professionals for misbehavior.
Importantly, most statutes require that most board seats go to part-time volunteers working in the very profession they are supposed to regulate. The seats on these boards can be hard to fill, because serving can be a big time commitment and offers no pay; often, only those already involved in advocacy through professional associations are willing to sign up.
For anyone interested in licensing reform, ignoring boards is akin to someone interested in criminal-justice reform ignoring the role of courts and judges. And in this case, the boards have all the wrong incentives for public protection. Licensing works to protect consumers only if it doesn’t go too far. If getting into a profession is too hard, or the rules are too strict about what professionals can and can’t do, professional service will be expensive and scarce. But for those already licensed, more is more. The harder that entering and practicing are, the less competition those professionals face, which can mean better pay, a better lifestyle, and more prestige.
As an antitrust professor who has studied how companies act when they have control over who competes with them and how, I had a guess about how boards stacked with advocates for their profession would behave when given control over licensing. They would act like a cartel—keeping competition down and profits high. I thought board members would struggle to “change hats” from professional to regulator. When I decided to write a book about professional licensing, I started attending licensing-board meetings in my home state to see whether I was right.
[Read: The onerous, arbitrary, unaccountable world of occupational licensing]
Some of what I saw confirmed this hypothesis. For example, I watched the Tennessee Board of Alcohol and Drug Abuse Counselors nix a proposed reform that would relax a requirement that applicants need to have majored in a behavior-health field, a rule that all but foreclosed the profession to anyone who hadn’t decided to be a counselor when they were a teenager. The reasons they gave had nothing to do with the sort of public protection licensing ostensibly serves. Rather, they wanted “to protect what we’ve got.” Another said anything less than a “fully robust” license would mean less pay and prestige for counselors. One put it simply: “It’s our responsibility to make sure we are looking out for this profession.”
That has it exactly backwards. A licensing board’s responsibility is to look out for the public and to implement decisions made by legislatures, including efforts to dial down licensing. But time and again, I saw licensing reform initiated by a state government die in these board meetings. For example, in 2019, Arizona passed a “universal recognition” law that purportedly allowed anyone licensed in any state in most professions to practice in Arizona. The law was touted as promoting interstate mobility and cutting the red tape of a state-by-state licensing system. But a member of Arizona’s psychology board later told me her board had functionally killed it, at least with respect to psychologists, by interpreting it narrowly. Similarly, in Tennessee, the legislature responded to the crisis of too few physicians by streamlining the licensure process for applicants from foreign medical schools. The licensing board flat-out refused to implement it.
Boards not only resist efforts to reduce licensing barriers; they actively work to increase them. They do this by lobbying the very legislatures that are supposed to oversee them, even using their licensing fees to fund their efforts. In these efforts, licensing restrictions are often portrayed as a win-win for the profession that lobbies for them and for the consumers who get more public protection.
But this ratchet isn’t always good for consumers, because professional services can become scarce and expensive as a result. Returning to the example of alcohol- and drug-abuse counselors, one used to need 1,500 hours of practical experience to be a counselor; then that doubled to 3,000. Today one needs 6,000 hours—as much as a medical residency—to qualify for a license in Tennessee. That and the college-major requirement have made this an exceedingly difficult profession to enter. Only about 400 counselors practice in Tennessee, a state where about 70,000 people deal with opioid addiction.
Some of what I saw, however, seemed to refute my theory that what amounted to industry self-regulation at the licensing boards would work to keep down the number of professionals.
An example: The medical-board disciplinary case of an ob-gyn who had lost his license the year before. He had had sexual relationships with a number of his patients. He had written some of them (and others) off-book prescriptions for controlled substances, in at least one case prescribing a quantity so large that he later said he had come to believe the patient was selling it on the street. He also admitted to occasionally having done drugs at work with his patients. Only six months after his license was revoked, he asked the board for it back, as a changed man with a new commitment to be a better physician. The board voted to grant him a new license the day of his hearing, a fresh start for a physician who sees mostly Medicaid patients in inner-city Memphis. Much of the board discussion focused on whether a chaperone requirement could be imposed on the newly relicensed physician without raising an alarm among his patients.
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My theory that boards would keep out unwanted competitors could not explain why the board didn’t bar this doctor from the profession for good. There seemed to be more to the story of self-regulation than cartel-like behavior. When it came to dealing out disciplinary measures, board members’ professional identity and years of advocacy created blind spots where they could not see the worst of their profession. Their professional associations, too, encouraged board members to give their peers the benefit of every doubt and to believe a fellow professional who promised to do better next time. This generosity of spirit was particularly notable in the healing professions, where doctors and nurses were dispositionally inclined to see practically every provider before them as capable of redemption. The effects of this dynamic have been devastating: For example, these impulses contributed to the opioid crisis, as prescribing practices went unchecked by professional licensing boards until too late.
The diagnosis is old: Professional licensing needs to be rolled back, to be used only where necessary to protect the public and where lighter regulatory touches—that don’t so severely impact consumers and workers—aren’t effective. And where we need professional licensing, such as in many health-care professions and in law, a lighter regulatory touch will keep professional services affordable and accessible.
But the prescription is new: States need to overhaul their licensing-board systems to eliminate the self-regulation that has made licensing a lose-lose for workers and consumers alike.