Why Hawaii’s licensing laws need reform

from Grassroot Institute of Hawaii, December 21, 2022

State lawmakers should consider reducing the burden that Hawaii places on workers via its occupational licensing laws, Grassroot Institute of Hawaii Policy Director Malia Hill told radio host Johnny Miro during his Dec. 18, 2022, show.

Hill said Hawaii is the fourth-worst state in the country when it comes to requiring occupational licenses, according to a study by the Institute for Justice, a public interest law firm based in Arlington, Virginia. 

Hawaii has licensing requirements for about 63% of the lower-income jobs examined by the Institute for Justice, and its requirements to obtain those licenses are arduous. In fact, for the jobs it does license, Hawaii actually has the highest occupational licensing burden in the country. 

Obtaining an occupational license in Hawaii involves spending an average of 972 days in education and experience, versus the national average of 350 days. And the average fees associated with a license in Hawaii are $506, versus the national average of $284.

Hill explained to Miro that occupational licensing hurts low-income earners, who must overcome these hurdles before they can start working. 

“I’m not talking about doctors and dentists and lawyers here,” Hill said. “We’re talking about floor sanders and florists and hair braiders and barbers.” 

Hill said 32 states don’t require a license to braid hair, 14 don’t require a license to be a makeup artist, and 18 don’t require a license to be a shampooer — “but all three of those professions require licenses in Hawaii.”

Miro and Hill also discussed how licensing requirements for doctors and nurses might be contributing to Hawaii’s healthcare shortages. “Too much regulation, too high a licensing burden, reduces the number of doctors and nurses in practice,” Hill noted.

One reform Hill would like to see is universal licensing recognition, which would mean recognizing other states’ licenses as valid, regardless of their license requirements, and letting people with a valid license from other states practice in Hawaii.

She said Hawaii should also look into interstate licensing compacts, which are more formal agreements established between states, to solve Hawaii’s healthcare problems. 

And if the Legislature is serious about pursuing that issue, Hill said, “Why not look at licenses for other lower-income professions? It would be a good way to help the economy advance worker freedom.”

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TRANSCRIPT

Johnny Miro: It’s time for Sunday morning public access programming on this H. Hawaii media radio station. Good Sunday morning to you. Great to have you live. 

I’m Johnny Miro on our public access programming each and every Sunday at 9 a.m. on our six Oahu stations at 101.1 FM, 101.5 FM, 103.9 FM, 107.5 FM, 96.7 FM and 97.1 FM.

Joined once again by a member of the great crew at the Grassroot Institute of Hawaii. This time would be, once again joining us, policy director Malia Hill. Good morning to you, Malia.

Malia Hill: Good morning. Thank you for having me.

Miro: Yeah, very interesting topic. Because you would figure — what? You need licenses. It makes everything better. It’s safer. But is it burdensome? And do we actually need each and every profession within the state to have a license? 

As Keliʻi Akina, the president of the Grassroot Institute, recently wrote [in] a column, Malia, recommending that many of Hawaii’s occupational licensing laws be reformed or repealed. 

Now, can you tell me a little bit about what occupational licensing laws are in the first place?

Hill: Absolutely. You know, effectively, a license is like a permission slip, you know, from the government that you need in order to legally work in certain professions. 

Now what the license requires — it varies depending on the profession. But generally, as a rule, they’re required by law, and they involve some amount of training or education, an exam or multiple exams and fees, obviously.

So, you know, we know about licenses when we’re talking about doctors and dentists, things like that. But occupational licensing is much, much broader than just, you know, doctors and nurses and medical licensing — what we’re familiar with.

You know, depending on the state, there can be licenses for everything from nurses to interior decorators to florists. It’s a really wide category.

Miro: So, thanks, Malia. These are laws that limit who can do certain jobs, correct?

Hill: Exactly. You know, it’s not enough that you have the skills to do something like braid hair or apply makeup. You also have to be able to afford licensing requirements. And that can be hundreds or thousands of hours of education — which also costs money — and then again you have the fees and requirements set out by the state. 

If you try to do, you know, hair braiding, flower arranging, whatever it is, without a license, you can get fined. Sometimes you can even end up in jail, depending on, you know, what the law says. And, you know, these are really hard on lower-income workers, especially.

Miro: OK. Do most states have similar laws, and if so, how do Hawaii’s occupational licensing laws stack up against those other states?

Hill: Well, it’s true all 50 states and the District of Columbia have some kind of licensing laws, you know, affecting a wide variety of occupations, but it’s not exactly equal across every state. 

So, the Institute for Justice does a survey of every licensing regime in the country, and their most recent one just came out just a month or so ago, and they found more than 2,700 licensing requirements for 102 lower-income jobs across all 50 states at the district [level].

Now, we’re not — again, I’m not talking about doctors and dentists and lawyers here. We’re talking about floor sanders and florists and hair braiders and barbers, that kind of thing. 

Anyway, when they do the state-by-state comparison, they found that Hawaii was the fourth-worst in the nation for occupational licensing. 

Now, Hawaii had licensing requirements for about 63% of those lower-income jobs, about 64[%] of them, and the highest overall burden. That means 972 days, on average, in Hawaii [is] lost to education and experience to get that license, as opposed to the national average of about 350 days.

And then the average fees associated with a license — in Hawaii, it’s $506 versus an average of $284. 

So it basically means Hawaii’s fourth worst overall, and the worst in terms of the burden put on people who are trying to get a license.

Miro: We’re speaking with policy director Malia Hill from the Grassroot Institute of Hawaii — grassrootinstitute.org for more. 

And what’s the alleged purpose of these laws, Malia, versus their practical effect?

Hill: Well, you know, whenever someone proposes a license or, you know, explains why licenses for this or that job need to exist, we’re always told this is about public health, public safety, protecting the public. 

But it’s pretty obvious that there’s more to it than that — that’s not really the sole purpose. Because, you know, some of these professions that have license requirements, you can’t really make a strong claim that they have much to do with health or safety.

You know, in Hawaii, travel agents and bill collectors have to be licensed. And, you know, you’re not looking at a public health issue with travel agents. 

So it’s really more like protectionism — a way to keep competition out of the market — and it ends up denying some people the right to work.

Miro: Sounds like you’re saying these laws do little to protect the public safety or welfare, more so from unscrupulous professionals. That’s what it sounds like.

Hill: Yeah, basically what I’m saying is that, you know, if you’re trying to protect the public, licensing laws — especially for these specific kinds of occupations they’re talking about — are really not the right tool. 

You know, there’s less restrictive ways to protect the public from fraud and unscrupulous actors, whether they’re licensed or not, because, you know, there’s no guarantee that a license is going to keep you from an unscrupulous person. 

So the idea that protecting the public is the reason to have a licensing law, it just doesn’t make sense.

For example, you know, there’s a lot of variation across the country between different states for their licensing requirements. Some states have been taking away licensing requirements for, you know, hair braiding or florists. 

And so, you know, there’s 32 states where you don’t have to have a license to be a hair braider; 14 states where you don’t need a license for a makeup artist; 18 states where you don’t have to get a license to be a shampooer.

All three of those things require licenses in Hawaii. But, you know, in those states, you know, no one’s avoiding salons because of the threat to health and safety. You know, this health and safety argument, it just really doesn’t hold water.

Miro: Yeah, it doesn’t sound like it. Alright, so the pros, the cons of occupational licensing, that’s a discussion this morning. 

Malia, what about the economic downsides — what is the evidence against them?

Hill: Well, you know, I think that one thing that we really need to remember is that when we’re talking about who suffers most under licensing, it’s really the people who — the workers who would have to go through this, overcome this burden, this barrier, before they can even start earning money and start working. 

You know, I’ve been focusing on cosmetology, so I’m just going to stick with that. You know, the average cost of cosmetology school nationwide is $16,000.

So if you’re in Hawaii and you want to braid hair — and you don’t even go to cosmetology school to do that, you learned it from your auntie or, you know, a family member because it’s, you know, sort of a cultural family thing — you still need to go, you need to spend $16,000 or more to get that degree so that you can get your cosmetology license. 

And so, you know, licensees start out with more education debt. And, you know, they’ve been doing research, and they found that licensees don’t even really make back the full cost of their licenses through higher wages than those that don’t have them. It’s just a bad financial deal. 

And that’s just, you know, how it hurts the individual worker. You could also make the argument that it’s bad for our economy as a whole. 

You know, licenses are keeping people out of work, and they prevent them from opening small businesses. They’re just a tax on a lower-income worker who, you know, wants the freedom to just make money and make a living for themselves.

You know, there’s a 2018 study that estimated that licensing costs the national economy about 2 million jobs each year. So, you know, in a small sense, we’re hurting the individual person, the individual worker. And in the larger sense, it’s not a good thing for our economy.

Miro: OK. Malia Hill from the Grassroot Institute of Hawaii, grassrootinstitute.org for more. 

And here’s the big question: Who oversees licenses? You know, who gets to determine that if you’re a hair braider, you have to pass an exam or pay some kind of a fee? Is that the Legislature, the governor’s office, someone else? Who is it?

Hill: Well, you know, the actual decision about, you know, “This should have a license, this should not,” generally comes from the state Legislature. 

For example, in 2019, the Hawaii Legislature passed a law to regulate midwives, which basically introduced a new kind of licensing for midwives. 

But in terms of, you know, who decides what the requirements are and oversees all that, that actually comes from appointed licensing boards.

Miro: OK. Talk about the abolishing of licensing, but what about the doctors, the lawyers, the architects? Do you think doctors should be able to practice without a medical license?

Hill: You know, when I’m talking about getting rid of licenses, I’m really mostly talking about these licenses that are a burden on workers, and they have no health or safety element, you know, like hair braiders and makeup artists. 

But I do think it’s an interesting question that you raised, you know. And I do think we should have a discussion about whether the licensing requirements for doctors and nurses have affected our healthcare shortages.

You know, there is a point where too much regulation, too high of licensing burden, reduces the number of doctors and nurses in practice, and, you know, you’re not getting enough of a public benefit out of it. 

So, you know, I think there are ways — short of getting rid of medical licenses, which, let me just forestall the angry response: I’m not suggesting getting rid of medical licenses altogether. But there are ways that we could ease the licensing burden for doctors and nurses who want to practice in Hawaii.

Miro: So it sounds like you want to see some type of reform. So what kind of licensing reforms would you like to see, Malia?

Hill: You know, there’s a couple different ways that we could go about it. I think the first and most obvious is just reviewing the licensing scheme that we have in Hawaii and getting rid of those licensing requirements that are unnecessary— you know, like hair braiding. 

You know, the Hawaii auditor has reviewed our licenses and even recommended against licensing requirements in the beauty industry, and yet we still have all of that.

It would also help if we stopped creating more licenses. At least if there was no, you know, data-based evidence that it was really needed to protect, you know, the public health and safety. 

The other thing we could do is try to increase the portability of licenses and letting people from other states who have a valid license practice or do their job in Hawaii — something called universal licensing recognition, where you basically say that you recognize other states’ licenses as valid regardless of what that state’s license requirements may be.

There are other states that are doing this. Arizona did it in 2019 and, ever since, they’ve issued 4,700 licenses to workers who have moved into Arizona from other states.

Miro: OK. Malia Hill from the Grassroot Institute of Hawaii. I’m Johnny, and I’ve heard a bit about interstate licensing compacts. Now, what are they and how do they change licensing?

Hill: You know, the licensing compacts, that’s a little different. It’s similar to licensing recognition, but they tend to be something you go to for more complicated kinds of licenses like doctors and nurses and psychologists. 

It varies by compact because it’s sort of an interstate agreement. But what they do, in essence, is the participating states agree to streamline licensing among themselves in order to allow qualified applicants to practice across state lines.

Sometimes it’s, literally, you can just go to another state and practice. Sometimes it’s more like there’s an expedited method to get your license recognized in that state.

Miro: So could the interstate compact solve Hawaii’s healthcare problems, you think?

Hill: Well, you know, I think that is a real possibility. You know, we know that Hawaii has to do something to address our shortage in healthcare workers, and the interstate compacts could be the key. 

You know, we could either pursue licensing recognition, like I mentioned earlier, or join something like the Nurse Licensure Compact or the Interstate Medical Licensure Compact.

Miro: That sounds a little similar to what the governor — Governor Ige — did during the coronavirus crisis. He used the emergency powers — remember? — to allow out-of-state health workers to work here in Hawaii, right? 

Did we see any problems with those workers, and did they provide lower-quality care?

Hill: You know, that’s a really good example. Because Ige’s COVID orders, his measures, they really were a sort of temporary license recognition. 

So, so as long as you had a license in good standing in another state and a local health facility was willing to, sort of, take you on and take responsibility for you as a doctor or a nurse or — it actually applied to a whole bevy of healthcare and workers — but any of those things, you could basically get this temporary permission to practice in Hawaii. 

And, like you say, there were no issues of quality or safety with this at all. And in fact, you know, after it expired, the Healthcare Association of Hawaii lobbied Ige just back in August to reissue that order so they could bring out-of-state nurses in to help with the staffing shortages and the stress on Hawaii hospitals.

And the Department of Commerce and Consumer Affairs just extended that — just maybe last week, I think it was — they’ve extended that program for three more months. 

So effectively, we’ve been operating with a sort of license recognition for nurses, at least, for a while, and it hasn’t caused any problems. It just really shows that this is a good path forward.

Miro: Yeah, it sure does. Malia Hill, so with all this evidence, you know, who favors licensing, and what are the chances we see licensing reformed during the upcoming legislative cycle?

Hill: Well, not to be super cynical [laughs], but generally, the people who favor licensing are those — either the people who just like regulation because they just like regulation or the people who benefit from the current system. 

For example, I mentioned the Hawaii auditor earlier, you know, they did a research, and they came out with a study saying, “You don’t need beauty industry licenses, it’s unnecessary.”

And in response, the Hawaii Board of Barbering and Cosmetology issued this ominous warning that if we delicense, you know, beauty industry professionals, it would open the door to fraud, incompetence and public distrust in barbers and cosmetologists. 

So, who favors licensing? The people who benefit from licensing. 

To be fair to the medical community, however, since doctors and nurses have come into this discussion too. I have seen multiple healthcare organizations and advocacy groups in Hawaii, and not to mention doctors and nurses individually — they’ve pushed for reform and even suggested that Hawaii join one of these interstate compacts. 

So it’s not, you know, universally everyone who benefits from keeping people out favors licensing. It really kind of depends.

Miro: So it sounds like [in] the upcoming legislative cycle nothing is going to get done with this — or maybe even brought up.

Hill: Well, I’ll be optimistic. Let’s end on an optimistic note on the upcoming legislative session. You know, we have a bunch of new people — well, we have some new people in. So yes, you know, we have to wait and see. 

And, you know, change can move slowly in Hawaii. 

But I — my hope is that this experience with the, you know, sort of de facto temporary licensing recognition for nurses at least persuades legislators to look into some kind of license recognition or interstate compact to address the doctor shortage and the nursing shortage, the medical professional shortage in general.

And I do think, you know — hey, while they’re at it, since they’re looking at licenses for doctors, it just kind of makes sense — why not look at licenses for, you know, other lower-income professions? 

You know, it would be a good way to help the economy advance worker freedom and just re-examine the necessity of some of these licenses like the hair braiders. And, you know, maybe, you know, even think about a universal recognition bill.

Miro: That’s Malia Hill from Grassroot Institute of Hawaii, been covering the topic of occupational licensing laws here in the state of Hawaii. 

Keliʻi Akina, the president of Grassroot Institute, recently wrote a column on that, and you can find out what he had to say at grassrootinstitute.org. Grassrootinstitute.org

Malia, thanks for all the great information, all the insight. I’m sure people learned a lot from this. And last thing, happy holidays to you, and I hope to be speaking to you soon sometime in the new year.

Hill: Happy holidays to you all, too, and I hope to speak to you again soon myself.