Last year Texas legislators were to first to hear the idea of the Occupational License Consumer Choice Act. In October 2018, New Mexico Gov. Susanna Martinez included Occupational License Consumer Choice in her occupational licensing reform Executive Order. Companion bills for the Occupational License Consumer Choice Act were introduced to the West Virginia Legislature this year.
The key to the Occupational License Consumer Choice approach is something called a non-license disclosure. With that, occupational licensing is no longer an entry regulation. As stated in the West Virginia bill:
Working without an occupational license. – (1) A person otherwise subject to the requirements of an occupational license by a state authority may work in West Virginia without an occupational license if the person makes a nonlicensed disclosure.
This is important because it would let people in service professions licensed by the state to retain their right to earn a living, while at the same time addressing the state’s concern that consumers might not make an informed choice in service provider.
I explained how this elegant solution would work last fall:
Knowledge imbalance vs. choice imbalance
After all, one of the service quality issues that occupational licensing is supposed to solve is a knowledge imbalance. A consumer usually doesn’t know as much as the professional regarding the service work, which is why the consumer seeks out a professional to do the work. Fear that this knowledge imbalance could tempt some professionals to take advantage of consumers is what drives some calls for licensing.
The occupational license, however, imposes a choice imbalance — removing consumers’ range of preferences for service professionals’ training, education, experience, and skill levels in favor of the licensing board’s one-size-fits-all dictate. (Not to be overlooked: the amount of expertise a consumer may seek in a service professional could also depend on the size and importance of the job.)
The non-license disclosure would attest to the fact that the consumer was informed about what professional qualifications he was choosing. The professional must be able to produce a disclosure signed by both parties if asked by authorities, and it would provide an affirmative defense to enforcement of a licensing regulation.
Another elegant part of this approach: it doesn’t overturn any occupational license. Instead, it would provide a real-time market test of the license.
Here’s how: If consumers find important value in the state license, they would demonstrate it by continuing to choose licensed professionals. This would show a revealed preference for state-licensed service professionals. On the other hand, consumers could demonstrate that they don’t find a particular service’s state license all that necessary after all.