News Story

Red Tape Keeps Flooded Midland Residents Up A Creek Without A Repairman

Homeowners pay price for government’s protectionist licensure schemes

Along residential curbs in Midland County this week, residents can find anything from mattresses and couches to dollhouses and abandoned pillow pets. But they shouldn’t mistake this phenomenon for a widespread garage sale: All the objects will be soaked, in many cases from a sewage backup.

These items were pushed, pulled, and dragged out of flooded basements.

After Midland’s near-record flooding, it’s no wonder residents are facing problems with water damage in their basements. But they’re also facing problems with flood repair. And thanks to Michigan’s occupational licensing laws, experts say consumers are paying more for repairs and waiting longer for service than they could be.

The problem stems from the state’s “ability to limit the supply of workers, which drives up prices,” says Morris Kleiner, a University of Minnesota professor and an expert on occupational licensure.

Michigan requires electricians, carpenters, plumbers, painters, boiler repairmen, and maintenance and alteration workers (like insulation workers and basement waterproofing workers) to be licensed. Electricians, who must undergo 8,000 training hours, have the most obstacles to overcome, but all of these occupations have certain requirements.

This usually means workers must fulfill a certain number of training hours, take an exam and pay a fee in order to contribute to the industry.

Last year, the Michigan House passed a bill to roll back many state licenses, but it did not pass the Senate. This week, the Michigan House passed a bill to to end painters’ licensing restrictions, but it has not yet passed the Senate.

According to Kleiner, consumers pay at least 15 percent more for services than they would without licensing. The reasoning is simple: Licensing rules limit the number of workers, and fewer workers means less competition and higher prices.

If an occupation like plumbing or restoration requires workers to jump through time-consuming hoops and pay fees in order to participate, fewer people are going to have the means or desire to do so.

Homeowners in Midland with damaged basements are facing long waiting lists. Almost a week after the flooding, residents wanting restoration are told they should expect to wait almost two weeks, according to Greg Salgat, an employee at Bear Carpet Cleaning and Water Restoration, a local company.

“We’re completely overwhelmed,” Salgat said. “Our business line rang over 700 times on Friday.”

Even though Bear Carpet Cleaning can work on up to 50 locations at once, the company is still backlogged, with employees working late into the night. The company has started sending out solo crews to fill the need, an unprecedented move.

“If there were no license, you would already have more people working in the industries in question,” said Dick Carpenter, head of strategic research at the Institute for Justice, a national group which studies state licensing policies. “That alone would reduce the time required to do clean up and repairs. But the license is operating precisely as designed: It has reduced the number of people working in those industries in your state.”

In a situation like this, where water damage is widespread and restoration companies are literally swamped with demand, consumers can use any help they can get. Kleiner said they often find a handyman would do just as well as a licensed plumber.

But the state limits that choice.

“The [supply] problem is exacerbated by excluding two types of workers who could step in and help in the effort,” Carpenter said. “The first is people in Michigan with the skills necessary but who do not have the license. The second is people who do live outside Michigan who would — if it weren’t for licensing — travel to Michigan to do the work.”

Proponents for licensing fear that fly-by-night providers would take advantage of vulnerable property owners if licenses were not in place. But research from David Skarbek of George Mason University shows otherwise. When Hurricane Katrina hit in 2004, the Florida government lifted its restrictions on roofers with no ill effects.

“Given the relative success of reducing restrictions and the government’s explicit recognition of licensing’s limiting effects on the availability of roofers,” Skarbek said, “reform of licensing, at least to the extent done in crisis, should be adopted permanently.”