Policy Analytics Symposium

April 12, 2021

The Mercatus Center at George Mason University is pleased to announce the creation of the Policy Analytics Society as a part of its QuantGov initiative. Policy analytics is, at base, the measurement of government policy for the purpose of studying its causes and consequences.

The new Society will serve the needs of scholars, researchers, and practitioners who use advanced analytical methods such as machine learning and natural language processing to identify and measure latent variables within public policy text. It aims to foster discussion of effective and legitimate ways of creating new data-driven research using human- and AI-powered algorithms. Because most public policy is written in unstructured text, using policy analytics to turn such text into structured data will lead to more and better research about the causes and effects of government policy.

To launch this effort, the Policy Analytics Society has released a series of working papers that showcases the development of policy analytics through novel datasets and methodologies. The following papers advance the study of best practices for the measurement of government policy and seek to empirically identify innovations for data-driven policy research. Topics covered by the symposium include a theoretical framework for policy analytics, methods for data validation, the use of machine learning to analyze trade agreements, data analytics related to occupational licensing, and a computational analysis of contracts.

Concept and Methodology

Towards a Formalization of Policy Analytics – Dustin Chambers

How to Improve Data Validation in Five Steps – Danilo Friere

Democratizing Policy Analytics with AutoML – Danilo Friere

Specific Applications

Using Machine Learning to Capture Heterogeneity in Trade Agreements – Scott Baier and Narendra Regmi

Validating Readability and Complexity Metrics: A New Dataset of Before-and-After Laws – Wolfgang Alschner

Measuring a Contract's Breadth: A Text Analysis – Joshua C. Hall, Bryan McCannon, and Yang Zhou

Man vs. Machine: A Novel Evaluation of Data Analytics Using Occupational Licensing as a Case Study – Edward J. Timmons and Conor Norris

Editors: 
People: 
Patrick McLaughlin

Man vs. Machine

March 25, 2021

For researchers of state regulatory policy, the difficulty of gathering data has long presented an obstacle. This study compares two new databases for state-level occupational licensing laws. The Knee Center for the Study of Occupational Regulation (CSOR) database uses traditional manual reading to gather data, while RegData uses a machine learning algorithm. We describe both data-gathering processes, weigh their costs and benefits, and compare their outputs. The CSOR database allows researchers to find specific licensing requirements typically used in the occupational licensing literature, but the traditional methodology is time and labor intensive. RegData provides researchers with a better overall measure of stringency and complexity in regulation that allows for comparisons across states. However, RegData cannot reach the level of detail in the CSOR database. The variables gathered by CSOR and RegData are useful for researchers and policymakers and can be used as a model to build databases for other state-level regulations.

Read more.

This paper is one of seven published as part of the Policy Analytics Symposium

COVID-19 Is Showing Us That Some Regulations Are Worth Cutting

Wednesday, April 22, 2020
Authors: 
Edward J. Timmons

Policymakers can lessen the economic impact of the shutdown by ditching regulations that keep people from finding creative ways to get back to work. Read more at RealClearPolicy

Combating COVID-19 With Emergency Occupational Licensing Reform

Tuesday, April 14, 2020
Authors: 
Edward J. Timmons

Edward Timmons and Conor Norris Read argue that occupational licensing laws limit the supply of health care professionals, and right now we need all the help we can get. Read more at Morning Consult

A Snapshot of Occupational Licensing Regulation in the Midwest and Mid-Atlantic States

August 12, 2020

Occupational licensing laws mandate that aspiring workers complete minimum levels of education and training, pass exams, and meet a variety of other requirements before they can begin working in their chosen field of employment. Occupational licensing affects more than 20 percent of the workforce. Its prevalence has steadily increased since the 1950s, when just 5 percent of the workforce required a license in order to work in a profession. The expressed purpose of occupational licensing laws is to ensure that professionals are competent and to protect the safety of customers. Research suggests that licensing may also support the development of human capital during a professional’s career.

However, licensing has been shown to have drawbacks. By restricting potential new entrants into a field, licensing protects professionals from competition and raises prices for consumers. Because licensing laws are passed at the state level, licensing also reduces interstate mobility. Meanwhile, the evidence that it improves quality is mixed at best.

In this policy brief, we compare the overall stringency of occupational licensing regulations for select states in the Midwest and mid-Atlantic states. This direct comparison allows us to identify states within a region whose level of occupational licensing regulation makes them outliers and states that should serve as a model for reform.

In our comparison group we find that Indiana was the most stringently regulated state, having the most restrictions and total words pertaining to occupational licensing of the states in our sample. Ohio was a close second with respect to occupational licensing restrictions and word count. Pennsylvania and Maryland were the least restrictive states in our group, with far fewer restrictions and total words than Indiana and Ohio. At the industry level, states also vary considerably in how much licensing burdens the same industry. Some states have relatively few restrictions for an industry, while others heavily regulate that same industry. These large differences in regulations for the same industry should motivate policymakers to reconsider the merits of stringent occupational licensing regulations.

Data Source

Our primary data source is Occupational Licensing (OL) RegData, a derivative of the RegData series from the Mercatus Center at George Mason University. Introduced in 2012, RegData uses machine learning and text analysis to identify restrictions contained in a jurisdiction’s regulations. Restrictions are instances of the words and phrases “shall,” “must,” “may not,” “required,” and “prohibited” within a regulation. OL RegData’s algorithm works by predicting the probability that a regulation contains language pertaining to occupational licensing. In addition, the algorithm identifies regulated occupations using a similar approach.

Additionally, we map each state’s regulations to the occupation categories using the Standard Occupational Classification (SOC) system. The classification of occupational licensing regulations into the SOC system allows for comparisons across states, including a comparison of the level of restrictions within an occupation.

Typical methods of gathering licensing regulations, which do not employ machine learning, have several shortcomings. It is time consuming to have an individual or team of individuals read through every state code to find the relevant information. Methods that rely solely on human effort suffer from possible error and subjectivity. Finally, it is extremely difficult and time consuming for humans to gather information with the level of detail of RegData.

The traditional approach for gathering licensing data is often to focus on one or a small number of occupations and a limited subset of variables. Two organizations, the Knee Center for the Study of Occupational Regulation and the Institute for Justice, have been able to generate datasets that cover a large number of occupations, but they simultaneously face limitations in the variables they can gather because of their labor-intense approaches. The size of the administrative code of each state makes the collection process difficult for traditional legislative research. This limitation creates an opportunity for software-based approaches, like that of RegData, to gather a substantial amount of information.

Strengths of Our Approach

Our method allows us to compare the overall levels of occupational licensing across states, unlike other methods that compare specific variables such as application fees or education requirements. Our data include measures of the stringency of regulations, including the length of the relevant portion of the code, the number of restrictions, and the difficulty of reading the text. We use these measures to compare the overall stance of states’ occupational regulatory environments. By comparing these measures across states, we can identify outlier states that need reform and model states with less burdensome regulatory environments.

RegData allows us to examine the data by occupation using the three-, four-, and five-digit codes in the standard SOC system. This approach allows us to compare across occupations within and between states. Similar occupations that pose a similar level of risk for customers yet have substantially different regulatory stances in the same state provide some evidence that the regulations are being driven by professional organizations’ rent-seeking rather than by a desire to protect public safety. Another advantage of classifying occupations according to the SOC system is that researchers will be able to directly use data that are collected by agencies such as the Census Bureau and the Bureau of Labor Statistics to examine the effects of occupational licensing on wages, employment, and other labor market outcomes.

Results

Comparisons at the State Level

Table 1. Occupational Licensing Restrictions and Words

State

Occupational Licensing Restrictions

Occupational Licensing Words

Institute for Justice Licensing Burden Ranking

Indiana

26,152

2,391,508

26

Ohio

25,630

1,638,103

20

Maryland

9,477

776,745

11

Pennsylvania 

5,851

538,085

50

Source: Kofi Ampaabeng et al., “State Occupational Licensing RegData” (dataset), QuantGov, Mercatus Center at George Mason University, 2019, https://www.quantgov.org/; Dick M. Carpenter II et al., License to Work: A National Study of Burdens from Occupational Licensing, 2nd ed. (Arlington, VA: Institute for Justice, 2017).

OL RegData has occupational licensing restriction data for 37 states. These states are included in the State RegData data series, which is also based on the RegData project. For this brief, we select four contiguous Midwest and mid-Atlantic states. Table 1 ranks the states in the sample by number of occupational licensing regulatory restrictions. The number of restrictions gives a measure of the burden professionals must bear to meet a state’s occupational licensing requirements. The number of words in the licensing code is an alternate measure of a state’s stance toward occupational licensing; a greater number of words implies that states are licensing more occupations, placing more requirements on each licensed occupation, or a combination of the two. Combined, occupational licensing restrictions and occupational licensing words provide evidence of the regulatory burden imposed by state licensing laws.

We find a considerable variation between states in terms of OL restrictions, which ranged from a high of 26,152 in Indiana to a low of 5,851 in Pennsylvania. Similarly, Indiana had the most OL words in the region. Ohio was second, with two-thirds the number of OL words as Indiana. Pennsylvania and Maryland have the fewest words.

As a comparison with existing data on occupational licensing, we also include the Institute for Justice licensing burden ranking for each state in our sample. A higher rank (e.g., 50) corresponds with a lower burden. The Institute for Justice measures the barriers to entering low-income occupations using the cost in terms of time and money of licensure requirements. States with higher fees, more days of required education, and more exams have a higher rank.

The results of this comparison suggest that Indiana has the most onerous licensing requirements in this region. Having the most restrictions and number of words, Indiana’s regulations are the most numerous and difficult to satisfy, although Ohio is similar. Compared to the nearby states of Pennsylvania and Maryland, the two least restrictive states, Indiana is substantially more restrictive. The differences between our ranking and the Institute for Justice’s ranking may be driven by the differences in methodologies. RegData measures the number of restrictions, not the burden of each restriction. Additionally, we include all occupations in our study, not only low-income occupations.

Table 2. Average Sentence Length 

State

Average Sentence Length

Ohio

34

Maryland

28

Indiana

25

Pennsylvania 

18

Source: Ampaabeng et al., “State Occupational Licensing RegData” (dataset).

Average sentence length (see table 2) is a measure of the average number of words per sentence. A longer average sentence suggests that a state has more complex regulations or regulations that are more difficult to understand.

Ohio has the longest average sentence length, with 34 words per sentence. Maryland and Indiana have similar average sentence lengths of 28 and 24 words, respectively. Pennsylvania has the shortest average sentence length, making its occupational licensing regulations the most straightforward and easy to read and understand.

Individual State Results

Table 3. Indiana Occupational Licensing Restrictions by Occupation

Occupation (SOC Code)

Restrictions

Word Count

Average Sentence Length

Total

26,152

2,391,508

110

Health diagnosing and treating practitioners (29-1000)

5,476

445,289

1,046

Counselors, social workers, and other community and social service specialists (21-1000)

3,340

330,175

370

Architects, surveyors, and cartographers (17-1000)

3,000

270,816

201

Private detectives and investigators (33-9020)

1,678

145,384

463

Life scientists (19-1000)

1,459

137,948

194

Real estate brokers and sales agents (41-9020)

1,211

98,755

268

Animal trainers (39-2010)

942

98,619

197

Lawyers, judges, and related workers (23-1000)

765

67,874

170

Supervisors of farming, fishing, and forestry workers (45-1000)

723

54,764

218

Securities, commodities, and financial services sales agents (41-3030)

704

55,626

38

Barbers, hairdressers, hairstylists, and cosmetologists (39-5010)

544

45,302

207

Hazardous materials removal workers (47-4040)

506

59,322

70

Miscellaneous healthcare support occupations (31-9090)

486

40,996

154

Painting workers (51-9120)

378

40,239

25

Ambulance drivers and attendants, except emergency medical technicians (53-3010)

297

19,987

20

Graders and sorters, agricultural products (45-2040)

272

24,570

121

Appraisers and assessors of real estate (13-2020)

255

27,207

70

Dental hygienists (29-2020)

254

22,615

127

Construction and building inspectors (47-4010)

244

23,322

70

Environmental engineers (17-2080)

235

21,136

55

Business operations specialists (13-1000)

231

24,391

60

Psychologists (19-3030)

220

16,741

54

Geological and petroleum technicians (19-4040)

219

16,311

26

Massage therapists (31-9010)

215

22,056

66

Gaming cage workers (43-3040)

214

33,018

25

Electricians (47-2110)

212

24,135

90

Accountants and auditors (13-2010)

206

22,030

56

Miscellaneous entertainment attendants and related workers (39-3090)

191

18,697

26

Pest control workers (37-2020)

176

18,581

24

Morticians, undertakers, and funeral directors (39-4030)

165

14,274

149

File clerks (43-4070)

161

11,856

29

Butchers and other meat, poultry, and fish processing workers (51-3020)

152

16105

25

Clinical laboratory technologists and technicians (29-2010)

152

22,561

51

Tax examiners, collectors and preparers, and revenue agents (13-2080)

126

12,942

50

Security guards and gaming surveillance officers (33-9030)

107

11,172

59

Diagnostic-related technologists and technicians (29-2030)

77

10,409

24

Librarians (25-4020)

75

7,012

24

Pipelayers, plumbers, pipefitters, and steamfitters (47-2150)

75

6,505

54

Explosives workers, ordnance handling experts, and blasters (47-5030)

69

4,999

17

Environmental scientists and geoscientists (19-2040)

67

7,250

28

Dispatchers (43-5030)

65

6,666

20

Landscaping and groundskeeping workers (37-3010)

62

7,816

43

Telemarketers (41-9040)

42

6,679

66

Fire inspectors (33-2020)

41

2,839

25

Postsecondary teachers (25-1000)

28

5,087

23

Miscellaneous health practitioners and technical workers (29-9090)

22

5,049

52

Detectives and criminal investigators (33-3020)

10

2,016

19

Bailiffs, correctional officers, and jailers (33-3010)

3

4,365

22

Note: SOC = Standard Occupational Classification.

Source: Ampaabeng et al., “State Occupational Licensing RegData” (dataset).

Indiana has the highest number of regulated occupations, with 48 of the 50 being regulated (see table 3). The most heavily regulated occupation is health diagnosing and treating practitioners. Healthcare workers have the most words and restrictions, and also the longest average sentence length, of any occupation regulated in the state. Counselors, social workers, and other community and social service specialists are the next most heavily regulated occupation, followed closely by architects, surveyors, and cartographers. The occupation with the fourth-most occupational licensing restrictions, private detectives and investigators, has the second-greatest average sentence length.

Table 4. Maryland Occupational Licensing Restrictions by Occupation

Occupation (SOC Code)

Restrictions

Total Words

Average Sentence Length

Total

9,477

776,745

67

Health diagnosing and treating practitioners (29-1000)

4,265

374,078

382

Heating, air conditioning, and refrigeration mechanics and installers (49-9020)

1,103

88,749

165

Counselors, social workers, and other community and social service specialists (21-1000)

1,051

91,178

122

Dental hygienists (29-2020)

840

73,174

29

Private detectives and investigators (33-9020)

720

46,373

90

Morticians, undertakers, and funeral directors (39-4030)

513

32,871

28

Psychologists (19-3030)

250

17,117

29

Massage therapists (31-9010)

142

12,258

30

Barbers, hairdressers, hairstylists, and cosmetologists (39-5010)

137

6,688

23

Accountants and auditors (13-2010)

127

11,198

26

Architects, surveyors, and cartographers (17-1000)

110

7,844

47

Appraisers and assessors of real estate (13-2020)

69

6,916

25

Aircraft pilots and flight engineers (53-2010)

61

3,140

21

Tax examiners, collectors and preparers, and revenue agents (13-2080)

40

2,391

19

Life scientists (19-1000)

35

1,226

19

Miscellaneous healthcare support occupations (31-9090)

14

1,544

22

Note: SOC = Standard Occupational Classification.

Source: Ampaabeng et al., “State Occupational Licensing RegData” (dataset).

Maryland regulates 16 of the 50 occupation codes on our list (see table 4). Health diagnosing and treating practitioners are the most heavily regulated occupation in Maryland, with roughly half of the restrictions and total words of all the occupations. Their average sentence length is also 382 words, more than 300 words longer than for the average occupation. Heating, air conditioning, and refrigeration mechanics and installers and counselors, social workers, and other community and social service specialists are the next most heavily regulated occupations.

Table 5. Ohio Occupational Licensing Restrictions by Occupation

Occupation (SOC Code)

Restrictions

Total Words

Average Sentence Length

Total

25,630

1,638,103

125

Health diagnosing and treating practitioners (29-1000)

12,258

810,348

609

Private detectives and investigators (33-9020)

5,548

340,600

315

Counselors, social workers, and other community and social service specialists (21-1000)

1,980

114,075

67

Barbers, hairdressers, hairstylists, and cosmetologists (39-5010)

1,412

69,519

62

Psychologists (19-3030)

1,128

74,375

75

Dental hygienists (29-2020)

1,052

85,187

37

Architects, surveyors, and cartographers (17-1000)

875

51,465

60

Construction and building inspectors (47-4010)

643

37,186

56

Accountants and auditors (13-2010)

458

38,671

34

Landscaping and groundskeeping workers (37-3010)

241

14,659

31

Real estate brokers and sales agents (41-9020)

35

2,018

34

Note: SOC = Standard Occupational Classification.

Source: Ampaabeng et al., “State Occupational Licensing RegData” (dataset).

In Ohio, 11 of the 50 occupations are regulated (see table 5). Health diagnosing and treating practitioners are the most heavily regulated occupation, with nearly half the total restrictions and total words. Their average sentence length is 609, almost five times the average sentence length for all occupations. Private detectives and investigators are the second most heavily regulated occupation. Counselors, social workers, and other community and social service specialists and barbers, hairdressers, hairstylists, and cosmetologists are also heavily regulated.

Table 6. Pennsylvania Occupational Licensing Restrictions by Occupation

Occupation (SOC Code)

Restrictions

Total Words

Average Sentence Length

Total

5,851

538,085

30

Health diagnosing and treating practitioners (29-1000)

2,722

222,626

176

Counselors, social workers, and other community and social service specialists (21-1000)

1,090

92,272

85

Dental hygienists (29-2020)

349

35,419

17

Private detectives and investigators (33-9020)

220

14,170

18

Appraisers and assessors of real estate (13-2020)

197

24,690

15

Psychologists (19-3030)

175

21,180

20

Securities, commodities, and financial services sales agents (41-3030)

139

13,287

55

Ambulance drivers and attendants, except emergency medical technicians (53-3010)

138

15,459

23

Architects, surveyors, and cartographers (17-1000)

135

13,810

17

Construction and building inspectors (47-4010)

129

13,197

16

Accountants and auditors (13-2010)

122

16,077

16

Environmental engineers (17-2080)

115

18,389

20

Massage therapists (31-9010)

99

7,306

18

Landscaping and groundskeeping workers (37-3010)

64

8,462

14

Clinical laboratory technologists and technicians (29-2010)

48

2,781

15

Real estate brokers and sales agents (41-9020)

31

11,613

30

Barbers, hairdressers, hairstylists, and cosmetologists (39-5010)

28

2,593

16

Heating, air conditioning, and refrigeration mechanics and installers (49-9020)

21

2,178

19

Miscellaneous healthcare support occupations (31-9090)

21

2,124

10

Supervisors of farming, fishing, and forestry workers (45-1000)

8

452

13

Note: SOC = Standard Occupational Classification.

Source: Ampaabeng et al., “State Occupational Licensing RegData” (dataset).

In Pennsylvania, 20 of the 50 occupations are regulated (see table 6). Health diagnosing and treating practitioners is the most heavily regulated occupation, with nearly half of the total restrictions and words for all the occupations in the state, and their average sentence length is nearly double that of the next-highest occupation. Counselors, social workers, and other community and social service specialists is the second most heavily regulated occupation. Dental hygienists are the next most heavily regulated occupation.

Cross-Occupation Comparison

Breaking our results down by SOC code allows us to compare results across occupations and states. The occupations that consistently face the greatest number of restrictions across states are health diagnosing and treating practitioners and counselors, social workers, and other community and social service specialists. The most heavily restricted occupation is health diagnosing and treating practitioners. Their average number of restrictions is 6,180, with an average of 463,085 separate licensing restrictions. Counselors, social workers, and other community and social service specialists have an average of 1,865 restrictions in our sample and an average of 156,925 words.

For many occupations in our sample, the regulatory stance differs considerably across the four states. For instance, Indiana places more than 2,400 restrictions on architects, while Ohio places fewer than 900, and Maryland and Pennsylvania place fewer than 150. Dental hygienists are regulated inconsistently between states. The number of restrictions on dental hygienists ranges from 1,052 in Ohio to 254 in Indiana. Even for occupations that are regulated more consistently between states, we observe outlier states. Ohio is unusually restrictive for health diagnosing and treating practitioners and private detectives, while the other states have consistent regulatory stances. Ohio also strictly regulates psychologists, while Indiana, Maryland, and Pennsylvania place fewer restrictions on professionals in that industry. Maryland places many more restrictions on morticians than comparison states.

Several occupations are licensed and heavily regulated in some states but unlicensed in other states. Heating, air conditioning, and refrigeration mechanics and installers are licensed and regulated in Maryland and Pennsylvania, but not in Ohio and Indiana. Supervisors of farming, fishing, and forestry workers are subject to licensing in Indiana and Pennsylvania, but not in Maryland and Ohio.

Healthcare professionals face very stringent regulations, and this is perhaps unsurprising, given the risk to the health and safety of patients posed by receiving substandard care. However, by designing such complex and disparate regulatory systems, states make it difficult for professionals to move between states. This creates rigidity in the healthcare system and limits the system’s ability to respond to shocks in demand. Outside healthcare, it is worth pondering the health and safety rationale for Maryland placing 513 restrictions on morticians—more than eight times the number of restrictions the state places on aircraft pilots and flight engineers. Discrepancies like these highlight the need for a careful reconsideration of occupational licensing restrictions.

Conclusion

In this policy brief, we use a novel dataset generated using OL RegData to explore differences in the stringency of occupational licensing for select states in the Midwest and mid-Atlantic region. Indiana has more occupational licensing restrictions and words than any other state in our comparison group, and Ohio is a close second. Pennsylvania has the fewest occupational licensing restrictions and words and the shortest average sentence length. Perhaps not surprisingly, occupational licensing restrictions are most prevalent in healthcare. More granular comparisons of occupational licensing across states suggest that there are significant differences in the burden of state regulation. It is not immediately clear why regulations should differ to this degree for professions that do not greatly differ across states. With this additional information in hand, policymakers should carefully reconsider occupational licensing laws and make sure that those laws are not overly burdensome and are providing the right mix of consumer protection and flexibility.

A Primer on Emergency Occupational Licensing Reforms for Combating COVID-19

March 26, 2020

The pandemic of COVID-19 has created a significant strain on the healthcare system in the United States. As of March 26, the Centers for Disease Control and Prevention has confirmed 68,440 cases of the disease and 994 deaths in the United States. As COVID-19 continues to spread, these numbers are only expected to increase, and with that so does the potential to overwhelm the US healthcare system.

American regulatory policy limits the country’s healthcare capacity in a variety of ways. In response, states must consider a range of temporary measures to allow the supply of healthcare professionals to meet the sudden growing demand and provide adequate care to patients. The existing web of state occupational licensing laws creates rigidity in healthcare labor supply. In this brief we highlight actions states have taken to reform occupational licensing, and we produce a novel ranking of these interventions as guidance to policymakers.

Currently, Italy is reporting a surge of infections among healthcare personnel. These infections make up 8.3 percent of the country’s total infections. With Italian hospitals overwhelmed from the onslaught of infected patients, the healthcare system is struggling. As Europe’s hardest-hit country, Italy is being forced to relax its own regulatory regime, calling in retired doctors and waiving occupational licensing requirements to treat the overwhelming influx of patients.

The situation in the United States may not play out to be as severe as in Italy; however, the problem in Italy shows how deadly a general healthcare staffing shortage can be. Without additional capacity, COVID-19 could strain American hospitals to their breaking point. Complicating this dilemma even more, much of America’s healthcare workforce falls into the population considered to be at a higher risk for severe illness. Registered nursing, an occupation that is already experiencing shortages across the nation, has over one million individuals age 50 or older.

States such as New York, which currently has the most cases in the United States, at 32,966, are already preparing for staffing shortages. Although expert projections on how COVID-19 will affect the United States vary in severity, they all seem to agree that the virus will test the limits of hospitals across the nation. With the number of infected Americans only expected to grow in the coming weeks, it is vital that American hospitals are well equipped to fight this pandemic.

We proceed in this brief by highlighting how occupational licensing creates a lack of flexibility in the market for healthcare professionals. We then analyze recent action taken by states to combat the crisis, and we offer a novel ranking of which interventions are likely to be most effective in adding healthcare staff capacity.

Why Occupational Licensing Creates Barriers in an Emergency

The United States healthcare system was in a weak position before the outbreak of COVID-19 owing to long-standing regulatory policies. Specifically, America has many regulations that restrict the available supply of healthcare, including but not limited to Medicare’s Graduate Medical Education residency limit, certificate-of-need laws, and occupational licensing laws. While occupational licensing laws affect many professions, they are ubiquitous in healthcare—nearly 44 percent of healthcare and education workers are licensed. Licensing is implemented with the intention of establishing a minimum level of quality and encouraging human capital formation for professionals throughout their career.

In healthcare professions, occupational licensing laws limit paths to begin working, mandating education, training, and exams that all professionals must undergo in order to begin practicing. These requirements are rigid, reducing healthcare supply flexibility and preventing supply from quickly adapting to meet sudden changes in needs, such as the current pandemic. While policy should not be designed for extremely rare events, it should be flexible enough to adapt to a novel crisis.

Research shows that occupational licensing reduces the supply of workers in a profession. Looking at select occupations, Morris M. Kleiner estimates that states without licensing experienced 20 percent faster growth in the number of professionals than states that licensed those select occupations. Across a larger sample of professions, Kleiner found an 11.4 percent reduction in the number of professionals as a result of the barriers created by occupational licensing. These findings are evidence that licensing laws have reduced the supply of healthcare professionals as a result of elevated entry costs. The rigidity of licensing requirements makes it more difficult for new professionals to enter an occupation quickly in response to a sudden surge in demand.

Because licensing laws are passed at the state level, they also reduce the interstate mobility of workers. State boards typically require professionals licensed in other states to apply, pass exams, and pay fees in order to begin practicing in their new home. These additional costs and delays, which can be as long as several months, reduce the interstate mobility of licensed workers by 36 percent compared to similar unlicensed workers. In a public health emergency, licensing substantially reduces the ability of workers to move to the areas that need additional care quickly.

Occupational licensing laws also clearly dictate the tasks that each profession is allowed to perform. Historically, the American Medical Association has exerted substantial influence over scope-of-practice laws. As a result, many states do not allow healthcare professionals to practice to the full extent of their education and training. In a rapidly evolving public health crisis, flexibility is essential to provide quality care and meet the sudden change in patient needs. 

A Ranking of Recent Reforms

Several states have enacted emergency reforms in response to the crisis. Policymakers are to be commended for taking quick action. List 1 (page 7) sorts responses by state, and List 2 (page 8) categorizes the responses by intervention as of March 25, 2020. We proceed by ranking the reforms that have been implemented into different tiers based on our expectation of their effectiveness. Tier 1 reforms we believe to be most effective, tier 2 we believe to be moderately effective, and tier 3 we believe to be least effective.

Tier 1: Most Effective Reforms

Blanket Expansion of Medical Scope of Practice

At the time of this writing, Maryland is the only state to have enacted a significant reform that grants all healthcare professionals the authority to work beyond their current scope of practice in healthcare facilities. New York has enacted this type of reform for select licensed health professionals.

Healthcare professionals learn a lot in their education, and while society may not want registered nurses (RNs) to practice like a physician under normal circumstances, at some point it may be necessary to give them an expanded role, especially given America’s older physician population. Freeing medical professionals from the normal limits of regimented scope-of-practice restraints will allow all medical providers to be more creative in deploying nurses and potentially devising better ways to make use of their abilities.

Many healthcare professionals such as physician assistants (PAs) and nurse practitioners (NPs) are not allowed to practice to their full skill sets and apply their full training because of scope-of-practice laws. In many states, PAs and NPs are not allowed to practice without a supervising physician. If a physician becomes sick with COVID-19, that physician’s PA or NP will be able to do little in states with restrictive scope-of-practice laws. Blanket expansions of medical scope of practice, like the one Maryland has already enacted, would automatically grant PAs and NPs broader scope of practice to help alleviate demand surges for healthcare services.

Given the large number of trained medical professionals, expanding their scope of practice can rapidly increase the availability of care and do so across the country. These professionals already have experience with the staff, team members, and institutional knowledge of the facilities they work in. In many states, NPs and PAs are already permitted to practice to the full extent of their medical training. There is no evidence that granting this authority reduces the quality of care received by patients.

Waiving Licensure Requirements

Eight states (Idaho, Maine, Michigan, Missouri, New Hampshire, New York, Pennsylvania, and Texas) have waived or modified licensing requirements for professionals. Idaho, Maine, and Missouri in particular, have granted broad authority for the waiving of all licensure requirements in the case of unmet need arising from COVID-19. The remaining states have modified licensing requirements on a more limited basis.

This measure is also likely to be very effective at increasing healthcare capacity and would complement a blanket expansion in medical scope of practice. As already-established medical professionals move into their full scope of practice, temporarily waiving licensing requirements will reduce the training of new professionals to the absolute minimum necessary for narrow tasks, such as operating the ventilators of severely ill patients. Even if healthcare providers significantly increase the number of ventilators available, they will still experience shortages without the requisite operating personnel. Experienced licensed practical nurses (LPNs) could be trained to be able to operate the ventilators temporarily to support the RNs and specialists running the ventilators during the crisis. Ensuring that they are well trained for their specific tasks and not having them waste time meeting requirements irrelevant for their roles during the public health emergency will help expand healthcare capacity more rapidly. Aspiring health professionals currently in the early stages of education can be trained to perform simple procedures and care relatively quickly under appropriate supervision and guidance.

Many nurses that could potentially begin practicing are currently locked out. Pearson VUE has suspended all offerings of the nursing board exams during the declared health crisis until April 17, preventing qualified nurses from entering the workforce. Waivers or modifications of licensing requirements would allow these nurses to begin working much more quickly. Pennsylvania and Texas have enacted specific reforms for nurses.

Allowing healthcare students in the end stages of training and in clinical rotations to begin practicing their profession would be another simple option to expand the healthcare supply with little risk. By allowing those in their final year of training to immediately practice, policymakers can augment the workforce by approximately 30,000 physicians and 158,000 nurses in the United States. Italy has already implemented this measure, allowing the cohort of physicians in training to begin working in hospitals nine months before its scheduled graduation.

Additionally, many laws require foreign physicians who have studied, trained, or practiced overseas to go through a training process to prove competency. States could consider temporarily waiving the required training if these physicians have adequate proof of their education. At the very least, states could allow foreign-trained physicians a scope of practice similar to an NP.

States should look to reforms made in Idaho, Maine, and Missouri as best practices to help immediately ease burdens placed upon the healthcare system from COVID-19. Steps taken by the other five states are good first steps, but broader waivers would be much more effective.

Tier 2: Moderately Effective Reforms

Out-of-State Temporary License

Fourteen states (and Colorado, whose reforms are currently pending) have enacted reforms allowing out-of-state licensed medical professionals to obtain a temporary emergency license to practice. These reforms will make it easier to move the supply of healthcare workers to meet sudden spikes in demand and, at the very least, even out regional shortages and surpluses. Some states, or regions within states such as California, face shortages of healthcare professionals in even noncrisis times. Allowing temporary licenses for out-of-state residents can smooth the shortages and surpluses. Such reform may also be beneficial if different areas face different levels of outbreaks.

However, allowing recognition for out-of-state licenses is less beneficial when crises are widespread rather than contained within certain regions. If the entire country faces a shortage of healthcare professionals, the effectiveness of this reform may be reduced.

In short, this reform allows capacity to shift from geographic pockets with the least need to pockets with the greatest need. This reform does not work to enhance overall capacity like the tier 1 reforms highlighted in the preceding section.

Tier 3: Least Effective Reforms

Allowing Retired Personnel to Practice

Seven states (Illinois, Iowa, Maryland, Massachusetts, New York, North Carolina, and Texas) have allowed retired medical personnel the authority to practice. Although this reform does add some immediate capacity, its effectiveness is limited owing to the high risk of morality from the virus for older citizens. When providers shift their limited healthcare resources to treating coronavirus patients, that will leave fewer medical professionals to provide treatments for other ailments. Retired and older healthcare professionals can safely help fill that gap and provide care to patients with ailments that will not give these retired professionals a disproportionate chance of severe complications and death.

The number of retired healthcare professionals, however, is limited. Because of their age, they likely have a lower stamina, requiring them to work shorter hours. While retired healthcare professionals are highly skilled and experienced, their return will add a limited amount of staff for hospitals.

Extended Expiration and Waiving Continuing Education

Four states have either extended expiration of licenses or eliminated continuing education requirements (Iowa, Maryland, Oklahoma, and Pennsylvania). During a public health emergency, it makes sense for states to waive these requirements. Waiving continuing education requirements will allow healthcare professionals to focus on treating patients, and their hours are expected to surge in response to increased demand. Because of the increased demand, licenses should be extended indefinitely until after the emergency ends. The overall ability of this reform to increase capacity, however, is limited. The most cumbersome barriers associated with occupational licensing remain in place with this type of reform.

Waived Fees

Georgia, Pennsylvania, and South Carolina have waived fees associated with obtaining occupational licensing. Waiving initial licensing and continuing education fees temporarily will reduce the costs of healthcare workers entering and remaining in the workforce. While this waiver may not have a substantial effect on the size of the workforce, it will make it easier for professionals, especially as the federal government considers stimulus programs. While this reform will do little to expand the supply of healthcare, it will prevent a reduction in supply while not penalizing noncompliance with rules that do not affect patient care.

Another Possible Reform: Military Training

Another option that states have not implemented at the time of this writing is allowing additional military personnel to be trained and allowing those already trained to administer care. There is a large number of military personnel trained for medical care who are unable to practice medicine because of licensing laws but who could immediately be allowed to practice.

Additionally, the military could quickly mobilize and train service members to operate ventilators and the few relevant healthcare tasks that accompany such operation. The military has much shorter, intense training regimens. Health providers can use the local National Guard barracks as makeshift “triage” centers for patients on ventilators. Italy has been forced to use hospital hallways and waiting rooms, but in a worst-case scenario, military installations would be a much better solution to prevent hospital overflow.

Conclusion

Because of the danger posed by the quick spread of and high hospitalization rate for COVID-19, states must be able to rapidly increase their capacity to provide care for patients in order to avoid a high death rate. America’s current regulatory policies do not allow the supply of healthcare workers to respond to sudden, sharp changes in demand. To their credit, a number of states have enacted emergency reforms to occupational licensing to help meet growing demand. Other states should look to current national leaders such as Maryland, Idaho, Maine, and Missouri. Maryland has granted all medical professionals blanket authority to practice beyond their scope of practice. Idaho and Maine have granted broad authority to exempt professionals from licensing requirements. Reforms like these are likely to be most effective at providing the healthcare system the capacity it needs to meet ever-growing demand for healthcare services as a result of COVID-19.

List 1. Emergency Reforms Sorted by State

Georgia

  • out-of-state emergency temporary permit (advance practice registered nurses [APRNs], MDs, PAs, respiratory care practitioners [RCPs])
  • waived fees

Colorado

  • out-of-state licensing (proposed)

Idaho

  • “Waive Licensing and Related Requirements”

Illinois

  • out-of-state emergency temporary license (nurses, pharmacists, MDs, PAs, RCPs)
  • retired or inactive licensees can practice (nurses, MDs, PAs, RCPs)

Iowa

  • extended expiration
  • inactive licensees can practice (nurses, MDs, PAs, RCPs)

Kansas

  • emergency temporary license

Louisiana

  • emergency temporary permit (allied health practitioners)

Maine

  • waived or modified licensing requirements

Maryland

  • extended expiration (all licensing boards)
  • emergency temporary healthcare permit
  • inactive licensees can practice
  • blanket expansion of medical scope of practice 

Massachusetts

  • emergency temporary permit
  • license reactivation for retired MDs

Michigan

  • nurse aide exam requirements waived
  • continuing education requirements waived
    emergency temporary permit

Missouri

  • waived or modified licensing requirements

New Hampshire

  • emergency temporary permit for medical personnel
  • nursing clinical experience requirements modified

New Jersey

  • emergency temporary permit for medical personnel
  • waived licensing requirements for out-of-state license
  • waived fees

New York

  • emergency temporary permit for medical personnel
  • waived or modified licensing requirements
  • blanket expansion of medical scope of practice (select personnel)
  • license reactivation for retired MDs

North Carolina

  • inactive and retired medical licensees can practice

Oklahoma

  • extended expiration

Oregon

  • out-of-state medical personnel emergency temporary license

Pennsylvania

  • waived nursing fees
  • extended expiration
  • waived exam for graduate students temporarily

South Carolina

  • waived fees
  • waived requirements for out-of-state nurses

Tennessee

  • out-of-state medical personnel emergency temporary license

Texas

  • out-of-state medical personnel emergency temporary license
  • waived exam requirements for graduate nursing students
  • license reactivation for retired nurses 

List 2. Emergency Reforms Sorted by Type of Reform

Out-of-State Medical Personnel Temporary License

  • Colorado (proposed)
  • Georgia
  • Illinois
  • Kansas
  • Louisiana
  • Maryland
  • Massachusetts
  • Michigan
  • New Hampshire
  • New Jersey
  • New York
  • Oregon
  • South Carolina
  • Tennessee
  • Texas

Waived or Modified Licensing Requirements

  • Idaho
  • Maine
  • Michigan (nurse aide examination, continuing education)
  • Missouri
  • New Hampshire (modifies clinical experience requirements)
  • New York (several occupations)
  • Pennsylvania (nursing exam)
  • Texas (nurses)

Inactive or Retired Licensees Can Practice

  • Illinois
  • Iowa
  • Maryland
  • Massachusetts
  • New York
  • North Carolina
  • Texas

Blanket Expansion of Medical Scope of Practice

  • Maryland
  • New York (select personnel)

Waived Fees

  • Georgia
  • Pennsylvania
  • South Carolina

Extended Expiration

  • Iowa
  • Maryland
  • Oklahoma
  • Pennsylvania

About the Authors

Ethan Bayne is a legislative research analyst with the Knee Center for the Study of Occupational Regulation at Saint Francis University. He received an MA in social and public policy from Duquesne University and his undergraduate degree from Thiel College.

Conor Norris is a research analyst with the Knee Center for the Study of Occupational Regulation at Saint Francis University. Norris has been published in the Journal of Regulatory Economics and has also written numerous op-eds that have been published across the country. He received his MA in economics from George Mason University and his undergraduate degree from Saint Francis University.

Edward Timmons is director of the Knee Center for the Study of Occupational Regulation and professor of economics at Saint Francis University. He is a senior affiliated scholar with the Mercatus Center and has published more than 50 op-eds, policy pieces, and journal articles on the topic of occupational regulation.

On Bank Size and Bank Asset Holdings

Tuesday, June 25, 2019
Authors: 
Stephen Matteo Miller
Joe Brunk

We have so far explored the relatively recent decline in the large number of banks in the US, as well as the long-term institutional factors that likely contributed.. In this last post, we examine the allocation of bank assets across the economy, including the role of bank size on small business lending.

Assets in Banks, Thrifts, and Bank Holding Companies

In our second post, we showed that the number of banks and thrifts, as well as the number of bank holding companies, has been declining. This suggests that banking activity has becoming concentrated. Holding companies are part of the reason for this trend..

Figure 1 shows that the fraction of banking assets held in banking entities that operate within a parent holding company has been increasing. The fraction increased nearly 10 percentage points during the 1990s. While the fraction increased by only two percentage points in the subsequent years before the crisis, it increased by about five percentage points in 2008.Banking Assets by Regulator

In our second post, we showed that the FDIC regulates the largest fraction of banking entities, although those entities tend to be smaller in size. The story changes when considering banking assets.

Figure 2 plots the fraction of banking assets by regulator. While the fraction of entities regulated by the OCC has been falling, the figure below shows that the OCC’s fraction of bank assets by regulator has been increasing, at just under 70 percent since the crisis. The fraction for the other regulators has been declining slightly.

Banking Assets Held in Small and the Largest Banks

Small banks, defined as those with $10 billion or less in total assets, make up about 96 percent of all banks. Figure 3 shows that while the share of assets and deposits for this small bank category have been declining since Q2 1992, the share of deposits and assets for the top five largest banks (in terms of total assets) has not only been rising, but now exceeds that for smaller banks. That said, the trend for large banks has flattened since the recent crisis. We find qualitatively similar results in terms of small business lending.

Figure 4 offers an alternative way to look at industry concentration based on the Hirschman-Herfindahl Index (HHI), calculated as the simple sum of squared (asset) shares for each bank holding company. While US horizontal merger guidelines make use of this measure, depending on the market, this figure typically gets measured at the local level.

While the index can be expressed on a 0 to 1 scale if the shares are expressed as decimal values, we use the more traditional 0 to 10,000 scaled used when the shares are expressed as a percent.

When measured at the local level, a market is deemed “highly concentrated” when the HHI equal to at least 1800.

The figure suggests that, based on a simplistic measure, the commercial banking sector is unconcentrated, and since the crisis, and the trend has declined rather than increased.

Small Business Lending and Bank Size

Conventional wisdom holds that small banks supply a large fraction of small business credit because they make extensive use of “soft” information, while larger banks cannot (see Berger and Black, (2011)). Initial evidence suggested that larger banks relied on quantitative criteria when making decisions concerning loan origination, while smaller banks made use of qualitative criteria (see Cole, et al. (2004)).

However, both small and large banks have made increasing use of credit scoring technologies, which offer a substitute for “soft” information. As a result, small banks may have lost their advantage in serving small businesses (see Berger and Frame (2007) and Berger, et. al. (2007)).

Figure 5 shows that large banks have been originating a larger fraction of commercial and industrial (C&I) loans of under $1 million, a commonly used proxy of small business lending available from call reports.

The top 5 largest banks in 1998 held about 8 percent of small business loans, and that fraction has grown to 27 percent in 2018.

For smaller banks, the story differs. In 1998, banks with parent holding companies or individual banks that had $10 billion ($1 billion) or less in total assets were originating just under about 53 percent (36 percent) of all small business C&I lending and that fraction has declined to 30 percent (16 percent) by 2018.

For FDIC-defined community banks, the fraction has fallen from about 38 percent to about 25 percent. This suggests that smaller banks, while certainly not unimportant, play an increasingly smaller role in funding small business C&I lending, while larger banks play an increasingly larger role in funding such lending.

Conclusion

Even with the large number of small banks still in existence, the size of the typical bank continues to increase. While small banks continue to play an important role, their influence will likely continue to diminish. Policy debates should focus more on consumer access to financial services rather than on the size of the entities providing those services.

Photo credit: Getty Images/Theodore Van Pelt/EyeEm

Subtitle: 
A Series on Bank Size and Concentration

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