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State NewsAn antidote to interest groups: sunrise review

An antidote to interest groups: sunrise review

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Occupational licensing has grown in recent decades. As recently as the 1950s, just 5 percent of workers needed a license to work. It was saved for professions like physicians, dentists, and lawyers. But from 1993 to 2012 Mississippi licensed 49 separate professions that do not require a traditional 4-year degree, which is more than almost any other state in the country. Today, 19 percent of workers need a license to work in the state of Mississippi. This includes professions like barbers, massage therapists, contractors, and tree trimmers.

While Mississippi has been a national leader in occupational licensing reform in recent years, the trend is for licensing to grow. States have implemented numerous mechanisms to reform licensing laws. The simplest way is to prevent these laws from being passed in the first place. For that, 22 states have turned to sunrise reviews, relying on an independent commission to measure the costs and benefits of proposed regulations.

The rationale behind licensing is to protect consumers. By requiring certain levels of education and training and requiring applicants demonstrate their skills to a board of professionals, states could ensure that professionals were of sufficient quality.

However, in practice, occupational licensing does have some drawbacks. The requirements for education and training can have significant costs, often posing barriers to entry into the profession. Reducing the supply of workers increases the prices they charge consumers, forcing people to pay more. Minorities are often hit harder by licensing requirements. Meanwhile, research tends to find that it has little effect on the quality of services that consumers receive.

Despite growing knowledge of the costs of licensing, it persists. Every year in legislatures across the country, bills are introduced proposing licensing for new professions. Licensing is the most common form of professional regulation, and once passed, these laws are notoriously difficult to repeal.

You can help reform occupational regulations. Please sign the petition below.

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If occupational licensing has these drawbacks that leaves so many worse off, why is it proposed? A new report from the Institute for Justice provides some insight. They reviewed sunrise reports for 15 states from 1985-2017. They found that at least 83 percent of the licensing bills were initiated by professional associations. These special interests sought licensing for economic interests and to raise the credibility of their profession in the eyes of the public.

Organized interest groups are effective at pressuring legislatures to pass laws that benefit them at the expense of society. One method that some states have adopted to counter this pressure is the sunrise review process.

Sunrise reviews provide a mechanism for states to evaluate proposed legislation before it’s brought to a vote. They are often used for professional regulation, to help state legislators assess the bills. Legislators often lack the capacity to independently research the costs and benefits of each bill, so they have to rely on knowledgeable third parties. Frequently, these knowledgeable parties are those professionals who stand to benefit from the legislation. The sunrise commission provides independent analysis for legislators, helping to balance the influence of special interest groups.

In practice, when a bill to regulate a new profession is proposed, it is first sent to the commission to review. The reviewers will detail the potential harms from continuing to not regulate the profession. They compare the costs and the benefits of regulation and have the ability to recommend less stringent forms of regulation that can protect consumers with lower costs. Before the legislature votes on the bill, the commission provides a recommendation accompanied by a detailed report of their findings.

How well do sunrise reviews work? In IJ’s review of the annual sunrise reports, they found that 54 percent recommended against licensure. An additional 20 percent of reviews recommended less stringent forms of professional regulation. In a vast majority of cases, the government believes that licensing would serve professionals’ interests, rather than the public’s interest.

The legislatures are free to ignore the recommendations of the sunrise review. When sunrise reviews recommend against licensing, legislatures follow them about 65 percent of the time. Legislatures are still twice as likely to pass licensing laws than sunrise commissions recommend, but sunrise commissions have a sizable effect on licensing.

This report also provides details about each state’s review process. Three features stood out as best practices. States that had strong, clearly laid out criteria had the most successful reviews. Another important aspect was independence. When the reviewers are removed from political pressure, the review reports provide much greater detail and recommend against licensing more often. Finally, states must be willing to devote time and resources to the reviews, to allow for in-depth reviews that truly investigate the costs and benefits of the proposed licensing laws.

These sunrise commissions can serve as an example for Mississippi. The Occupational Licensing Review Commission currently has the power to review all new and existing professional regulations. Giving them a more resources and a clear mandate to provide a sunrise review for all new proposed licensing laws would strengthen the OLRC. Doing so would protect Mississippians from needless red tape, while still encouraging regulation when necessary.

Occupational licensing is overwhelmingly sought by special interests who stand to gain from these laws, not the public who bears the brunt of the costs. Other states’ experience shows that sunrise reviews can be an effective measure to counteract the pressure of professional associations, helping legislatures to craft better policy that limits unnecessary red tape.

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