The Regulatory Thicket Hurts the Most Vulnerable
|Topics:||Administrative Law & Regulation • Regulatory Transparency Project • State Governments|
For years, the District of Columbia’s main regulatory agency, the Department of Consumer and Regulatory Affairs have resisted reform. D.C. residents will argue about anything, but they are unified in their frustration with this agency: builders complain that permitting takes too long and code inspections are too arbitrary; building tenants complain code violations go unenforced; businesses complain there is too much paperwork required to get up and running; policy experts worry professional licensing disproportionately harms lower-income professionals. The agency’s operations remain stuck in the past, and no administration has managed to significantly reform it.
Importantly, while the District residents and policy makers have generally complained about the incompetence at the Department of Consumer and Regulatory Affairs, few have wondered if the consequences go beyond it. Just a single agency in the city controls the licensing of businesses and professionals and implements the building code, touching every aspect of business decisions, from leasing space to hiring employees.
A recent paper from the Regulatory Transparency Project finally gives name to what has irritated and overburdened D.C. residents and businesses for years: the Regulatory Thicket—an unruly growth of unnecessarily complicated and redundant regulations that stifle economic growth and close paths to opportunity.
Many of the points made in this paper resonated with me. First, the authors note that:
“…[M]uch of the regulatory activity takes place at the state and local levels where governments have no obligation to identify the costs or benefits associated with regulations they impose… National advocacy organizations, quite aware of the low barriers to passing laws at the local level (e.g., no cost-benefit analysis and a smaller and more easily manipulated legislative body) are increasingly lobbying local governments to push their regulatory agendas. …This practice has turned local governments into petri dishes of ideology, with potentially disastrous effects on the economy.
I cannot agree more: Just in the last year, the city enacted a paid family leave benefit at a cost of $250 million a year—nearly as much as corporate franchise taxes—even though two thirds of its workers live elsewhere in the region, and tried to impose a carbon tax even when the city buys all of its electricity from elsewhere. In each case, the central organization pushing for the legislative changes had little or no connection to the District of Columbia, but wanted to use their legislative success in the capital to advance their national agendas.
Or, this point:
“It is very difficult to quantify the entirety of regulatory burdens systematically. Besides the federal government and the 50 states, there are over 89,000 local government entities including counties, cities, townships, municipalities, special districts, and school districts. Many of these entities impose regulations. While the costs of these regulations are cumulative, there is simply no way to quantify just how much regulation there is systematically.”
Even in the District of Columbia, which has a single government that combines the functions of a state government, local governments, a city, and a school district, it is impossible to figure out the costs of regulation. The city tracks the cost of legislation on the government, but not on the private sector. I have personally witnessed bills being tweaked to save a government agency a couple hundred thousand dollars, but no care from the Mayor or the Council Members when the business costs were in the millions.
But too often, the burdens of overrun regulations are pushed on the shoulders of the most vulnerable. Consider professional licensing: a central theme in the paper. In the District, 18 different professional boards regulate 125 occupational and professional categories. This is in addition to 20 other boards that are responsible for the licensing over 50 health and mental health occupations. In some cases, more people sit on boards than the number of people they license. According to the city’s own reporting, its licensing boards have licensed 12 percent of all private sector employment (69,863 individuals)—a exceptionally large number in a city of law firms, consultants, and non-profits.
Nearly half of these occupations do not require significant post-secondary credentialing (such as those required for doctors, counselors, social workers, or teachers) but require government licensing. And most occupations licensed by the city are middle or low-wage jobs that are attractive to low-skilled D.C. residents who do not have high levels of education or formal training. Of the 59 occupations licensed by the city I can match to BLS occupational categories, 42 are occupations with middle-wage jobs—paying below the median salary in the region and above minimum wage. Furthermore, 14 of these occupations are associated with lower skill levels but living wages, with median wages between $27,000 and $35,000. These occupations, according to the BLS, collectively employ over 20,000 workers.
Why should we care about occupational licensing? Occupational licensing plays an important role in employment, wages, mobility, and the health of the labor market. State licensing can act as an impediment to worker mobility, and when onerous, can close paths to well-paying jobs for low income residents. Licensed workers generally earn more and experience less unemployment than their unlicensed partners across the country. This may seem like a good thing, but only for those who can pay the fees or meet the regulatory requirements. Others who are willing to work hard, or learn on the job, are left behind. This does not bode well for the District’s most vulnerable residents.
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Yesim Sayin Taylor is the Executive Director of the D.C. Policy Center