Professional licensing protects the public and protects incumbents. The two functions are often conflated and rarely separated.
The Dual Function of Licensing
Professional licensing serves two functions simultaneously, and the tension between them is the source of most licensing policy disputes. The first function is quality assurance: licensing requirements establish minimum competence standards that protect the public from the harm that unlicensed, incompetent practice could cause. The second function is market protection: licensing requirements restrict entry into the licensed profession, reducing competition among incumbents and allowing the incumbents to capture rents from the protected market position that reduced competition creates.
These two functions are not mutually exclusive — the same licensing requirement can serve both simultaneously. But they are not perfectly aligned: the licensing requirement that provides substantial quality assurance may also provide modest market protection, and the requirement that provides substantial market protection may provide minimal additional quality assurance beyond what a lower-bar requirement would have provided. The question for any specific licensing requirement is which function predominates — and whether the market protection it provides is justified by the quality assurance it achieves.
When Licensing Barriers Are Excessive
Licensing barriers are excessive when the quality assurance function does not require the entry restriction the licensing requirement imposes. The licensing requirement that excludes otherwise competent practitioners through requirements that test for attributes unrelated to the quality of the licensed practice — through educational requirements that reflect historical credential politics rather than current competency needs, through examination requirements that test knowledge that the actual practice does not require, through continuing education requirements that serve the interests of education providers rather than the practitioners' ongoing competency — imposes the market protection costs of licensing without the quality assurance benefits that justify those costs.
Identifying the Balance
Identifying whether any specific licensing requirement is appropriately calibrated to its quality assurance function requires analysis that neither the licensed profession nor the licensing body has an incentive to conduct: the regulated profession benefits from the market protection and has no incentive to advocate for reduced barriers, and the licensing body has developed an institutional identity around the standards it enforces. Independent analysis of the relationship between specific licensing requirements and the quality of the licensed practice — and specifically of whether less restrictive requirements would provide comparable quality assurance — is the analysis that most licensing debates lack.
Licensing requirements that cannot be justified by the quality assurance they provide are market protection dressed in the vocabulary of public protection. The beneficiaries are always the incumbents. The cost is always borne by the public — in restricted access, higher prices, and foregone innovation.
Discussion