The Problem with Licensure

Summary: Licensure in many cases is simply a license for (1) people to do substandard work, (2) other people to be trusting of people that shouldn’t be trusted, and (3) groups of people to limit entry of others into their profession. In my opinion, licensing in most cases should not be required, but should be an option for people who choose it as a form of insurance that the good or service provided is trustworthy. Here’s what I mean…

First, a couple of stories to set the stage. When I was a teenager, my father was on the city council in our town. He was frustrated one time about a man in town who refused to get a building permit to make modifications to his house. As I thought about it, I found myself on the side of the man who didn’t want to get the building permit.

Later on, in a different town, I became a member of a city council. Every year, it came time to renew the licenses of every business in town. And nearly every year I asked for a discussion on why we required business licenses. No one could really explain why, except that it was the law, that it helped ensure our business tax revenue, and that we needed safety personnel to inspect their premises for dangerous substances or environments (which only happened for new businesses anyway). We never did come to a conclusion whether piano teachers and lawn mowing youth needed business licenses.

While still on the city council, we hired a licensed well drilling contractor to fix a well we were having problems with. During the course of fixing the problem, the driller made a serious mistake, after which he promised for several days to get the problem fixed. When, finally our calls were not returned by him, we sent an officer of the peace to track him down, but to no avail. Getting the well fixed correctly cost the city an enormous amount of extra money.

What do all of these events have in common? Government.

It has become the unfortunate trait of most Americans that, when a venture is sanctioned by government, they trust that it is, will be, or has been done correctly. A multitude of problems ensues. I’d like to analyze each of the above-mentioned anecdotes in this light.

Building Permits. The home I purchased has been in need of plumbing repair on 2 or 3 occasions in the 14 years we have lived there. Each time the plumbing contractor comes, he exclaims “Who did this plumbing? It’s terrible!” My house, shoddy plumbing and all, was inspected and passed by the building inspector. Several homes in our town had to be redone, even after inspections by the building inspector, because the building contractor used deceptive and shoddy practices. Yet who do people remember when it comes to the problems this event caused the families who bought these homes? My city government. But who cares? Nobody can vote the building inspector out of office anyway. But did you forget for just a second that the problem was not the building inspector’s fault?

Because people know that homes have been inspected by an authorized building inspector, people don’t often think about the reputation of the home builder. They just want a home that is in their price range and that the government tells them is fit to move into. In most cases this works well. But when you have a shyster building contractor, licensure prevents the full onus of shoddy workmanship from falling upon him.

Building inspection should remain an option, but it does not have to be a function of government. Government does not have a reputation to keep up, in the first place. But imagine what would happen to a private building inspector if word got around that the houses he inspects are actually of substandard workmanship? He’d be out of a job before too long. I don’t even think there should be a requirement to have your home inspected. What I do think, however, is that it should be required to list on the title of your home who it was inspected by, if anyone, and who the inspector was. I suspect that most people would opt to get their home inspected by a private inspector. I know I would. And did you notice that in this scenario, no one has to be issued a building permit before they can start building.

Business Licenses. Business licenses accrue no benefit to a city, and in fact cause more work for city employees than they are worth. Surely certain kinds of businesses should not be allowed in certain areas (such as very noisy, dusty, or otherwise caustic establishments in residential areas) but this has nothing to do with licensure. The penalty for non-payment of taxes, especially in the case of large businesses, is very prohibitive; and it’s easy to discover when such businesses aren’t paying taxes. It is as easy to hide one’s business from the business licensors as it is from the tax collectors, anyway.

Engineering Licenses. Engineers are so often trusted first for the fact that they have a license rather than the fact that they are good engineers. I sat through a plethora of city council sessions where the ‘lowest responsible bid’ was accepted, responsible meaning more than anything else that the engineering firm was licensed and that it had bid lower than any other bidding firm. In most cases, this works just fine. But in the case of our well driller, it didn’t. It is interesting that government issues licenses to engineers based on their ability to pass a test. The head engineer in a state government usually has a great deal of prior experience in the private engineering sector, but his government office is in no way responsible if an engineering firm makes a huge mistake. In a private-licensing scenario, licensing engineers would have their reputations sullied if engineering firms that they certified are caught doing substandard work. Better yet, a firm’s history speaks many more volumes than a license does. If I am required to delve into a firm’s historical accomplishments, I am much more likely to find an engineer that will do my job correctly. If a firm has no history, I would be a fool to ask him to do a large or complicated task for me. Licensure for engineering firms should be optional, with private entities providing certification of licensure. This will require everyone—buyer, seller, and certifier—to work harder in order to ensure a quality product or service.

The following is a partial list of the ever-increasing number of licenses required in the state of Utah:

Cosmetologists
Nail Technicians
Athletic Trainers
Environmental Health Scientists
Occupational Therapists
Speech Therapists
Massage Therapists
Landscape Architects
Security Personnel
Court Reporters
Geologists

Every one of these license schemes has the effect of making it more difficult both for individuals to become entrepreneurs in these fields and for beneficial innovations to occur in them. A lot of these are relatively new licensing requirements that contribute to the bloat of government.

Licensure by government makes little sense in most cases. In cases of public health or social welfare there is an arguable reason to have licensing, but in most other cases it makes much more sense to have private firms do the licensing. This makes for smarter consumers and better service providers all around.