Against Occupational Licensing

December 5, 2017
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                                                     Link to the article above

Amid many questionable opinions, the Wall Street Journal editorial page has an excellent take on occupational licensing, as can be seen from the November 24, 2017 editorial linked above. The editorial draws from the report “License to Work: A National Study of Burdens from Occupational Licensing” by the Institute of Justice.

I have been a vocal opponent of occupational licensing for longer than I have been a proponent of negative interest rates as a monetary policy tool (November 5, 2012). In my August 12, 2012 post “When the Government Says “You May Not Have a Job” I write

… sometimes, the rich and the middle class both gang up on the poor. This is nowhere more in evidence than in the area of occupational licensing. …

Once an occupational licensing regime is set up, one factor making the system hard to change is that those who “paid their dues” to get the license resent the idea that others could do what they do without a license. But even before an occupational licensing regime is set up, an important impetus is often those within a field who resent the idea that others who do lower quality work should be allowed to tarnish the reputation of a field. There is a problem here. It is often a low level of skills that puts someone in the position of being poor. Therefore, to say that no one should be allowed to put up a shingle to do cheap, low-quality work is often to say that a poor person should not be allowed to work. But somehow, the poor who look so sympathetic in other contexts start looking like “riffraff” when they are the competition. …

… if political forces are insistent that something must be done by government, there is all the difference in the world between government regulation of labels and government regulation of substance. …

To the extent that even the urge toward substantive occupational licensing cannot be resisted because of at least superficially plausible arguments about health and safety, it might be possible to get a better balance by imposing some kind of global budget constraint on licensing requirements that forces regulation to focus on those requirements that have the least specious justifications. 

The kind of global budget constraint I have in mind in that last sentence is the one I proposed in my July 22, 2012 post “Magic Ingredient 1: More K-12 School“: 

What I want to do is to restrain the tendency to go overboard on occupational licensing while allowing genuinely necessary competencies to be transmitted by requiring states to ensure that their schools high school tracks that would make it reasonably possible to be meet the legal qualifications for any of at least 60% of all licensed occupations, with each student able to be qualified with his or her high school diploma for at least 10% of all licensed occupations. Then the graduates might actually be able to get a job. This requirement for getting the Federal education grant could be met by any combination of reducing licensing requirements and increasing effective training that each state chose. I am sure that states would game the rule, so that the overall effect would be less than what this sounds on the surface, but it would be better than the way things are now, where students graduating from high school are kept out of many of the more desirable occupations by occupational licensing restrictions. 

For those who want to fight occupational licensing as I do, the editorial linked above, “Licenses to Kill Opportunity” is itself a rich resource, hinting at the richness of the Institute of Justice report “License to Work: A National Study of Burdens from Occupational Licensing.” Below let me first give some quotations from the Wall Street Journal about the facts, then about the interpretation of the motivation for licensing and the costs of licensing:

Facts:

  • California’s door repairmen, carpenters and landscapers must first rack up 1,460 days of supervised on-the-job experience, then pay more than $500 for the license, before they can work as a contractor.
  • Until recently, the New Hampshire Board of Barbering, Cosmetology & Esthetics could levy fines on salons that have a barber’s pole—or even a pole painted red, white and blue that resembles one—but no licensed barber.
  • Only three states and the District of Columbia require a license for interior designers. But in all four, aspirants must clock six years of education or experience, pass an exam, and pay between $1,120 and $1,485 for the license. That’s far more training than is required for a dental assistant (Washington, D.C.), optician (Florida), midwife (Louisiana) or pharmacy technician (Nevada).
  • In February an Arizona board targeted a cosmetology student who dared to give free haircuts to the homeless. He risked being barred from the profession until Gov. Doug Ducey interceded.

The Motivation for Licensing:

  • The cost and time to obtain a license is no accident, as professional guild members sit on state licensing boards and reinforce the racket. They want to limit competition to keep prices high.
  • Licensing proponents claim they’re merely protecting public health. But the Institute for Justice found that on average tree trimmers undergo 16 times more training than an emergency medical technician, and cosmetologists more than 11 times.
  • … heavy-handed licensing doesn’t follow party lines, which means the rules are rooted in political muscle more than ideology.

The Costs of Licensing:

  • Stiff licensing requirements are often prohibitive for America’s working poor, keeping them trapped in low-wage, low-skill jobs.
  • Many states also bar people with a criminal record from working in a licensed profession. Society pays the price. Researchers at Arizona State University’s Center for the Study of Economic Liberty found that in states with burdensome licensing requirements, recidivism rates increased by more than 9% over a 10-year span. In states where it was easier to get a license, the rates went down.
  • Nationwide, licensing drives up prices by as much as $203 billion annually. The requirements also hurt consumers by restricting access to goods and services.

Because it is a genuinely bipartisan good government initiative, the fight against the overgrowth of occupational licensing is a fight that can be won. (It isn’t just the Wall Street Journal and Institute of Justice trying to restrain occupational licensing. The Obama administrations Treasury Department also weighed in against excessive occupational licensing.) Because it is a fight at the state level, it is a good effort for politically inclined high school and college students as well as their elders to get involved in. 

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