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Does occupational licensing promote consumer health and safety? Econometric study looks at primary data for some answers

Does occupational licensing promote consumer health and safety? Econometric study looks at primary data for some answers little research has actually probed, historically or now, whether licensing is helpful or harmful to the consumers it is supposed to benefit. Empirical evidence is scarce. A study released in May by the National Bureau of Economic Research (NBER) is intended to start filling the gap.

Entitled “The Effect of Occupational Licensure on Consumer Welfare, Early Midwifery Laws and Maternal Mortality,” the study uses a data set assembled from primary sources to look at the effect of midwifery licensing laws introduced in states and municipalities between 1900 and 1940 upon a measurable probability: the likelihood of dying.

Research over the last four decades has primarily focused on the economic effects of setting requirements that restrict entry into licensed fields: higher prices, insulation from competition, reduced access to services, fewer jobs created. “Whether occupational licensing [protects consumers] or not is an important, but unanswered question,” say Montana State University economist D. Mark Anderson and colleagues at several other universities who conducted the study.

The NBER research team’s conclusion: Requiring midwives to be licensed reduced maternal mortality by 6 to 8 percent and may have let to modest reductions in infant mortality and mortality among children under the age of 2 from diarrhea. As reviewers at Chicago Booth Review succinctly sum up the study’s findings: “Licensing midwives saves lives.”

The case of midwifery was uniquely suited to studying licensing’s impact, the study authors note, because American women in the early 20th century typically gave birth at home either attended by a doctor or midwife who had sole responsibility for the health of mother and infant.

“By drawing upon historical data, we are able to estimate the relationship between requiring that a group of health care providers (midwives) be licensed and a specific consumer health outcome (maternal mortality) over which they had a direct, immediate, and profound impact,” the authors explain.

Before adoption of early state licensing requirements, the market for midwifery services was wholly unregulated, making it simpler to examine licensing’s impact. The pattern of regulation today is more difficult to isolate for purposes of a study. “In the modern health care sector where a large number of specialists are already licensed, loosening or tightening licensing requirements for a specific type of health care provider represents only an incremental change in the overall licensing regime.”

From 1900 to 1940, 22 states and at least a dozen municipalities adopted midwifery licensing requirements, the study reports. The first licensing law had been adopted in Illinois in 1877 as part of a practice act for any person “practicing medicine in any of its departments.”

Licensure requirements adopted from 1900 to 1940 varied significantly among the states. Applicants in Mississippi were judged based on their character, cleanliness, and intelligence, but were not required to take an exam or graduate from a school of midwifery, while California, Washington and Wisconsin required that midwives graduate from a recognized school of midwifery and pass an examination administered by the state medical board. In 8 of the 18 states for which the researchers have pre- and post-treatment maternal mortality data, obtaining a license required only receiving basic instruction from a public health nurse or county health officer.

In spite of such differences, the study found that the estimates suggest that adopting even the least stringent licensing requirements led to a 5 percent reduction in maternal mortality. States that required applicants to pass an exam or graduate from a recognized school of midwifery appeared to show a more pronounced relationship between midwifery laws and maternal mortality, the authors note. Overall, the introduction of licensing for midwives was associated with a 6 to 8 percent reduction in maternal mortality as reported annually in Mortality Statistics and Vital Statistics of the United States.

To control for the possible role of broad improvements in antiseptic technique or antiseptic awareness which took place in the same span of time, the study tested whether midwifery laws were related to non-maternal mortality from sepsis (deaths caused by bacterial infection) and non-maternal mortality from tetanus. “The results provide additional evidence that the relationship between midwifery licensing requirements and maternal mortality is causal,” the authors report.

The NBER study authors believe that the estimates are “the first econometric evidence of which we are aware on the relationship between licensure and consumer safety and are directly relevant to ongoing policy debates both in the United States and the developing world surrounding the merits of licensing midwives.”

They add: “Whether requiring doctors, dentists, and other health professionals to be licensed also leads to better health outcomes is an open, but crucial, question that deserves the attention of future researchers.”