Value of licensure reaffirmed by new research report

By George Spencer

For years, professional associations and regulatory boards lacked hard data that demonstrated the value of licensing amid state regulatory threats to licensure in highly technical professions. In 2020, the Alliance for Responsible Professional Licensing (ARPL) sought to fill that information gap by commissioning Oxford Economics to help people better understand the nuanced impacts of licensing on professions, as well as trade and vocational occupations.

The study, published in the 2021 quantitative report Valuing Professional Licensing in the U.S., found that in fields that require advanced education, women and minorities benefit significantly from current licensing policies. In addition, a license narrows the gender wage gap by about one-third and the race-driven wage gap by about half, according to the study.

A female engineer, for example, can expect higher wage returns from gaining a license than a male engineer. For lower-skilled workers, though, men see better licensing returns than women. Highly skilled minority workers, meanwhile, receive higher returns from licensing than high-skill nonminorities, the report says.

The report shows that a distinction exists between professional and occupational licensing. “Its findings suggest licensing is an important economic tool for professionals,” said Alice Gambarin, a senior economist at Oxford Economics, which conducted the study for ARPL. “These new findings reflect the distinctions between each profession and occupation. Licensing systems that support them should take those differences into consideration.”

In addition, the report also referenced a 2019 ARPL-commissioned national study by the Benenson Strategy Group (BSG) in which 75% of 952 registered voters said they supported licensing regulations for highly technical professions that have a direct effect on public health and safety. More than two-thirds of the voters said professional licensing should be required unless evidence shows that its elimination would not negatively affect public health and safety, and 76% said professional licensing makes consumers feel safer.

Nonetheless, reasonable regulation and substantial equivalency requirements are endangered in states around the country.

Legislators in 36 states have proposed about 130 licensing-related bills. Many would potentially reduce licensing requirements for highly technical professions and potentially put the public at risk from inadequate and improper practice, according to Marta Zaniewski, AICPA vice president–State Regulatory & Legislative Affairs.

“Time and time again we have seen that an attempt at broad-brush policymaking doesn’t work, but reasonable regulation and professional licensing does,” said Zaniewski, who sees no sign of this issue going away. “Occupational licensing will continue to be a hot issue, especially given workforce and budget challenges some states are facing. As a result, this issue will continue to be proposed and discussed in statehouses around the country for many years to come.

“It’s a myth that there’s a silver bullet for occupational licensing. The ARPL/Oxford Economics study now gives us substantial data from a reputable nonpartisan group stating that regulation and the need for licensing should be considered differently for occupations and professions,” Zaniewski said. “There need to be very clear distinctions between professions and occupations. The licensing systems already in place for CPAs, architects, and engineers reflect those differences, given the impact these professions have on the public.”

Although there is an assumed difference between what constitutes a profession or occupation, Zaniewski said there is now a concrete difference. “We always knew education, exams, and experience played a key role, and now with this report we have the data to confirm those differences matter.”

Perfect storm

Around six years ago, a perfect storm of events intensified states’ desire to assess occupational licensing in jurisdictions, according to Zaniewski. In 2015, the Obama administration issued a white paper that called on states to review unnecessary occupational licenses that limited worker mobility and reduced wages. That same year, the U.S. Supreme Court rendered a decision regarding an antitrust case in North Carolina that involved persons who performed teeth-whitening procedures on the public. Prior to this case making its way to the Supreme Court, the North Carolina State Board of Dental Examiners stopped the practice of teeth whitening by the group, given their interpretation of what constituted the practice of dentistry in North Carolina. As a result of the vague language in the final Supreme Court ruling, and with the majority of the North Carolina State Board of Dental Examiners primarily composed of dentists, the case was seen as a prime example of too many market participants regulating their own profession. The ruling created an opportunity for jurisdictions to closely examine the composition, functions, and responsibilities of state licensing boards and the role professions played in the decision-making functions of regulatory boards.

Zaniewski said: “2015 was the catalyst of ongoing conversation regarding licensing and regulation as various interest and political groups began engaging and lobbying on this issue. Legislative writing and policymaking should be a nuanced and collaborative process. Instead what we have seen, and keep seeing, is legislation that is usually written in a vacuum that applies broad-brush policies that don’t take into account existing models for responsible licensing and regulation.” Occupational licensing continued to be a bipartisan issue with the Trump administration taking office in 2017. The push for deregulation continued with the former administration asking governors to reform licensing and regulations models in their jurisdictions.

As the pandemic continues, and licensing issues keep getting prioritized on legislative agendas, the AICPA is monitoring occupational licensing bills to ensure they do not harm the profession and the public. “The current situation worries us because public engagement may be limited due to COVID-19,” Zaniewski said. “There may be instances where the profession is in a position where we may not have the dedicated space and time to educate legislators on the importance of the CPA license.”

Furthermore, executive branch officials accustomed to issuing sweeping pandemic executive orders may be testing waters regarding their executive powers. There is tension in states between legislative and the executive branches of government, given the number of executive orders issued as a result of the pandemic. “We are keeping an eye on how this type of political tension may play out on issues in various jurisdictions,” Zaniewski said.

As the 2021 state legislative sessions move along, Zaniewski recommends continued membership involvement with state CPA societies to raise the voice of the profession regarding occupational licensing. “Legislators need to hear directly from CPAs on why licensing matters, learn about the model we currently have in place to protect the public, and understand the important work CPAs do — and no one can deliver that message of importance better than the AICPA membership and the state societies.”

George Spencer is a freelance writer based in North Carolina. To comment on this article or to suggest an idea for another article, contact Chris Baysden, a JofA associate director, at Chris.Baysden@aicpa-cima.com.

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