A common assumption is that the workers and businesses regulated by governments oppose such rules. When it comes to occupational licensing mandates, however, the regulated industries and occupations are typically supportive of the regulations. People already working in licensed occupations benefit when the state forces their would-be competitors to get a license before operating legally. The mandates limit competition and reduce the supply of labor, increasing the price for the services provided by those who are licensed.
If more people understood this dynamic, lawmakers might be less supportive of occupational licensing. Efforts to scale back these laws, however, suffer from a dynamic that economists call “concentrated benefits and diffuse costs.” This theory explains situations where laws that cause more harm than good remain in place, even in a democratically controlled government. The reason is that these laws benefit a small special interest group — people who get the concentrated benefits — and this group will go to great lengths to protect those regulations and the benefits they provide. The harms, on the other hand, are diffuse. They do not impact the typical taxpayer or consumer in a significant way. In other words, the regulated industry faces strong incentives to preserve its benefit, while the average voter has little or no incentive to push for change. As a result, reforming licensing laws remains of little importance for most voters.
This is related to a theory developed by economist George Stigler, which he called “acquired regulation.” He wrote, “We propose the general hypothesis: every industry or occupation that has enough political power to utilize the state will seek to control entry.” Today, this is more commonly referred to as regulatory capture.
This occurs when an industry or occupation uses the power of government to benefit itself. People in these industries advocate for state lawmakers to create regulations, such as licensing requirements. These laws can be designed in such a way as to provide a competitive advantage to existing firms. For instance, proposed licensing requirements often contain “grandfather clauses” that grant licenses automatically to people already employed in the occupation. Incumbent firms also benefit when state-imposed regulations make compliance relatively more expensive for new firms seeking to enter the market.
There are many examples in Michigan showing that regulatory capture is common and that regulated industries work to protect their concentrated benefits by opposing reforms. In just the past few years, industry groups and occupational associations have proposed new licenses and regulations and successfully thwarted the loosening of some existing licensing requirements. In each case, the regulated industry clearly benefited at the expense of consumers and would-be competitors. Below are several examples.
Aspiring barbers need 1,800 hours of training in Michigan. Legislation was introduced in 2012 that would repeal this requirement along with a mandate that barbers attend an in-person college. Michigan Barber School Director Darryl Green said he was “in shock” that lawmakers were considering eliminating these requirements. He explained: “It does have a lot to do with public health. I’m not saying we are as important as doctors, but we are the closest you can get. We are turning this into the Wild, Wild West. … I’d like to see them get a haircut in a barber shop five years from now. It will be like rolling the dice.”
Raising the specter of an industry turning into the Wild West is a common refrain from groups benefiting from the limited competition and higher prices licensing requirements produce. It’s mostly a red herring, though. Nothing would prohibit barbers from logging 1,800 hours of training if they thought it was useful and gave them an advantage over their competitors. That few would do this training if it were not required suggests that it is not providing much value. The more likely reason the director of the Michigan Barber School is opposed to eliminating required training mandates is that his employer would lose the business of providing this training to would-be barbers.
In 2019, 2020 and again in 2023, Michigan lawmakers proposed licensing requirements on hunting and fishing guides. These new rules would mandate fees, CPR training, annual reporting and prevent anyone with a criminal record from the field. One of the sponsors of these bills noted that current hunting and fishing guides are driving the effort and said, “This is a package of bills that has been one of the main goals for many of our hunting and fishing organizations in this state for the last several years.”
Michigan repealed its licensing law for dietitians and nutritionists in 2014 after a state review committee found “lack of clear public health and safety benefits.” But in 2021, a bill to reestablish these licenses was proposed. It would require dietitians and nutritionists to obtain a college degree (nutritionists would need at least a master’s degree), complete 1,000 hours of supervised practice, pass exams, pay fees and take continuing education courses.
People currently operating in these fields — many of whom would be automatically granted a license — supported the imposition of these requirements on others. Ann Hoffman of the Michigan Academy of Nutrition and Dietetics said: “Licensure ensures the most qualified, educated and well-trained professionals will treat chronic illness and disease. There are no alternatives to state regulation of the occupation that adequately protect the public from risk of harm which is real in Michigan.”
In 2020, the Legislature approved more regulations on funeral home directors. The new law required people working in these fields to pass state and national exams and accumulate continuing education hours to maintain a license. It also makes it harder for individuals from other states to get licensed in Michigan. As noted in media reports, the representative who introduced the bill is a funeral home operator. Interest groups representing funeral homes and schools offering mortuary science courses supported the bill. It was signed into law in December 2020.
Those groups will be the chief beneficiaries of these more stringent requirements. They will result in more revenue for schools offering mortuary science courses and less competition for existing funeral homes. Individuals and businesses with a license already would be grandfathered in, so most of these new requirements will not apply to them, only to their future competition.
A Michigan law requires property managers working for someone else to have a real estate license. An attempt to repeal this requirement was defeated, with the Michigan Realtors Association, a group representing licensed realtors, leading the opposition. Restricting property management services to license holders reduces supply and limits competition for realtors.
Associations representing musical therapists supported a new licensing requirement for the occupation in 2019. The bill would have mandated a college degree, 1,200 hours of clinical training, a board exam and hundreds of dollars in fees and testing costs. It stalled in committee and was not made into law.
Michigan statute requires fire sprinkler installers to have a contractor’s license. A 2019 proposed law supported by fire protection associations would have made the mandates much more stringent. The bill, which did not pass, would have required a four-year apprenticeship, 8,000 hours of practical experience, 280 hours of classroom time and hundreds of dollars in annual fees.
Food delivery drivers would have had to obtain a certificate to practice in Michigan if a 2022 bill had passed. They would have to pass a test and possibly receive training as well. The sponsor of the bill owns a chain of restaurants that primarily offer dine-in services.
A requirement that solar panel installers obtain an electrician license was introduced in the Michigan Legislature in 2021. The bill passed the House but stalled in the Senate. It had broad support from special interest groups representing licensed electricians.
Naturopathy is treating patients with natural remedies, such as vitamins, herbs and organic food, as well as coaching clients in self-healing, such as exercise and lifestyle change. State and national groups representing currently practicing naturopathic physicians advocated in 2018 to establish a state license for this practice, which would have required a college degree, fees and testing. The bill passed one chamber of the Legislature but did not progress further.
The Michigan affiliate of the American College of Nurse-Midwives developed a bill to require professional midwives to obtain a state license to practice. The Legislature approved and it was signed into law in 2017. The licensing requirements mandate that midwives pay a $650 upfront fee, a $400 renewal fee, complete an accredited training program, obtain 30 hours of continuing education and more.
Lawmakers have repeatedly tried to loosen the occupational restrictions on nurses in Michigan, only to be stymied by groups benefiting from the current laws. In 2020, for example, a bill passed the Legislature that would have had Michigan join 38 states in a nursing compact. The compact would make it easier for hospitals to hire nurses with experience in other states. It was opposed by the Michigan Nurse Association Board and some unions and ultimately vetoed by Gov. Gretchen Whitmer.
Michigan has some of the most restrictive rules on nurse practitioners in the county. While other states let highly trained nurses write prescriptions and run their own medical clinics, Michigan law severely limits their practice. When lawmakers tried to loosen these rules and allow nurse practitioners to work independently, the state medical associations — comprised mostly of physicians who benefit from these restrictions on nurses — came out in opposition.
Rose Ramirez, a physician and former president of the Michigan State Medical Society, said this about the effort: “The best health care teams are physician led. I worry about the safety of the patients in our state who deserve to have well trained physicians supervising their care.” These rules were relaxed during the COVID-19 pandemic. But Gov. Whitmer then reinstated them, against the advice of her health advisor.