A costly and unnecessary paid leave plan

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Senate Democrats unveiled their paid family and medical leave bill this week, and the big question was: Why? 

The reasons given — that it will be a job recruitment tool and a family benefit — were hardly enough to justify its cost. 

The bill’s fiscal note predicts that the mandatory 0.5 percent tax would raise $156.6 million a year from private employers. That would make it New Hampshire’s sixth-largest tax, coming in right behind the real estate transfer tax. It would extract from the economy $50 million more per year than the interest and dividend tax does. 

Two years’ worth of revenue from this tax would surpass the entire balance of the state’s employment security trust fund. 

That is a hefty weight upon the economy for a tax that is entirely unnecessary. 

This tax doesn’t have to exist because the program it would support doesn’t have to exist — even if one agrees that some type of paid leave insurance must be created.

Gov. Chris Sununu’s proposal shows that even if creating a paid family leave plan is a top priority, there is no need for it to take the forms of a mandate, a tax and an entitlement. 

Gov. Sununu’s innovative proposal showed — before the Senate leadership released its plan — that state leaders can offer a paid leave program for employers that avoids high taxes and employer mandates. 

Based on testimony given before the Senate Finance Committee on Tuesday, it remains unclear from a policy perspective why a tax-and-mandate approach was taken when less costly and intrusive options were available. 

It is not as though a 12-week program, vs. the six weeks in Gov. Sununu’s proposal, is essential. California’s landmark paid leave program offers six weeks, and a 2015 study by the California Employment Development Department found that most people who take the leave don’t use all of it.

Supporters of the Senate version say it is necessary to attract workers to the state. Although research does show that many workers would prefer additional benefits rather than a raise, paid family leave is fairly low on the list of preferred benefits. In a 2017 Harvard Business Review survey, only 42 percent of employees said they would consider paid maternity/paternity leave when considering whether to take a higher paying job vs. a lower-paying job with better benefits. (The survey did not include an option for paid medical leave.) 

The survey found that the four most attractive additional benefits were 1) better health, dental, and vision benefits, 2) more flexible hours, 3) more vacation time, and 4) work-from-home options. 

This context is important because paid leave is just another form of employee compensation. Employers gauge employee preferences when deciding whether to offer higher pay or more generous benefits. A paid family leave mandate would deny both employers and employees the option of deciding whether other forms of additional compensation would make more sense for them. 

For example, 80 percent of employees in the Harvard Business Review Survey reported that they’d consider foregoing higher pay if they could work from home, and 88 percent said they’d consider foregoing higher pay if they could have more flexible hours. But only 42 percent said the same of paid parental leave. 

Flexible hours and work-from-home benefits could in many circumstances offer people much better long-term options than a mandated 12-week paid leave plan. And about twice as many people would prefer those two options to paid leave. There is no reason to believe that a paid leave plan is such a crucial form of compensation that it must be mandated by the state. Employees don’t think it is, so why should lawmakers?

If there are options for providing a good or service that don’t involve the use of force or coercion, and that good or service is not an absolutely essential one that only government can provide, then there is no justification for using force or coercion to provide it. Paid family leave is a nice benefit, but it fails the test of whether it should be imposed via government mandate. 

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The minimum wage is virtue signaling

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As of July, the average hourly wage for private employment in New Hampshire was $26.22, according to Bureau of Labor Statistics data compiled by the Federal Reserve Bank of St. Louis.

In February, New Hampshire recorded its highest average hourly wage on record, $26.89. (The Federal Reserve data show New Hampshire wages regularly peaking in winter, dropping a bit in summer.)

Even counting for inflation, New Hampshire’s real per capita personal income is up more than $4,000 since the recession.

Hillsborough County was in the top ten counties in the country for wage growth last year, and New Hampshire was among the top five states, according to Federal Bureau of Labor Statistics data released in August.

Amid all of this good news, activists and some politicians are telling everyone that things are bad for the simple reason that state law doesn’t mandate a higher entry-level wage.

This fixation on government mandates rather than the actual economy is a really telling difference in the way some people view the world. On one side, people look around and say, “things are good!” On the other, people bury their heads in statute books and say, “things are terrible!”

The “things are terrible” crowd is pushing again to raise the state minimum wage to $15 an hour. As always, the central assertion is that $7.25 an hour (New Hampshire’s minimum wage is the federal minimum) is not a ‘living wage.”

This is where the gap between the actual economy and economic notions expressed in law grows very wide.

The state Labor Market Information Bureau has compiled U.S. Census estimates for the number of people working at or below the minimum wage in New Hampshire. (Tipped jobs can pay below the minimum.) The data (based on surveys) show only 8,004 Granite Staters working at the minimum-wage or less in 2017.

That’s really low. In fact, it’s a 48 percent decline from the 15,284 Granite Staters estimated to have worked a minimum wage job in 2016. (The number for 2015 was 15,845.)

Why the drop? We don’t know yet. And because of the small sample sizes, it’s possible that a sizable chunk of the decline is a measurement error. Next year’s data will help fill out the picture. But even if 50 percent of the drop is a reporting error, New Hampshire would still have only about 11,600 people working at or below the minimum wage. That’s out of a working-age population of around 913,000, according to Census figures.

At the current estimate of 8,004 people, less than 1 percent of New Hampshire’s working-age population makes the minimum wage or less.

The data further show that 73.5 percent of Granite Staters making the minimum wage or less work in “food preparation and serving-related occupations.”

Tips, commissions and overtime pay are not included in the minimum wage figures, so the actual take-home pay of about three-fourths of New Hampshire employees who are classified as minimum-wage workers will be considerably higher than the minimum wage.

The Census estimates also show that 3,951 people, or 49.4 percent, of Granite Staters who make the minimum wage or less are between the ages of 16-24. These are high school and college-age employees with fewer skills and limited experience.

And experience, as in axe throwing or being Jose Canseco, is a key factor. Looking at the lowest-paying sector, food preparation and serving-related occupations, we see an entry-level wage of $8.36 an hour, a mean wage of $10.55 an hour, and an experienced wage of $13.76 an hour —just $1.24 an hour less than the $15 an hour wage some activists and politicians are demanding.

This tells us that wages are not a measure of a person’s moral worth or dignity, but of economic value. Employers pay inexperienced teens less than experienced adults for reasons that ought to be obvious to anyone who’s ever had a job or waited in line at a McDonald’s. And they pay higher wages to attract better employees.

Even in the fast food industry, competition for good employees is driving up wages so that the minimums in many paces are $10 an hour or higher.

More than doubling the minimum wage to $15 an hour would have a relatively small effect on the pay of experienced employees even in the lowest-paid industries. But it would have a big effect on entry-level positions, effectively pricing younger, less-experienced people out of those jobs.

In an economy in which employers are voluntarily raising wages, we are being told that the government must mandate a very high wage floor, which gets us back to the point about markets vs. laws.

Laws are expressions of moral values. Markets are expressions of economic values (mostly). Even when markets are pushing pay rates higher, people who view the world a certain way find this unacceptable precisely because it does not come from a moral directive.

For the conspicuously virtuous, everything all the time has to be an expression of moral values. Markets don’t operate that way. They consider tradeoffs, which the conspicuously virtuous rarely do. Everything is black and white, good or bad.

So even if markets are driving wages higher, society must act collectively to mandate that wages never fall below whatever the virtuous wage floor of the moment is. Refusal to pass such a mandate is considered a society-wide moral failure.

Or to put it in the contemporary vernacular, minimum wages are virtue signaling.

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Burning money

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Every time you pay your electricity or heating bill, you’re lighting your money on fire. That is, you’re trading money for the energy released by burning some combustible material — natural gas, home heating oil, wood pellets, etc. So in effect, you’re burning your money.

That’s OK, it’s how a market economy works. You don’t make your own clothes or slaughter your own food or build your own home by hand, you pay other people to do those things. (Excepting some of you in the North Country.) When you trade money for energy, you’re basically burning money. The priority, then, is to burn as little of it as possible.

In New Hampshire, politicians keep preventing you from doing that. In fact, they continue to force you to burn more money for electricity than you would otherwise choose to burn.

On Thursday, legislators overrode Gov. Chris Sununu’s veto of Senate Bill 365. The bill forces electric utility companies to buy power at above-market rates from the state’s six biomass power plants and municipal solid waste incinerators.

The bill’s own fiscal note projected that it would cause electricity rates to rise by between $15 million and $20 million a year. So legislators knew exactly what they were doing. They knowingly voted to make you burn more of your money than necessary when buying electricity.

They’re very practiced at this. Over the years, legislators have passed one law after another to prohibit electric utilities from buying power at the lowest available price.

All of these costs add up. Here are just two examples.

A 2015 study by the Beacon Hill Institute found that New Hampshire’s Renewable Portfolio Standards would raise electricity prices by 3.7 percent by 2025, for a total impact of $70 million.

A previous biomass subsidy bill passed just last year, SB 129, also forced utilities to buy additional power from biomass plants. Its costs were estimated at around $75 million to $100 million.

To understand how these mandates make electricity more expensive, imagine you’re a cave man who needs to build a fire. Og is willing to offer you a bundle of wood he chopped himself for one rabbit pelt. Unk is offering you a bundle of organic, cured, and deodorized buffalo chips for one rabbit pelt and a handful of arrow heads.

You just need a fire. You’ve got a fresh squirrel in your deer-skin sack, you’re hungry, and you’ve got to make a new spear to replace the one you lost when that mammoth ran off with it dangling from its side. (WHY WON”T THOSE THINGS JUST DIE??) So you turn to Og.

At that moment, the clan’s code enforcement officer strides up to remind you of the clan leader’s decree that everyone has to use organic buffalo chips as a fuel source once a week. (Unk is the clan leader’s cousin.) You used wood every day this week. You’ve got to buy the dung.

You give Unk your worst arrow heads, naturally, but now you’re out all those arrow heads and will have to make more. You’re no warmer than you were before. The fire didn’t cook your meat any better. It just cost more because someone with power ordered you to support the organic dung industry.

There are other ways politicians and regulators force prices higher. They can even be politicians and regulators in neighboring states.

Across the country, electricity prices have fallen thanks to the natural gas boom. But the prices fall faster and farther in places where politicians don’t block pipeline construction. In New England (and New York), politicians and regulators have made it extremely difficult to build new pipelines.

As ISO New England has pointed out, though natural gas power generation has grown tremendously in in the last 20 years, “the natural gas pipelines that deliver low-cost shale gas into the region have not been expanded at a commensurate pace.”

Public policy is a major reason why New Hampshire has the fifth-highest electric rates in the country.

Politicians could immediately lower those rates by repealing laws and withdrawing regulations that prohibit utilities from buying power at the lowest available market price.

Instead, legislators continue to add new laws that push prices ever higher.

Utilities want to sell us power for less money. They would if they could. But the state forbids it. This needs to stop. We shouldn’t allow our politicians to force us to light our own money on fire.

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The lumberjacks are not OK

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How many lumberjacks live in New Hampshire?

Given the debate over Gov. Chris Sununu’s vetoes of two bills to further subsidize the state’s forest products industry, it’s an important question. No one seems to know the answer.

Supporters of the two bills, Senate Bills 365 and 446, say the subsidies would save 900 jobs. Sometimes they say 1,000 jobs. These figures are supposed to include people who depend on the forest products industry for their own livelihoods.

Maybe. But state data show only about 400 people employed in forestry and logging in New Hampshire. That’s down from the high 400s a decade ago.

Some of those good folks showed up in Concord on Thursday to demand that legislators override Gov. Chris Sununu’s vetoes and add even more subsidies to the already subsidized biomass and solar power industries. This is corporate welfare dressed in flannel.

Legislators know that a direct state subsidy of the state’s dwindling number of biomass plants, financed by tax increases, would be a non-starter. So they found another way to pay for this corporate giveaway: Hide the costs in everyone’s utility bills.

Both bills force utilities to pay above-market rates for electricity, thus raising prices for consumers. Because the rate increases would be mandated by law, they’d have the same effect as a tax hike. But because they’d be hidden in your electricity bill, they wouldn’t show up on any list of new taxes.

Nice trick.

The state Public Utilities Commission estimated that SB 365 would cost the average commercial utility customer in New Hampshire an extra $5.15 a month, which comes to $75.60 a year. In total, the bill would cost ratepayers about $20 million annually.

Utility customers would get nothing in return for that extra $20 million. It’s just a mandatory price increase. Instead of buying electricity from the lowest-cost producer, utilities would have to buy some of it from the state’s biomass plants, which can’t produce electricity as cheaply as their competitors can.

SB 446 would further increase electricity rates (by an undetermined amount) by letting these biomass plants and other producers build large-scale solar systems — and then forcing utilities to buy that solar power at inflated prices.

These aren’t just subsidies. They’re laws that forbid utilities from buying power at the best rates.

It’s critical to understand that because these bills never became law, upholding the governor’s vetoes takes nothing away from the forest products industry in New Hampshire. It simply means that ratepayers aren’t forced to pay them tens of millions of dollars more each year for the exact same product — electricity — that can be purchased from other providers at a lower cost.

Supporters say the bills are needed to save jobs. But jobs are plentiful in New Hampshire right now. What they really mean is that they’d like everyone to pay more for electricity so about 400 people can keep very specific jobs.

The unemployment rate is 3.2 percent in Coos County, 2.3 percent in Carroll County and 2.1 percent in Grafton County. The economy is galloping like wildlife fleeing the booming steps of Paul Bunyon. The issue is not whether jobs are available in the most thickly forested parts of New Hampshire. They are.

The issue is whether the state should forcibly confiscate tens of millions of dollars a year from 1.3 million people in an attempt to preserve specific jobs for about 400 people.

At about $20 million a year, SB 365 alone would generate enough money to pay each person in the forestry and logging industry roughly $50,000. Tuition at Harvard University this fall is $46,340.

If legislators override the governor’s vetoes, they will force Granite Staters to pay enough money in utility overcharges to purchase a Harvard degree for every forest and logging industry worker in the state every four years.

But instead of buying Harvard degrees or any other form of education or training to enable folks in a struggling industry to better survive a changing labor market, Granite Staters will be freezing a few hundred jobs in time — as the world continues to move on. That’s not a good use of $80 million.

These bills also would hurt Granite Staters who are even worse off than the people in the forest products industry. Higher electricity rates will eat into the budgets of low-income residents as well as manufacturers and other businesses. At 7.3 percent, New Hampshire has the lowest poverty rate in the country. But that still comes to about 95,000 Granite Staters living below the poverty level. To provide a handout to 400 employed people, these bills would take money from scores of thousands of low-income people, many of whom have worse employment prospects.

Subsidies can sound nice and compassionate. Most people want to help their fellow man. But subsidies aren’t just help. Unlike free trade, in which both parties win by getting something they want at an agreed-to price, subsidies help some by harming others. They do this because they force people against their will to pay for something they neither want nor need (in this case, high-priced electricity). That’s not compassion; that’s compulsion.

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Gangster Tactics

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If you live in New Hampshire and enjoy wine, there’s something you should know (besides how approach a tasting). Your own state government, which sells wine, wants to be your primary supplier. Really, it wants to be your only supplier, but the Legislature won’t allow that. So to satisfy its impulse to smash all enemies, it’s rigging the wine market to kneecap upstart competitors.

The New Hampshire Liquor Commission both sells — and regulates the sale of — alcohol. This blatant conflict of interest gives it the power and incentive to limit its competition. Naturally, it uses that power.

After Prohibition, the Liquor Commission was the state’s only alcohol retailer. In the decades that followed, it aggressively fought the private-sector sale of beer and wine, changes that were proposed and ultimately ordered by legislators, who have grocers and drinkers as constituents.

Today, the commission is fighting a new competitor — direct wine retailers. The Liquor Commission is this week acknowledged that it has been systematically banning the direct-to-consumer sale of wines that are also sold in state liquor outlets.

The National Association of Wine Retailers this week called the commission’s actions “gangster tactics.”

During Prohibition, gangsters controlled the production and distribution of alcohol and snuffed out competitors. Ironically, the Liquor Commission, which was created to control alcohol distribution after Prohibition ended, wound up operating like a more lawful version of La Cosa Nostra. It pursues competitors relentlessly and does what it can to eliminate, or at least handicap, them.

Using the word “gangster” to describe the behavior of New Hampshire officials might call to mind images from a Weird Al parody. But where the power to whack competitors exists, it’s used.

Occupational licensing laws often grant specific industries the power to restrict competition. Licensing boards, made up of practitioners of a particular trade, are empowered to both practice and regulate that trade. Not surprisingly, they tirelessly suppress competition and seek legislative authority to further restrict entry into their field.

Public schools succeeded sank an Education Savings Account bill that would have expanded the definition of what constitutes a public education. It would have allowed families to spend the state portion of their public education dollars at non-public schools (local dollars would remain with the local public school district).

Perceiving this as a competitive threat, public school administrators, some local school boards, the teachers’ unions, and their political allies fought hard to maintain their advantage. They successfully turned enough Republicans against the bill to kill it in the House.

Even preppy suburbanites do it. Municipal officials and voters regularly approve ordinances to limit new business and home construction, reducing competition and raising prices.

It’s not that institutions granted such power attract people with a lust for blood and conquest. It’s that the combination of incentives and opportunity leads inevitably to anticompetitive behaviors.

So if you wondered why you could no longer order your favorite wine online, wonder no more. The Liquor Commission’s been taking a lead pipe to the knees of your favorite winery.

This was originally published in our weekly email newsletter, for which you can sign up here.

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The licensing juggernaut rolls on

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Can you define “art therapy?” More specifically, can you define it well enough to criminalize the unauthorized practice of it?

The state Senate thinks it can.

This coming Wednesday, the House Executive Departments and Administration Committee continues its hearing on Senate Bill 535, to establish state licensure of art therapists. (The bill passed the Senate on March 15.)

If SB 535 becomes law, it will be a misdemeanor for any individual to practice art therapy for pay without a state license. For corporations, it would be a felony.

What is art therapy? According to Art Therapy Journal, the practice originated in the 1940s when artist Adrian Hill, being treated for tuberculosis, thought to teach art to his fellow sanitarium patients as a means of therapy. Early practitioners were not therapists, but artists who realized that the artistic process had various therapeutic uses. Only much later did art become adopted as a treatment method by therapists, as the journal recounted.

SB 535 assumes, contrary to the history of art as therapy, that highly specialized training is an essential foundation for blending art and therapy. To get a license under the bill, one would have to obtain a master’s or doctorate in art therapy and accumulate “not less than 2 years, with a minimum of 2,000 hours, of supervised experience in art therapy.”

One need not try to practice unlicensed psychology to fall afoul of the law under this bill, but merely use integrate basic psychotherapeutic principles into the creative process for the purpose of helping people feel better or cope with stress or trauma.

Not all of these techniques are a part of a new, highly specialized scientific field. “Throughout recorded history, people have used pictures, stories, dances, and chants as healing rituals,” a major 2010 review in the American Journal of Public Health concluded.

No doubt there are highly trained specialists who can do wonders with art therapy and who deserve handsome compensation for their services. The problem with this bill, as with so many licensing bills, is its assumption that anything short of the work of the most highly trained expert is so dangerous that it must be banned.

Importantly, SB 535 does not ban the unlicensed practice of psychology. That is already illegal. The bill makes it illegal to apply the principles of psychotherapy to art instruction.

In the beginning of this legislative session there was hope that lawmakers would reduce licensing burdens. Part of that hope came from the huge shortage of licensed substance abuse counselors relative to demand.

New Hampshire’s opioid addicts are going without treatment in part because state licensing requirements have kept the supply of counselors artificially low. Senate Bill 487, which mandates that the state waive licensing requirements for substance abuse counselors who have licenses from other states, was, surprisingly, not killed by the Senate. It is slowly making its way through the House.

But despite shortages in other fields, the Senate has killed bills that address similar problems. This week the Senate killed House Bill 1217, which would have reversed the mandate, passed in 2016, that all school nurses have a bachelor’s degree. Nurses in any other setting need only an associate’s degree. School officials testified that they face serious nursing shortages and that the bachelor’s requirement has made the problem worse. They were no match for the lobbying power of Big Nurse.

And as this Unnamed Newsletter has noted before, the Senate killed House Bill 1685, which would have reformed the occupational licensing process to make it less burdensome.

Maybe, like a Rolling Stones fan who unwittingly hopped into an Uber driven by a Beatles obsessive, you’re tired of hearing this tune. Fine. We’ll cue up something cooler. In just a second. First, we’ll remind you that, unlike John Lennon’s songwriting ability, occupational licensing remains a huge issue, as the number of bills dealing with it suggests. And highlighting its problems is the only way for people to understand how damaging licensing can be. Roughly a third of the U.S. workforce faces occupational licensing requirements. That figure was only about 5 percent in the 1950s. By contrast, about 11 percent of the workforce is unionized.

Licensing can be a significant barrier to upward mobility and economic opportunity. In New Hampshire, legislators continue to block reform and pass new requirements, making these problems worse. Relief typically comes only when a crisis develops, as in the case of licensed substance abuse counselors.

There are real consequences to inaction. Schools are short of nurses. Opioid addicts get worse while waiting for counselors. But requirements keep being piled on, as if everything is fine.

Things aren’t fine, and they’re getting worse. Without some action by legislators to control the growth of these requirements, they will continue to spread like a plague of job-eating, wage-eroding, state licensed locusts.

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Will the legalization craze extend to everyday jobs?

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On Tuesday, the august members of the New Hampshire House of Representatives will consider House Bill 287, which would create a commission to study legalizing prostitution. It comes with an “ought to pass” recommendation from the House Criminal Justice and Public Safety Committee. (The jokes really are so obvious, you’ve probably already thought of a better one than this newsletter would.)

HB 287 is part of a growing trend toward legalizing behavior once considered taboo or at least distasteful. From same-sex marriage to marijuana use to prostitution, government-imposed restrictions on private behavior are being abolished. There is even a new movement to make marijuana use a 10th Amendment issue and get the federal government out of it altogether.

(Honestly, 10th Amendment advocates are making a big strategic mistake here. Marijuana should be at the end of the list. It does the 10th Amendment movement no good for everyone to be too complacent after the first victory to put down the Doritos, get off the couch and continue fighting.)

While Granite Staters this year hear a lot about the pros and cons of legalizing “sex work” (that’s what it’s called in the bill), lots of other non-controversial occupations will remain illegal to practice for pay without state approval. For instance, auctioneering.

RSA 311-B makes it “unlawful” for any person to “knowingly engage in, or offer to engage in, auctioneering for a fee, commission, or other consideration unless such natural person has a valid license under this chapter or such other person is an authorized business organization.”

Unless you have a license, you break the law just by claiming you are “able to perform auctioneering.”

In New Hampshire, this is a criminal offense. Auctioneering for pay, or merely claiming the ability to perform auctioneering, is a misdemeanor for an individual and a felony for a business.

The “Occupations and Professions” section of state statutes is peppered with criminal penalties for working without state permission.

RSA 314 makes it a misdemeanor to practice eletctrolysis without a license.

RSA 323 makes it a misdemeanor to sell lightning rods without a license. (We are not making this up.)

RSA 328-H makes it a violation on first offense, a misdemeanor on second, to practice “Asian bodywork therapy” without a license.

RSA 331-A makes it a misdemeanor to engage in real estate brokerage without a license.

RSA 332 makes it a misdemeanor to “practice veterinary medicine” without a license. The statute defines “practice of veterinary medicine” as: “To diagnose, treat, correct, change, relieve, or prevent animal disease, lameness, deformity, defect, injury, or other physical or mental conditions….”

It is not always a criminal offense to work in certain fields without permission. Sometimes the state just makes it really hard to enter the field.

To become a cosmetologist, one must complete 1,500 hours of schooling or 3,000 hours of training under a licensed cosmetologist.

To become a pastoral psycotherapist, one must have a master’s in divinity, a Ph.D. in pastoral therapy, and 3,000 hours of supervised experience.

To become a “shampoo assistant apprentice,” one must first “work under the direct supervision of a licensed barber or cosmetologist for at least 150 hours” and pay a $25 fee. This is for a job that consists exclusively of “shampooing, rinsing and removing rollers or permanent rods, rinsing treated or untreated hair, and other cleansing or sink-related functions not requiring the skill of a cosmetologist or barber.”

If not the state, who will save us from unregistered shampoo apprentices?

Thankfully, some people have noticed that the state’s occupational licensing regime has become exceedingly burdensome. Rep. Bill Ohm, R-Nashua, has introduced a bill to create an occupational regulation review commission that would examine whether licensing boards use the least restrictive means to achieve their goals. It’s not as sexy a media topic as prostitution, but (presumably) it would have a bigger impact on the average Granite Stater.

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Live Free, But Ask First: Occupational Licensing in New Hampshire

September 2015

Daniel Hyland

In the effort to rejuvenate New Hampshire’s economy, occupational licensing is an important puzzle piece that is often overlooked. With the ostensible aim of protecting consumers, occupational licensing regulations set up barriers to entry, potentially preventing countless workers who would readily contribute to economic growth, but find themselves blocked by restrictive policies. The result for the consumer is higher prices and fewer choices.

Occupational Licensing: How New Hampshire Compares

Occupational licensing refers to any situation where someone wishing to enter a line of work must first apply to the government for permission to do so.[1] Obtaining a government license requires that job-seekers meet state-determined standards regarding age and education, as well as pay fees and pass related exams. A recent White House report notes that “about 25 percent of today’s U.S. workforce is in an occupation licensed at the State level, up from less than 5 percent in the early 1950s.”[2]

In their publication License to Work: A National Study of Burdens from Occupational Licensing, the Institute for Justice examines state-level licensing regulations on 102 low-to-moderate-income occupations, ranging from auctioneers and bartenders to tree trimmers and upholsterers. New Hampshire licenses only 34 of these 102 occupations. However, these occupations are often highly regulated, and New Hampshire’s licensing laws are the 28th most burdensome, as measured by the average requirements imposed on license applicants. That means New Hampshire is substantially worse off than Rhode Island, at 37th; and barely better than neighboring Massachusetts, at 25th.

Combining the number of occupations licensed by a state with the state’s average licensure burden yields the ranking criteria of “most broadly and onerously licensed state.” This makes the Live Free or Die state the 43rd most broadly and onerously licensed, slightly worse than Vermont at 44th.[3]

Some aspects of New Hampshire’s score in this study are particularly surprising. For instance, to obtain a city bus driver’s license requires 0 days of supervised education, but to become a cosmetologist requires 350 days of education and/or experience. To become a pharmacy technician, responsible for preparing and labeling medications and recording dosage information, the state requires a $25 fee, and nothing else; but to become a sign language interpreter costs $860, in addition to experience requirements and exams. New Hampshire requires 161 more days and $54 more to become licensed as a barber than as an emergency medical technician; and it is one of only 5 states to license shampooers–an occupation that both Hawaii, the most burdensomely regulated state in this study, and Arizona, the most broadly and onerously licensed state, do not regulate.[4]

Discrepancies like these point to deeper, underlying flaws. At 28th in terms of overall regulatory burden, New Hampshire needs to ask some questions about its licensing laws on the whole.

A view from 40,000 Feet:

In their report, the White House concludes that “current systems of licensure…place burdens on workers, employers, and consumers, and too often are inconsistent, inefficient, and arbitrary.”[5] Furthermore, such barriers significantly hamper the economic potential of “those who most likely aspire to [low-to-moderate income] occupations—minorities, those of lesser means and those with less education.”[6]

This is especially important in light of concerns regarding economic growth, since about half of the 102 occupations examined in the Institute for Justice’s study offer potential for new business creation (barbers, travel guides, and massage therapists, for example); and “about one-third of the 102 occupations are construction trades, such as masons, glaziers, painters and cement finishers, and in these trades, only those who act as contractors and have their own business need a license.”[7] This means that not only are job-seekers potentially barred from existing jobs due to these regulations, but new job creation is hindered as well.

To determine the areas most in need of reform, License to Work recommends asking whether an occupation is licensed in other states, whether a given state’s burdens are comparatively high, and whether licensure burdens in a given occupation are relatively high compared to occupations with greater safety concerns.[8]

Questions like these help to identify the shortcomings of regulations, and to determine whether licensing laws address a genuine harm or are only in place to artificially restrict the available supply of labor, thus allowing licensed workers to charge higher wages for their services. Since many licensed occupations offer potential for job creation, there is the risk that licensing regulations could be influenced by existing businesses, who would naturally want to limit any competition. This is known as “regulatory capture,” where the control of a regulatory body is used for private gain at the public’s expense.

There is ample reason to suspect such ulterior motives in any instance of licensing. A recent study found that “where government licensing is required for the job it raises hourly wages by about 8.4 percent.” The study also noted that it was unclear whether such gains are the result of conscious endeavors to artificially raise wages, or of workers having “acquired reputations that are valued in the market place.”[9] But there is evidence to suggest a conscious effort on the part of vested interests to restrict competition. As pointed out by the Council on Licensure, Enforcement and Regulation (CLEAR), “professions rather than consumer groups usually seek regulation,”[10] and licensure laws often “require entrants into a trade to pass exams…designed and graded by representatives of incumbent suppliers.”[11]

These circumstances suggest that businesses and workers are using the regulatory system for private gain, contrary to its intended purpose of protecting the well-being of the general public.

What Are the Alternatives?

In many states, licensing regulation is accompanied by what are known as “sunrise” and “sunset” laws. Sunrise refers to “a process under which an occupation or profession wishing to receive state certification or licensure must propose the components of the legislation, along with cost and benefit estimates of the proposed regulation…[and] convince the legislators that consumers will be unduly harmed if the proposed legislation is not adopted,” and “Sunset is the automatic termination of regulatory boards and agencies unless legislative action is taken to reinstate them.”[12] These common-sense measures provide basic and necessary accountability for regulators, requiring them to provide justification for new laws to be created, and for existing laws to persist.

New Hampshire however, has no sunrise law, and its sunset law was repealed.[13] In order to reform its regulatory legislation, state policymakers may resort to the introduction of new legislation–and in fact, there are two examples of this from recent years. House Bill 446, introduced in 2011, would have repealed the legislative authority to regulate a number of professions. But despite a favorable committee recommendation, the bill ultimately failed to pass.[14] The bill’s main sponsors followed in 2012 with HB 1265, a more general bill which would have set criteria for occupational regulation, established a committee “to determine the appropriate level of regulation for each occupation and profession,” and provided for the practice of professions “without being subject to laws that regulate the occupation or profession which are arbitrary, unnecessary, or substantially burdensome.” This bill was referred to an interim study, after which it was eventually voted down.[15]

Such difficulties demonstrate a concern that sunrise and sunset laws aim to address: namely, that regulatory legislation may tend to be easy to pass, but hard to undo. [16]  According to the Bureau of Labor Statistics, licensing regulation may be prone to this kind of outcome because of so-called “ratchet” effects: new licensing regulations often include “grandfather” clauses, which allow existing practitioners to continue their work without being subject to the new requirements. Because of this, a newly licensed market looks essentially the same as it did prior to regulation, and prices will tend to remain what they were. Consequently, the increase in wages discussed earlier may not occur immediately. However, as time goes on the grandfathered workers begin to exit the field, leaving mostly licensed workers who are protected from competition by the licensure laws; in this new situation, “de-licensing” may cause wages “to fall immediately with the inflow of new workers.” [17]

Perhaps this explains why there have been only eight instances of successful de-licensing in the last 40 years–and why, in half of those cases, attempts to reinstitute licensing regulations followed swiftly afterward. New Hampshire’s 2011-2012 reform efforts constitute one of only nine attempts nationwide in recent years to collectively de-license groups of occupations–all of them unsuccessful.[18]

Due to such concerns, it is important not only to address existing licensing regulations, but to be vigilant in scrutinizing proposed new licensure laws, and to explore alternatives to licensing.

One of the main alternatives to licensing is voluntary certification, which could be (and often is) offered privately, rather than through the government. Certification not only provides a lower-cost and less burdensome alternative, but significantly it can provide a clearer view of the genuine worth of standards in the eyes of practitioners and the public. By exposing certification requirements to ordinary market forces, a more appropriate balance can be reached between the standards set for practitioners, and the market demands on workers in a given profession.[19]

Conclusion

The White House report on occupational licensing concludes that there “is ample evidence that States and other jurisdictions should review current licensing practices with an aim toward rationalizing these regulations and lowering barriers to employment.”[20] To do this, New Hampshire should examine what measures are already in place to oversee licensing regulations, and cast a critical eye upon the motives that may underlie licensing requirements to ensure that any regulation protects both individual freedom and economic growth. Lowering barriers to entry means greater marketplace competition, with all the benefits that follow: lower prices, higher quality, and more consumer choice–and ultimately, more freedom and more growth in New Hampshire.

Click here to download a pdf version of this report

 

 

Appendix I:

Selected Occupations that Require a License to Practice in New Hampshire and their Requirements to Obtain

Burden Rank Occupation Number of States that License Fees Education/Experience (in days) Exams Estimated Employment             (as of May 2013)
1 Preschool Teacher 49 $130 1,825 2 2670
2 Athletic Trainer 46 $450 1,460 1 130
3 Earth Driller 47 $260 1,095 1 100
4 Midwife 29 $920 730 3 40
5 School Bus Driver 51 $80 732 6 310
6 Mobile Home Installer 39 $75 731 0 70
7 Cosmetologist 51 $124 350 2 320
8 Barber 50 $124 187 2 #
9 Massage Therapist 39 $125 175 2 50
10 Makeup Artist 36 $154 140 3 –
10 Skin Care Specialist 50 $154 140 3 40
12 Manicurist 50 $119 70 2 310
13 Sign Language Interpreter 16 $860 2 3 210
14 Cathodic Protection Tester 16 $1,500 8 2 120
15 Animal Trainer 20 $0 90 0 50
16 Bus Driver (City/Transit) 51 $70 0 5 330
17 Truck Driver 51 $60 0 4 6410
18 Emergency Medical Technician 51 $70 26 2 110
19 Pest Control Applicator 51 $20 0 3 190
19 Vegetation Pesticide Handler 51 $20 0 3 –
21 Shampooer 5 $25 35 0 #
22 Weigher 24 $106 0 1 –
23 Travel Guide 21 $60 0 1 370
24 Pharmacy Technician 12 $25 0 0 –
25 Child Care Worker 33 $27 0 0 2690
26 Auctioneer 33 $115 19 1 –
27 Slot Key Person 21 $510 0 0 –
27 Gaming Supervisor 23 $510 0 0 –
29 Animal Breeder 26 $200 0 0 –
30 Coach (School Sports) 24 $45 1 0 1220
31 Taxidermist 26 $50 0 0 –
31 Fisher 41 $50 0 0 –
33 Gaming Dealer 24 $40 0 0 –
34 Security Guard 37 $20 0 0 2250
  # included with Cosmetologist

 

 

[1] Donald J. Boudreaux, “Occupational Licensing: Reality Differs from Rhetoric,” Pittsburgh Tribune-Review, March 25, 2014, accessed July 31, 2015, http://mercatus.org/expert_commentary/occupational-licensing-reality-differs-rhetoric

[2] “Occupational Licensing: A Framework for Policymakers,” White House, accessed July 31, 2015, https://www.whitehouse.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf

[3] “License to Work: A National Study of Burdens from Occupational Licensing,” Institute for Justice, http://www.ij.org/LicenseToWork

[4]ibid., “State Profiles: New Hampshire,” http://licensetowork.ij.org/nh

[5] “A Framework for Policymakers.”

[6] Institute for Justice, conclusion, http://www.ij.org/l2w-conclusion

[7] ibid., “The Occupations,” http://www.ij.org/l2w-occupations

[8] ibid., Conclusion.

[9] Morris M. Kleiner, “Analyzing the Labor Market Outcomes of Occupational Licensing,” Cato Institute: Research Briefs in Economic Policy 26 (2015)  http://object.cato.org/sites/cato.org/files/pubs/pdf/research-brief-26-updated.pdf

[10] “Sunset, Sunrise, and State Agency Audits,” Council on Licensure, Enforcement & Regulation, accessed July 31, 2015, http://www.clearhq.org/resources/sunset.htm

[11] Boudreaux, “Reality Differs from Rhetoric.”

[12] “Sunrise, Sunset & State Agency Audits.”

[13] ibid.

[14] HB446 of 2011 Session of the New Hampshire General Court

[15] HB1265 of 2012 Session of the New Hampshire General Court

[16] “A Framework for Policymakers.”

[17] Robert J. Thornton and Edward J. Timmons, “The de-licensing of occupations in the United States,” Bureau of Labor Statistics: Monthly Labor Review (May, 2015) http://www.bls.gov/opub/mlr/2015/article/pdf/the-de-licensing-of-occupations-in-the-united-states.pdf

[18] Ibid.

[19] Edward J. Timmons, “‘Occupational Licensing Gone Wild?’: Why Licensing Is Not Always the Answer” (testimony presented before the Indiana Senate Commerce and Technology Committee, April 16, 2015.) http://mercatus.org/publication/occupational-licensing-gone-wild-why-licensing-not-always-answer

[20] “A Framework for Policymakers.”

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New Hampshire Ripe for Raising the Age

Marc Levin

April 2014

Click here to download a pdf version of this report

Most of us would not want to be judged for the rest of our lives based on what we did when we were 17 years-old. Unfortunately, this is the reality for too many youngsters in New Hampshire since the state lowered the maximum age of juvenile court jurisdiction from 18 to 17 in 1996.  Now, With House Bill 1624 that overwhelmingly passed the House and will be heard on April 10 in the Senate, New Hampshire has an opportunity to join 40 other states in ensuring that most 17 year-olds are held accountable and rehabilitated in the juvenile justice system.

Fortunately, New Hampshire citizens can be assured that this proposal won’t let lawbreakers off the hook. The juvenile system maintains confinement options and, with smaller probation caseloads, actually provides closer supervision on probation than the adult system.

Perhaps most importantly, the juvenile system is oriented towards working with the most important institution in society- the family. New Hampshire 17 year-olds are covered by the state’s compulsory education law and in most cases are attending high school while living with their parents. Yet, because they are considered adults in the justice system, if they are arrested, a parent has no right to be informed and would not have a right to participate in any court proceedings or probation meetings. However, research has shown the most effective probation programs for this age group are those that work to strengthen the family’s capacity to provide discipline and structure.

This is one reason why studies have demonstrated that youths sent to adult court have a 33.7 percent higher recidivism rate than similar youths processed through the juvenile system. Not only does the juvenile system focus on the family, it offers age-appropriate programming and partners with the education system. For example, a juvenile probation officer typically maintains contacts with the local schools so they can respond quickly if a teen on their caseload is truant.

While most offenses committed by 17 year-olds are low-level, nonviolent crimes that do not result in incarceration, those youngsters that are placed in adult lockups with hardened criminals have a much higher rate of being physically and sexually abused. For this reason, the federal government recently strengthened the standards under the Prison Rape Elimination Act (PREA). This means that state and local lockups must not only separate 17 year-olds, because they are juveniles under federal law, but also provide them with programming. The official legislative analysis for HB 1624 estimates that this legislation will avoid up to $10 million in statewide capital expenses for retrofitting county jails and $250,000 in jail operations costs per county.

Furthermore, while an adult conviction can be a lifetime scarlet letter, those with a juvenile adjudication can often have their record sealed once they become an adult if they refrain from further offending and comply with all their obligations. This makes it far easier for those who have made a youthful mistake to years later obtain employment, student loans, and housing, all of which contribute to being a law-abiding, productive citizen.

Finally, it is important to note that youths charged with a felony in New Hampshire can be transferred to adult court following a certification hearing. At this hearing, the judge considers factors such as the maturity of the offender, whether the offense involved violence, and the likelihood of rehabilitation. There is a presumption in favor of transfer for youths charged with the most serious offenses such as first or second degree murder, attempted murder, manslaughter, first degree assault, aggravated felonious sexual assault, and kidnapping. Any juvenile who has been tried and convicted as an adult will thereafter be tried as an adult for any subsequent criminal offense.

HB1624 not only raises the age, but also makes other improvements in New Hampshire’s justice system. It clarifies the laws surrounding competency to stand trial and the right to counsel, promotes the adoption of evidence-based practices (those proven to reduce recidivism), requires the Department of Corrections to adopt plans to stop prison rape, and enhances data collection on key performance measures.

New Hampshire policymakers have a great opportunity to put more troubled teens on the right track by raising the age. This will result in 17 year-olds being held accountable and treated in the way most New Hampshire parents would want if it was their son or daughter.

 

Marc A. Levin is the director of the Center for Effective Justice at the Texas Public Policy Foundation.

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We Need To Insist on More Boring Stories

Charlie Arlinghaus

January 22, 2014

As originally published in the New Hampshire Union Leader

The most sensational stories make the news but the most important work of the legislature is too boring for anyone much to care. The sensational stories will have little or no impact on New Hampshire. The boring stories have a long lasting but not sensational impact for years to come. That fundamental conflict is the long term struggle good public policy faces and it will be on display this year.

Some issues are more fun than others. The state’s House of Representatives passed a law legalizing marijuana last week. Certainly the debate raises interesting issues about changing societal attitudes, whether a prohibition structure is effective, the government’s legitimate role in drawing a line between legal and illegal substances. But the media response to the issue is all out of proportion to the issue’s relevance to current affairs.

This issue, which has no actual chance of becoming law this year, ought to be covered. But the disproportionate coverage of it is related to the titillation. Time magazine’s headline came with an attached giggle: “New Hampshire House Votes For Legal Weed.” Every editor’s secret adolescent fantasy about working the word pot or weed into a headline has become reality. It’s worth noting that the debate over last year’s passage of a medical marijuana law was accompanied by no such titillation.

A marijuana law is fun for headlines and television. If only the legislature would debate legalizing and taxing prostitution some poor newsman’s head might explode with glee.

Much of the work of state government and the legislature is dramatically less dramatic. Ultimately, the hard work of the legislature is a trustee managing what government has decided it is to do and exercising fiduciary oversight. Think of them as trustees acting on our behalf.

Unfortunately, that role is incredibly boring. Are you excited about debates over the rainy day fund and expected revenue growth? Of course not. You’re a normal person and it bores you to tears (we’ll leave aside, for the time being, the question of how normal you can be if you’ve actually read this far in a column of mine).

But the boring work is important. Congress ignores its fiduciary role regularly and as a result we have a debate about whether a balanced federal budget is even theoretically possible or relevant.

The state will ignore the details for a few years until we have serious structural problems and have to make some sort of sudden correction. You’ll remember the supposedly draconian budget passed in 2011? It was a very difficult 6.2% cut at the end of day (on an apples to apples basis).

The amount of correction needed became worse and worse as each year went by and they didn’t do anything. But failing to act isn’t news. It becomes news when the problem has grown so large that the required action is painful.

A small example of this is the current debate over state transportation spending. Year after year highway spending got worse. It’s not that we didn’t spend money but that we spent it on the wrong things. There is an obvious reason for that. We name big, exciting projects for politicians. We don’t name routine but cost-saving maintenance after anyone.

No politician ever ran for office bragging about how he increased the paving schedule which will lead to a gradual reduction is the number of miles under higher cost disrepair as opposed to more inexpensive fixes. I’m getting bored just writing the words.

In the end we like brand new, fun, high tech (and completely unnecessary) overhead high speed tolling. It’s really cool and people notice it. On the other hand, paving 42 miles of state route 865 before its gets into a state where it has to be completely redone at 20 times the cost is hardly conversational.

There must be a way to reward politicians for doing the hard work that’s boring. I think the only real way is to force them to talk more often about details. We may not always understand the details but they should be able to discuss them in a way that gives us at least some confidence they’re paying attention.

In addition, next time they talk about a big, bold new initiative ask them about the cost. How much was it and what were the alternative uses of what is after all our money (including, dare I say it, letting us keep it and use it ourselves).

I don’t begrudge a headline writer another fun drug story so long as there’s still a spot or two for the boring stuff.

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