New Ohio Law Targets Occupational Licensing Boards and Aids People with Criminal Records

Ohio Gov. John Kasich signed SB 255 on Friday which puts an expiration date of 6 years on all state licensing boards unless they are renewed by the legislature. Prior to a board’s end date, the board must present to standing committees so that lawmakers can evaluate the usefulness, performance, and effectiveness of the board. Each board will have the burden of proof to demonstrate there is a public need for its continued existence. The Legislature will determine whether a board is necessary to protect the health, safety, or welfare of the public and whether its regulations are the least restrictive form that adequately protects the public interest.

This sunset review will also analyze a board’s staff, its budget and its enforcement actions and conclude whether the board has inhibited economic growth, reduced efficiency, or increased the cost of government. One-third of the state’s licensing boards will be reviewed every two years.

Any proposed occupational regulations will have to undergo a similar sunrise review process. The Ohio Legislative Service Commission will analyze the extent to which the requirement for the occupational license stimulates or restricts competition, affects consumer choice, and affects the cost of services.

Boards who present to the legislature to introduce new regulations are expected to provide evidence of present, significant, and substantiated harms to consumers in the state and explain why current laws are insufficient. The goal of the sunrise and sunset reviews in SB 255 are to prohibit new and existing regulations that restrict entrants into the occupation with no clear public protection need identified.

The law also allows an individual who has been convicted of a criminal offense to request a licensing authority to determine whether the individual is disqualified from receiving or holding a license based on conviction. This is particularly impactful for people with criminal convictions who are considering occupations with extensive amount of training or education required. Previously an applicant might go through years of training and spend thousands of dollars only to find out when they apply for a license that their criminal conviction disqualifies them from licensure. Under this new provision, licensing boards must tell a potential application whether or not they have a conviction that would ban them from receiving a licensure which will spare practitioners a significant amount of resources. Licensing boards must also publish all offenses that could disqualify applicants online.

Ohio is following in the footsteps of Nebraska who was the first state to pass legislation mandating this type of sunrise/sunset review process. Nebraska’s LB299 has the same twostep process for review where first, there must be “present, significant, and substantiated harms” that warrant government intervention. Second, if such a problem exists, the legislators must first consider a regulation that is the “least restrictive” and imposes the lowest burdens and costs while still protecting consumers from the harm. A similar bill was also passed last legislative session in Louisiana.

As states continue to think about the way they regulate occupations, more states may follow this sunrise/sunset model as a way to thoughtfully consider if government intervention is needed to protect the health and safety of the public.

Occupational Licensing Consortium Convenes Second National Meeting

On November 28-30, the states a part of the occupational licensing policy learning consortium convened for the second annual meeting in Clearwater, Florida. The state teams had the opportunity to focus on four population groups who are disproportionately affected by licensure—individuals with criminal records, veterans and military spouses, dislocated workers and immigrants with work authorization. License portability, reciprocity, and interstate compacts were also major topics. States had the opportunity to connect with and learn from fellow consortium states, as well as hear from states outside of the consortium that have taken action on occupational licensure including Nebraska and Michigan. 

New funding allowed for four new states to participate in this year’s consortium meeting. Idaho, New Hampshire, North Dakota, and Vermont formed state teams made up of legislators, regulatory agencies, and governor’s staff and joined the original 11 states in Clearwater to begin action planning their licensure reform. These states who recently came aboard the project will be part of the consortium going forward.

CSG was also able to expand existing state teams to include more regulatory board members. Licensure reform is a challenging policy area with many competing interests. Bringing together all stakeholders is something CSG wanted to accomplish as a part of this effort. Pursuing licensure reform without input from the licensure boards is not something states have had much success with. In order to engage more regulatory agencies, CSG used additional funding to expand state teams to include these key stakeholders.

The focus on particular reforms from the consortium states as discussed at the meeting ranges widely from sunrise/sunset review, interstate compacts, communications/marketing plans, board consolidation, data collection/standardization, and laws for military families.

One additional point of discussion for the state teams was developing a transition plan for states with outgoing governors and legislators. With state teams being made up heavily of legislators and governor staff, some teams are needing to come up with a plan maintain momentum once these new state leaders take office. The partners at CSG, NCSL, and NGA have committed to developing a transitional memo that states can request which will explain the project and ask for support from the newly elected official.  

The consortium will formally meet one more time in the summer of 2019, but the project partners hope this is just the beginning of state occupational licensing reform.

Vermont Deputy Secretary of State Chris Winters said, “This was the best conference I’ve ever been a part of. I was so glad to be able to contribute, and was also really proud of my Vermont team and their focus. This conference has energized them.”

Each consortium state has accomplished things throughout this project, but the latest consortium meeting in Clearwater was a great time for states to reset focus, refine vision, and energize to pursue common sense licensure reform.

More States Take a Hard Look at Licensing Practices

States continue to take significant actions in attempts to lessen barriers to workforce entry caused by occupational licensing. CSG currently facilitates a consortium of 11 states looking at occupational licensing reform as a part of the Occupational Licensing Assessing State Policy and Practice project in partnership with NCSL and NGA, funded by the US Department of Labor. However, the examples below come from states not currently participating in this project’s consortium, signifying that occupational licensing reform is a priority for states nationwide, and not just the 11 states participating in this CSG project.

Oklahoma

In December 2016, Oklahoma Governor Mary Fallin called for the formation of the Occupational Licensing Task Force to study the issue of occupational licensing in Oklahoma and to provide recommendations by December 2017. In January 2018, the Task Force released their final report with a draft blueprint for analyzing occupational licensing. This blueprint can be used to evaluate whether government licensing is necessary in a particular occupation. It takes factors such as public health and safety risks, means to protect public interest, and board member participation into consideration to determine if licensing is appropriate or if a less restrictive means of regulation could be used.

The blueprint starts by asking the question: “Is there a compelling public interest that needs to be protected?” From there, the blueprint calls for using the “least restrictive means that would sufficiently protect the public interest.” The blueprint lists 13 possible ways to protect the public interest, ranked from the least restrictive (market competition) to the most restrictive (occupational licensing). The Task Force is also suggesting that state laws mandating licenses be subject to legislative review periodically — a sunset provision — and that this standard blueprint be used to make sure licensing is the least restrictive way to meet the state’s interest.

Louisiana

Sponsored by Rep. Julie Emerson, Louisiana House Bill 748 establishes a review process within the office of the governor. This occupational analysis would use a two-step process to review both proposed and existing regulations. First, there should be credible empirical evidence of a systematic problem that warrants government intervention. Second, if such a problem exists, the regulation must be the least restrictive form that imposes the lowest burdens and costs while still protecting consumers from harm. Every year, the office will examine one-fifth of the state’s occupational regulations to identify any rules or laws that should be repealed or modified so that they are the least restrictive. HB 748 gives Louisiana one of the most robust licensing review process in the nation.

Arizona

Arizona Governor Doug Ducey issued an executive order to all state licensing boards in March 2017 mandating a full review of all existing licensing requirements. It also requires the licensing boards to provide economic justifications for any standard that is more burdensome than the national average and for any license that is not required by at least 25 other states. The Arizona State Legislature followed suit by passing SB 1437, or the Right to Earn a Living Act, which bars licensing boards from writing regulations that restrict entry into a profession if a public health or safety benefit cannot be proven. The new law also empowers individuals to petition a board for further review of a licensing requirement.

Nebraska

Similar to Louisiana’s sunset review process, Nebraska passed an Occupational Board Reform Act (LB 299) which requires state lawmakers to undertake a review of Nebraska’s occupational licensing laws in order to loosen or eliminate requirements that serve as barriers to employment without benefiting public safety. The bill requires that licensing laws “respect the fundamental right of an individual to pursue an occupation” and requires lawmakers to favor less restrictive forms of regulation in circumstances where licensing rules violate that right.

Another important aspect of the bill is a change how state licensing boards will review criminal histories. As a result of LB 299, before applicants complete any required training, they will be able to petition an agency to see if their criminal history would be disqualifying. If denied, applicants will then be able to appeal that disqualification. In some cases, an aspiring worker will go through the entire credentialing process only to find out that a previous conviction disqualifies them from practicing the profession. LB 299 eliminates that possibility by telling the applicant up front whether or not they possess a disqualifying conviction.

The themes from these state examples are similar. States are trying to determine whether legitimate health and safety concerns exist for licensed professions, and if so pursue solutions to licensing problems by finding least restrictive form of regulation while continuing to ensure the health and safety of the consumer.

New Occupational Licensing Analysis Opposes Traditional Theory

A commonly cited argument for occupational licensing reform states that licensing results in restricted employment growth and higher wages for licensed workers, which in turn increases consumer costs. Higher wages benefit licensed workers, but wage disparity leads to inefficiency and unfairness, including reducing employment opportunities and depressing wages for excluded workers.

However, CSG’s analysis of data from the Bureau of Labor Statistics (BLS) finds no evidence that licensing has any effect at all on wages and employment growth for electricians and massage therapists. Using original CSG time-series licensing data along with occupational employment data from BLS’ Occupational Employment Statistics (OES) program, this analysis compares wage trends before and after licensure, to a control state that does not license the occupation at all. Plotting wages for the licensed state and the control state, with hourly median wages on the vertical axis and year on the horizontal axis, while drawing a vertical line at the year of initial licensure shows any potential licensing effect. Deviations from wage trends prior to licensure can be attributed to licensing if the effect is similar across several state comparisons.

(SEE ATTACHMENT FOR PLOTTED DATA)

When comparing the time series data plotted for licensed and non-licensed states, there is no evidence that these occupations becoming licensed has an effect on wages and employment. The result is most convincing for electricians. When looking at the plotted time series data, the trend lines barely changes at all upon initial licensure. If a licensing effect did exist, we would expect the line to trend upward for wages and downward for employment after a state licenses electricians.  However, when comparing with the control states that do not license, the trend lines hardly deviates at all upon initial licensure. This result is consistent across all three sets of state comparisons.

The result seems to hold even for an occupation within an entirely different industry. The trend lines for massage therapists are more erratic, but still do not seem to support a possible licensing effect. There must be other effects at work causing the wage and employment lines to shift, but these shifts do not occur in sync with the treatment state adopting a license requirement.

If most economists agree with the assumption that occupational licensing increases wages for licensed workers and decreases what are some possible explanations for this result? It may be the case that a licensing effect takes many years to be seen. The increase in wages and decrease in employment growth could be a slow, gradual process over the course of many years that eventually restricts entrants into the profession, but does not do so initially.

Secondly perhaps the licensing requirements adopted are not severe enough to deter an aspiring practitioner from entering the occupation.

Electricians

StatesExperienceNo. Of
Exams
Length of
Renewal
Continuing
Education
Initial
Cost
Renewal
Cost
Iowa16000, h13187575
Kentucky4, y11615050
Massachusetts8000, h1345330104

Massage Therapists

StatesTraining
Hours
No. Of
Exams
Length of
Renewal
Continuing
Education
Initial
Cost
Renewal
Cost
Illinois600124837087.5
Michigan5001354290115
Nebraska10001224322127

The above tables from CSG, NCSL, and NGA’s Occupational Licensing Database outline the licensing requirements for electricians and massage therapist in each treatment state where a license was adopted. Based on previous literature, if a licensing effect did exist for these occupations, you would expect the effect to be even more noticeable in the graphs for Nebraska and Iowa. The training and experience requirements for these two states are double the requirements for the other states who also recently adopted a license, yet the trend lines do not suggest that a more severe licensing effect exists.

This result is important to policy makers who are looking for new ways to grow their state’s economy. Occupational licensing reform has been a workforce priority of the two most recent presidential administrations with President Obama’s administration releasing a 76-page policy framework for state officials, and the Trump administration awarding large grants to enhance state occupational licensing portability of which CSG was a co-recipient.

Enhancing portability of state licensing and creating more a more equitable system for vulnerable populations like veterans and military families, people with criminal records, immigrants, and long-term unemployed workers is a crucial need. However, it is not clear from this evidence that deregulation will have the economic impacts that some believe.

If the result of a state adopting a license for certain occupations is negligible for these economic indicators, perhaps policymakers should focus their efforts on things other than deregulation when figuring out how to grow their state economies. Some argue that removing these licensing barriers will result in an influx of new practitioners into the occupation which will stimulate job growth. The evidence from CSG’s analysis does not show that this would be the case. If an occupation becoming licensed does not affect wages or employment, then deregulating an occupation likely won’t affect these outcomes either.

Plotted BLS Data