Ed Timmons, Founding Director of the Knee Regulatory Research Center, discusses the impacts of universal recognition, a licensing reform he sees “popping up in a number of states” over the last few years. He shares the benefits of universal recognition—from labor force participation increasing to unemployment numbers decreasing. As he explains, when you move to a state with universal recognition, the new state recognizes the license from the state you left when you meet certain requirements.
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Ed Timmons, Founding Director of the Knee Regulatory Research Center, discusses the impacts of universal recognition, a licensing reform he sees “popping up in a number of states” over the last few years. He shares the benefits of universal recognition—from labor force participation increasing to unemployment numbers decreasing. As he explains, when you move to a state with universal recognition, the new state recognizes the license from the state you left when you meet certain requirements.
GL Solutions helps governments run, grow and adapt. For more information about GL Solutions and our modernization service for regulatory agencies, visit us on the web at www.glsolutions.com. Or connect with us via Facebook, Twitter or LinkedIn. Reach our host, Sam Hardin, at hardin@glsolutions.com. We look forward to hearing from you.
Well, thanks, Ed. Thanks for joining and talking with me today. So first off, why don't you just, you know, introduce yourself and tell us who you are and what you're working on and field study.
Ed Timmons:Thanks, Sam. My name is Ed Timmons. I'm a service associate professor of economics at West Virginia University. And I'm also the founding director of the Knee Regulatory Research Center. Our mission is to produce high quality research on the effects of government regulation, and to communicate the results of that research broadly to inform real world policy change. And our main focus areas, and one area that I've been particularly passionate about is occupational licensing. I wrote my dissertation on the subject about 15 years ago. And we also do work on scope of practice for licensed professions. We also do research on the effects of certificate of need regulations, as well as we're now piloting research on the effects of criminal justice regulations on people's access to the labor market.
Sam Hardin:Okay, so I'm making an assumption here, but, you must be interested in economics or the labor industry from kind of a macro level. That's probably where your interest kind of came in to getting at the Knee Center and West Virginia University. Okay, well, let's talk about what you're working on lately. And some of the recent studies and articles that you've come out with. I've been following them. I've been reading them. I'm really interested in because I work in this space. But I think also it's important for the general American workforce population to be kind of aware of what's going on and how it affects them. So tell me what you're working on.
Ed Timmons:Yeah. So I recently put out a new working paper that looks at the effects of universal recognition. And just to take a couple of steps back. I mean, of course, occupational licensing affects a significant chunk of the workforce. Now, it's estimated that anywhere from one in five to as many as one in three workers in the United States has to get a license to work. So this affects professions like lawyers, barbers, cosmetologist, geologists, even florists, depending on the state. So there's big variety with respect to how occupations are regulated on a state by state basis. And there can be some significant consequences associated with those regulations. Of course, the laws are passed with the stated purpose of trying to create a minimum quality standard for these workers. But of course, by imposing these restrictions, there's also some costs and consequences. And one of the costs and consequences of licensing is that licenses aren't portable. For the most part, driver's licenses are relatively portable from state to state. I recently moved from Pennsylvania to West Virginia, and it wasn't too painful for me to transfer from my license from Pennsylvania to West Virginia, I didn't have to take any tests, I just had to fill out some paperwork and the process was taken care of. But occupational licenses typically don't work that way. Typically, if you move, I mean, let's say I was working as an engineer in Pennsylvania, and had a license. My license wouldn't necessarily transfer to West Virginia. And same goes if I was a certified public accountant or a barber or any one of the large number of licensed occupations that there are in the United States. It's been estimated by another team of researchers that occupational licensing restricts mobility by 7%. So there was a research paper that Morris Kleiner and Jana Johnson put out. It's a couple of years old. But they found that licensing restricts mobility for individuals that are looking to move from state to state. So what I did with my research paper with Kihwan Bae, my colleague at the Knee Regulatory Research Center, is we estimated the effects of an important reform that has been popping up in a number of states over the last couple of years and it's called you universal recognition. What universal recognition does is that if I have a license, and I move into a state that has universal recognition, and that there's now 21 states that have passed some form of universal recognition, my license will be recognized. I generally have to meet some requirements. I have to have a license that's in good standing. And I have to have at least a year of experience. And there's some variety from state to state as to what those requirements will be. But for example, Ohio is one of the states that recently enacted the reform earlier this year. If I were a licensed worker, and moving into Ohio, my license would would transfer. I wouldn't need to meet a lot of the additional requirements. And those additional requirements can be quite burdensome. I might have to take another test. I might have to complete more training. There might be a variety of hurdles, I might need to, to jump over. Even if I'm experienced for decades, I'll still have to meet those requirements in order to be able to continue working in my chosen profession. So no, that's in a nutshell the crux of the reform that we analyzed in the paper.
Sam Hardin:Okay. And just to make sure I'm understanding correctly, because one of my questions was how does this get enacted in all of these states? And so how I understand it is, interest groups or law firms will will bring these statutes to senators. And senators will bring it to state legislative sessions and call for that. And then that's how it gets enacted in the States. And from what I understand, these interest groups or these law firms have to go state by state by state by state. And so that's why, you know, we're at 21 right now. And I think it first initially was brought about in 2019. Is that correct? In the state of Arizona, or?
Ed Timmons:Yeah, no, that's that's an excellent point. I'm glad you raised it. Arizona was the first state to pass a specific variety, what I would consider to be the more effective flavor, if you will, of universal recognition. But the first state to pass the reform is actually New Jersey. New Jersey passed the reform. It didn't receive much fanfare. It was just kind of, you know, hey, here's a bill, big deal. But it was an important piece of legislation. But that legislation actually passed in 2013. And, you know, there are some differences with respect to universal recognition, as I mentioned, with those specific requirements that workers need to meet in order to meet the requirements of the legislation.
Sam Hardin:So it seems like it's kind of gained some traction as of late. What are your thoughts? Maybe COVID brought about some of this. Like the need for a lot of people moving around, moving into different states, kind of bearing the burden of reapplying or going through that process for their occupational licensing?
Ed Timmons:Yeah, I mean, I think there have been a couple of things. I mean, I think the the study that Janet Johnson and Morris Kleiner put out, I think was important, because it was the first study that I think effectively quantified how licensing might be restricting mobility from state to state. But, there have been some other landmarks as well. I mean, one that I oftentimes point to is in the summer of 2015, the Obama administration put out a white paper. And it was a really well done piece that summarized things that us economists have known about occupational licensing for a while now. And I think prior to that report, for whatever reason, this issue was more of a right side of the aisle issue. But with the publication of that report by the Obama administration, I think licensing came on the radar of both sides of the aisle. So I think that was really critical that that report, made it more of a nonpartisan issue. And I think you're spot on Sam. You know, with COVID for a variety of reasons, there have been some frictions in the labor market. And a lot of employers have had difficulty finding skilled workers. So I think legislators are open to thinking about how can we remove some of these frictions? If we have workers on the sidelines that are teachers, let's say, and because our process of recertifying them is too onerous, and they're not working, that doesn't seem to be the right strategy. I mean, if we can somehow bring those skilled teachers, and all of the skilled licensed workers that might be sitting on the sideline, back into the labor market. And I think there's also been some recognition of this from the various branches of the military, given the fact that veterans and their families and active military duty, families move quite a bit. So they feel the bite of occupational licensing, more so than civilians. So I think there's been some recognition, and that's something that Michelle Obama was very passionate about. And very many other elected officials have shown interest and trying to ease that, and for the most part, for veterans, that issue is just about there. But for the rest of us, as I mentioned, you have 21 states that have passed some form of recognition, some better than others. But it's still not a problem that's completely solved, you still have people that they move, and they're not able to put the skills that they have to work.
Sam Hardin:You know, I'm from Oregon. And, you know, I had a lot of friends that would move to Vancouver, just right across the river from Oregon. And so a lot of them would live in Vancouver, Washington, but go work in Portland, Oregon. I could see how it gets a little annoying or burdensome to have to then transfer a license over when it's like, well, every single day, I go to work just over that bridge, over in Portland.
Ed Timmons:Absolutely.
Sam Hardin:Yeah, that's another example. So we've talked about it a little bit, but if you could outline some of the benefits of universal recognition? What are some of the problems being solved and positive effects and why you support it? You talked about enabling people to work in different states and lowering some of the barriers to entry there for the workforce. But could you speak on that a little bit?
Ed Timmons:Yeah, absolutely. So in the in the working paper that we put out, we find that when states pass universal recognition that their employment rises by a full percentage point. So it's a pretty significant and large effect on the folks that are working in states to pass the reform. And the reform seems to operate through a couple of different channels. First off, it makes it easier for individuals that are new residents. So if they're moving in from another state, maybe they'll be more inclined to want to move. So we did estimate that states that pass universal recognition had almost a 50% increase in in migration. Migrations not big, but as a percentage, it was a pretty large effect, in terms of in migration. But what the reform also does is it has benefits for folks that are already living in the state. So there could very well be folks that have valid licenses. But because they find the existing recertification process to be too burdensome, or they don't know where to start, they're not participating in the labor market. So you could very well have folks that have a valid license from their previous state, and they have years of experience, but they're not able to work in their new state, because their license doesn't transfer. So you could very well have folks that are out of the labor force entirely, come back into the labor market, because now their license will in effect be valid, and they'll be able to work under this new reform. Also, you could very well have folks that are underemployed. You could have folks that are working perhaps in a field that they weren't previously licensed in but they figured, you know, I don't really want to go through this whole process. So let me go ahead and work in something else. Let me maybe get a gig as an Uber driver or what have you, rather than go through the whole process. And we in fact find that labor force participation goes up in states that have passed this reform. And we also find that unemployment goes down. So it makes it easier for those that are looking for work to find work. And we suspect that that's because, well, you know, now, what I was doing for years and years, in my previous home state, I can continue to do without meeting the typical barriers and passing the exams and so forth, that I used to need to complete in order to continue working.
Sam Hardin:Yeah. Okay. And it would probably be pretty impactful for certain positions. I'm thinking about nurses and teachers, where there's a shortage. Or, some states are just having a hard time filling a lot of those positions or more, you know, rural states, it's like, you know, that they have a hard time finding teachers and nurses, and I'm sure many other, you know, occupations, I'm just not thinking of him right now. But, you know, this kind of supports that mobility. I moved from a couple states, and I actually got my wallet stolen, and I lost my license. And so when I moved to the state of Montana, it was a driver's license from another state, but I had recently moved, and so I had to go back and take the driver's test, written and the driving test. And so, you know, the driving test is like, okay, I got this. This is pretty easy. But, you know, the written test, I was like, gosh, you know, I don't, you know, I have to go back and kind of read the book to understand what's going on, and it took me some hours. So you can imagine that on a greater scale, right? Whether it's continuing education hours or some of these tests, like the Board of Accountancys. Those tests are not easy. I could definitely see the burden there. So the way I understand it, there's different kinds of factions. I don't know if that's the correct word within universal recognition. And, the way I understand it, because these are being enacted by states, each state will include clauses within the legislation that kind of differentiates how it's enacted in the state. And so, I tried to break it up into three categories. And I might be wrong about this, but so you can correct me. But some states that have enacted universal recognition, have the substantially equivalent or scope of practice, you know, kind of connector there for states. And then others, which can be crossed over, but also have the proof of residency. So you have to show that, yes, I live here for more than just snowboarding or vacationing. And then some states are, are pretty much open, unilaterally come on in as long as you've been doing this for a year, and, and you were licensed on the state, go for it. So can you kind of help me distinguish those those
Ed Timmons:Yeah, absolutely. And you're spot on. I mean, different? that's a great way of separating out the the various types of reforms that we've seen. Yeah, so a number of states like New Jersey and Pennsylvania, and several other states that have passed the reform, they have language that says that your requirements or your license has to be substantially similar. So I would say that this makes the reform a little bit less effective, because there can be significant differences from state to state with licensing requirements. One that sticks out in my mind, and one that I've studied pretty extensively is barbers. There are still states that require barbers to complete as much as 1,800 hours of education and training. Whereas, if I'm a barber in New York, I can become a barber in a little less than 300 hours. So you know, pretty wide differences. And if that language is there, and a board is interpreting the law, it could very well be that if I'm a barber in New York, I really can't move into Pennsylvania and keep working, I'm going to have to potentially complete additional requirements in order to be eligible for this reform. The other variety that you mentioned is a residency requirement. And although Arizona doesn't have the substantially similar, and that's what really separated Arizona at first, from the other states that have passed this reform, Arizona does have a residency requirement. And so what this would say is that, you know, before you take advantage of this reform, you have to move here first. So that might create some disincentive for folks that are thinking about moving into the state because I have to move there before I've secured employment. You know, I think folks would probably prefer to have the job first, before they go ahead and do the move. So you know, that might provide some disincentive for folks. And the case you mentioned, the folks working across the border, well, those folks would be out of luck. They wouldn't be able to make use of the reform because they're living in Washington or Oregon, or vice versa. And, you know, they're not residing in the state that passed the reform. Oregon and Washington unfortunately, don't have the reform as as of today. There's still other states, like Iowa, also Missouri, Idaho. They say that, if you have a license in good standing, and you have a year of experience, that your license will transfer. You'll be eligible for the reforms. So you don't have to be a resident. You don't have to meet substantially similar requirements. And there's also states that have now included language. Missouri is one of them. Iowa's one of them. Ohio as well. I think Mississippi has this language as well where they'll say that, even if you don't have a license, but you've been working in this profession for at least three years, or at least five years, it varies from state to state and you you can verify you know that you've been working in that profession in some way, that you'll also be eligible for a license. So they're, in effect, accepting experience, as is often done with licenses. In some cases, they'll have an apprenticeship pathway to obtain the license. Essentially, they're saying that if you have that relevant experience, and you've shown a good track record, and working in this profession, that you can begin working in Iowa or Missouri or one one of these other states that has that flavor. But yeah, there is pretty significant differences. One other difference I'll note is that and it's been popping up more recently, is states are excluding some professions from the reform. And unfortunately, teachers is one of them that gets excluded a lot from the reform. Not to say that no states allow teachers to take advantage of the reform, but teachers is one profession that oftentimes gets excluded. And in some of the more recent states, some of the medical professions are left off of the reform. Most of the states that have passed the reform, I think it's about 15, do allow medical profession professionals to take advantage of the reform. And if there's any profession where it makes sense, where, you know, the standards are pretty uniform, not all of them, but for many of the medical professions, they're pretty uniform from state to state. Universal recognition, probably, if you're gonna make any argument against it, the standards are pretty comparable from state to state. So this seems like the right type of reform, particularly with COVID, and, you know, some of the pockets and continuing shortages of medical professionals in a number of areas. It seems like a no brainer. But it's been getting excluded from some of the states that have recently enacted the reform.
Sam Hardin:Why do you think like teachers are being excluded?
Ed Timmons:I think. And, you know, I think it could very well be that the professional associations for whatever reason are concerned about competition. But I mean, it's, it's a shortage situation. It's not it's not as if these workers are going to take their jobs. And, you know, our research shows that we couldn't really observe a consistent negative effect on wages. So it doesn't really seem like the reform negatively impacts the workers that are already licensed. But, you know, for whatever reason. Or could very well just be, you know, we had to jump through these hoops, so they should have to jump through these hoops as well. You know, I fall into that trap myself sometimes as a doctorate. PhDs have to jump through a whole bunch of hoops; I had to do it, they should have to do it. But there has to be some learning. I mean, if the the old way isn't the right way. And these folks can show their competency in other ways. You know, why not? Let them do it, especially when there's a shortage.
Sam Hardin:So maybe we call it a little bit of protectionism. In state kind of wanting to protect their, their people in state.
Ed Timmons:Yeah, I mean, I've testified on on these reforms in a couple of states, and, you know, the folks that are testifying against the reform are the professional associations. You know, those are the folks that are really the loudest voices in the room against the reform. And you have groups that are in favor, like, you might have the state's Department of Commerce and researchers like me that have looked at this issue. But, you know, definitely the professional associations oftentimes, are the folks that are most opposed to this type of reform.
Sam Hardin:So, with that, I want to kind of zoom out a little bit, because there are different things going on with the US under the realm of whether it be universal recognition, some of them are called interstate compacts. And then there's also I know, with working with a lot of these boards, and in servicing them for IT needs, there's things called reciprocity agreements. And so how does universal recognition differ from those two? And if you could speak to that first.
Ed Timmons:So I mean, I'll start with reciprocity. And this is essentially the status quo. With reciprocity, a state could enter into a reciprocity agreement with another state or a group of states. And essentially, the states would have to decide that our requirements seem to be about the same. And if you accept our licensed workers, we'll accept yours. So I mean, if let's say that West Virginia had a reciprocal agreement with Pennsylvania for barbers, then barbers would be able to have their license recognized in West Virginia and vice versa, if they're moving from Pennsylvania to West Virginia, or West Virginia to Pennsylvania. This process is subjective. And it essentially requires those individual states to identify those other states. It can be time consuming. At the Knee regulatory Research Center we gather licensing requirements on a state by state basis. It's not an easy thing to do. You have to read through those statutes, and that data is not widely available or accessible. We're trying to improve that. But you know that that data is not all that great. So reciprocity agreements are limited as they are for a variety of reasons. Licensing requirements vary. It can be hard to get that information. And the boards themselves very well might not necessarily have the incentive to do it. Compacts are a relatively more recent reform that we've seen. Probably the compact that has been most successful is the Nurse Licensure Compact. I think the majority of states now have passed the revised E-Nurse Licensure compact or enhanced Nurse Licensure Compact. An issue with compacts, though is that it's occupation by occupation. So I mean, it's been estimated that there are as many as 1,000 licensed occupations. So we could be waiting decades for there to be a compact for every single profession. And I think compacts work less well when you have differences in requirements across states. Like one compact that I'm very, very skeptical about is the compact for cosmetologist because cosmetologist, licensing requirements vary from state to state. And what I worry about is that there could very well be movement upwards in education requirements, in the name of portability. But are you potentially excluding folks from wanting to be a cosmetologist, if all of a sudden we say that every single state has to require 2000 hours, in order to be eligible to participate in this compact. So cosmetology licensing requirements can be quite a bit lower than that there's many states that only require 1000 hours. So, you know, I worry about the the amount of time that it would take to have a compact. There's been some anecdotal evidence that even for the Nurse Licensure Compact, that people don't really understand how it works. It can be difficult for licensees to navigate that process. So I would say compacts are also less effective than universal recognition. With universal recognition, you're saying, we're simply going to accept other states licenses. We're going to recognize that other states have economies that function and work very well. You don't see examples of really bad barbering in New York relative to other states, even though the licensing requirements are quite a bit lower. People in New York seem to be getting by just fine. We're going to we're going to give New York credit. We're going to respect the work that the licensing authorities in New York did. And if people are working as barbers and doing good a job, we're going to accept that license. And we're not going to do it one by one, like you have to do with a compact. We're simply going to say, if you're a licensed worker, we're going to recognize your license. So for that reason, I think universal recognition is the best way to go about doing it. You're hammering out every single licensed occupation at once. And you don't have to go through the process of a compact, because compacts themselves have additional requirements. There's additional bureaucracy that gets created by the compact. So it seems like it's replicating in a less effective way what you're able to do with universal recognition. Universal recognition to me makes the most sense.
Sam Hardin:Well, to your example. So let me make sure I understand this correctly. So for your example for the cosmetologist, for the joint compact version, you're basically taking a group of states that want to, you know, join this compact, and they're saying, or it could be that they take the most stringent of the states for the requirements and say, Well, you know, okay, Idaho, just, for example, Idaho is the most stringent on cosmetology requirements. So we're going to enact that for all of these states. And, then that might not be really needed. It just may be they're the most, you know, outspoken, I guess, maybe about it or, you know, most kind of organized, I guess around it. And so that becomes the compact requirements when really maybe it's not needed.
Ed Timmons:That's exactly right. I mean, the professional associations have everything to gain from the licensing requirements being more stringent. And in some cases, the the folks that sit on licensing boards own schools that are benefiting from requiring these aspiring workers to complete a minimum amount of education and training. In economics, we talk about the theory of concentrated benefits and dispersed costs. The professional associations benefit a lot from the status quo, and they have for many, many years. All of us as individual consumers, we feel it but we only feel it a little bit. We have to pay a little bit more for haircut. We have a little bit less choice with respect to the providers. So you and I well, I go to the legislature and lobby because I really...not lobby but to speak about these reforms because I'm very passionate about them. But most folks, and understandably so because their costs are so low, they're not going to be engaged in it. It's complicated. You know why would an individual spend a lot of time. They've got a lot more on their plate to worry about. So, you know, as individual consumers, we're not going to go and say, hey, you know, we don't want cosmetologist all have to complete 2,000 hours of education and training, because it's small to us. But to those cosmetologist, it's a big deal. And they're gonna always be the loudest voice in the room, whenever it comes to making any kind of reform.
Sam Hardin:And so also, one of the things I understand about universal recognition, comparatively, is that, you know, it's unilateral compared to joint compacts where it's bilateral and the reciprocity agreements is bilateral meaning, you know, both states have to agree. Which, you know, you think about it, as, you know, going back to your driver's license example, it's like, unilaterally states say, you know, for the most part, say, you know, if you have a driver's license in another state, you can use our roads, it's totally fine. And so that's kind of another example to, say, universal licensing, that unilateral is just making it easier.
Ed Timmons:Absolutely.
Sam Hardin:Let me ask you, so if you had to, so let's say, it seems like this is becoming more bipartisan, and you know, it's gaining traction, 21 states, you know. It's growing. If I forced you to poke a hole in universal recognition, you know, what are some of the weaknesses, or what is a weakness? Or what is maybe troublesome to you, if you had to choose one, or maybe an opposing side that you, you know, have heard and may have legs?
Ed Timmons:I mean, I think something that oftentimes gets said is that, well, you know, this state is different. You know, our state is unique. And you know, that's why our requirements are different. I mean, that's an objection that oftentimes gets made. And, you know, I think my counter argument to that would be well, you know, why is it that in 49 other states in DC, you don't have any evidence whatsoever of people receiving lower quality service, or there being more incidents of harm? You know, I think that there needs to be and I think, you know, part of it, as I mentioned before, is that that data is scattered. You know, it's all over the place. And we're trying to fill in the gaps. And there have been other efforts as well. The National Conference for state legislatures, they have a database of 30 occupations. The Institute for Justice, they publish every couple of years, a report on occupational licensing requirements for a little over 100 lower income occupations. You know, we're looking to take that one step forward. We have 50 occupations right now that we released earlier this year. And our objective is that in 2024, we'll have a longer list of professions, and we're going to update it every year, so the state legislatures will have access to that information. And they'll be able to see, well, you know, does it really make sense for us to have the most strict requirements? You know, Louisiana, very famously, is the or maybe infamously, is the only state that licenses florists in the entire country. You know, does it make sense to have a license for a florist, if every other single state doesn't have it? And you know, the arguments that get made are: Well, you know, it's going to put all the small florists out of business. Well, small florist exists in West Virginia, and every other state. They're doing just fine. So yeah, I mean, and coming back to the the objections about universal recognition, I think I'd really like to see all the states that passed it, follow the model of states like Iowa and Idaho, where they simply say that, if you have a license in good standing, we'll accept your license. You don't have to be a resident. You don't have to meet substantially similar requirements, and even offering an alternative pathway as some of the states have done. Because there are occupations that aren't universally licensed like florists. Louisiana has not passed this reform. But if somebody was moving from another state into Louisiana and they really were passionate about florist design, they wouldn't be able to do it. And, you know that would be unfortunate for those individuals and also for consumers. They wouldn't be able to purchase things from that provider.
Sam Hardin:So the data well informed data will help you know, kind of bring to light the need for universal recognition and basically the mobility of licenses. And your research center will continue that data and continue that mission forward and bringing that forward for us to review. And I'm excited to see what you guys have coming out and continue to review that. Ed, thank you so much for for talking with me today. I'll wrap it up there.
Ed Timmons:Thank you so much, Sam. Hope you have a great New Year. Have a great holiday.