Reforming occupational licensing rules can reduce the cost of professional services and improve efficiency.
Americans’ quality of life depends on access to essential services provided by the nation’s legal, medical, and financial services professions. Yet, lost in the current chaos over the performance of the federal government is that most Americans’ access to these services is severely limited by states’ licensing policies for prospective providers to practice in those professions.
Occupational licensing reduces the supply of lawyers, physicians, and financial professionals by discouraging otherwise qualified people who are unable to invest the time and incur the costs necessary to obtain a license. Licensing also reduces competition and increases prices. Appropriate licensing reforms could increase the availability of legal, medical, and financial services at a lower cost without sacrificing quality.
Occupational licensing allegedly protects consumers who lack the information and knowledge to judge the competence of a service provider by ensuring that consumers are served by people who have received adequate training and certification in their profession. The American Bar Association (ABA) approves the training and regulation of lawyers, and states award a license to practice law after an applicant passes an examination. The American Medical Association influences education standards, and state medical boards issue licenses to applicants who meet their entry requirements. Specialty societies governing various physician specializations publish additional practice requirements. Finally, state boards set education and examination requirements to become a licensed certified public accountant, and the Financial Industry Regulatory Authority administers qualification examinations to prospective financial advisors.
Empirical research has found, however, that occupational licensing has not protected consumers from incompetent and unscrupulous service providers. But advances in information technology have enabled the public to acquire information about a service provider’s competence and reputation through online discussion forums and evaluations provided by both consumers and third parties.
A fresh look at current licensing policies reveals that they reduce access to and increase the price of services. Roughly 80 percent of the public is not served by the legal profession, and pro bono service to the poor amounts to no more than 2 percent of all legal representation. The United States is nearly 15,000 primary care physicians short of the preferred minimum threshold per patient. In 2022, more than 1,500 areas of the country—accounting for roughly 40 million people—had only one physician to serve more than 3,500 patients. The recent decline in college students majoring in accounting has exacerbated the decline in accountants, and registrations of broker-dealers—who buy and sell securities for their accounts or for customers—have also declined.
People who seek access to legal, medical, and financial services face excessive prices. The average hourly billing rate at the nation’s top 200 law firms in 2024 was $1,114 per hour. The minimum cost of legal services for handling a simple contract, simple bankruptcy, or employment dispute are $300, $1,500, and $10,000, respectively. The rising share of health care costs in the Gross Domestic Product of the United States is attributable in large part to the high prices of medical services, and the declining supply of accountants and financial professionals has significantly increased the prices of their services.
Licensing reforms that allow market forces to operate effectively, while still subjecting practitioners to the criminal and civil liability systems, could improve access and reduce costs. These reforms could be accomplished in the legal services area by offering low-cost, specialized legal education programs to the public and allowing graduates of those programs to provide legal services. Such programs could include vocational and online courses of study. College graduates could provide legal services after receiving a bachelor’s degree in law in new undergraduate programs. The influx of lawyers and other providers could provide basic, low-cost legal services such as representing clients in small-claims court, providing advice on simple contracts, and assisting indigent people with problems that, if not resolved, could lead to abuse or children being held in foster care.
Graduates of three-year ABA-accredited law schools who pass a bar examination could continue to work for law firms as well as for corporations or foreign law firms that could also offer legal services. The increase in competition would reduce prices for more complex legal services.
Restrictions on the provision of health care could be significantly reduced. Advanced practice registered nurses and physician assistants could receive full practice authority, allowing them to provide care promptly without being tethered to physicians. Greater access to other health care professionals who could provide primary care would benefit low-income patients in particular.
Access to health care provided by licensed physicians also could be improved, and prices for their services could be reduced. Universities could reduce the out-of-pocket costs of and time required for a medical education if they created combined undergraduate and graduate medical programs that could be completed in six years instead of eight. The supply of physicians could increase if more Americans with medical degrees were promptly matched with residency programs and if matching programs included more graduates of foreign medical schools. The ability to specialize in a particular medical practice also could be streamlined if the completion of its own, narrower credential—including specific educational, training, and examination requirements—were sufficient to practice.
Finally, the cost and time of the educational and licensing requirements to become an accountant or a financial advisor could be reduced. With little justification, most states require an additional year of education beyond what is required for a bachelor’s degree to become an accountant. A bachelor’s degree in business supplemented with work experience could replace this educational requirement. Allowing and encouraging specialization and voluntary certification in a selected specialty could streamline the exam process required to become a certified public accountment.
The current regulatory framework governing broker-dealers and financial advisors is a complex tapestry of rules and standards with multiple regulatory bodies. A more streamlined and coherent regulatory framework for finance professionals could place greater reliance on peer review and self-regulation.
President Donald J. Trump is committed to reducing the inefficiencies created by government institutions. Accordingly, he should persuade state bodies to reform their licensing requirements, which are violating federal antitrust laws by creating anti-competitive entry barriers, reducing access to, and increasing the costs of vital legal, medical, and financial services.
This essay draws from the author’s edited book, Reforming Occupational Licensing in the United States: Reducing Social Costs and Increasing Social Benefits in the Legal, Medical, and Financial Services Professions.
