Working for a better economy, better governance and a better society

Americans are worried about jobs, yet the government makes it harder to work. More than 1100 professions are licensed by at least one state.

In addition to lawyers and doctors are locksmiths, interior decorators, funeral attendants, librarians, hair stylists, food caterers, florists, barbers, and music therapists. As well as operators of conveyor belts and sellers of frozen desserts.

In 1950 just five percent of Americans needed official permission to work. Today nearly a quarter require some form of government approval.

Licensing is an extraordinary scam. The Wall Street Journal noted Texas’ requirement that “shampoo specialists” in hair salons take 150 hours of classes, including on the “theory and practice” of shampooing. There’s also a practical exam—which tests applying conditioner.

Licensing obviously punishes consumers. The Obama administration found that licensing increase prices, on average, as much as 16 percent. The rise is bigger in some occupations and some states.

In response, people may go without or do the job themselves, sometimes with disastrous results. Surveys have found up to 95 percent of people in child support, consumer debt, and eviction cases act “pro se.”

Licensing denies many people work in their preferred career. Regulation also discourages new forms of practice online and across state lines. Immigrants and military spouses suffer particularly.

Government restrictions on employment are particularly counterproductive at a time of high unemployment. By one estimate licensure destroys nearly three million jobs. Overall, licensing has been estimated to cost $100 billion to $200 billion a year.

The only serious argument for regulation is to protect consumers or bystanders. But fewer than 60 occupations are licensed in all 50 states.

Public Choice economics predicts that concentrated interests will out-organize the public, manipulate the law, and capture regulatory agencies for fun and profit. Thus, professional regulation is not designed to weed out the incapable.

Virtually every system grandfathers in existing (incompetent) operators. The rules for the same work vary dramatically by state. Standards often are irrelevant to practice. Moreover, regulators focus on punishing competition, not incompetence.

Yet, reported the administration: “most research does not find that licensing improves quality or public health and safety.”

The administration suggested limiting requirements to health and safety, reducing regulatory burdens, adding public members to licensing boards, allowing licensees to provide all services in their competency, limiting restrictions to consumer protection, conducting rigorous cost-benefit assessments, harmonizing requirements across state boundaries, and creating interstate practice compacts.

Better would be to end most regulation, instead relying on market mechanisms for consumer protection. Mercatus noted how the rise of the sharing economy “has overcome market imperfections without recourse to traditional forms of regulation.” In particular, the internet and information technology have dramatically expanded information sharing, reputational feedback mechanisms, competitive alternatives, and innovative experimentation.

The only exception to full deregulation might be limited rules covering professions with the greatest impact on health and safety. Even then the market can do a better job than government.

California State University economist Shirley Svorny noted how state licensing fails to assure physician quality. In contrast, “Consumers are protected by an interdependent system of private oversight motivated by concerns over reputation and liability.”

At most, government might enhance private consumer protection by creating systems of registration of practitioners, certification of professionals, and requirements for bond or insurance. But voluntary licensure and certification can do the same.

Like so much pernicious regulation, licensing is virtually impossible to eliminate once imposed. Incumbent practitioners typically become strong advocates for protecting their privileged positions.

Rather than rely on political action alone, Nick Sibilla of the Institute for Justice urged more litigation. He noted that the Institute had won cases rolling back licensing of two dozen occupations, most recently for “tax preparers, casket-making monks in Louisiana and African hair braiders in Texas.”

As I point out in the Freeman: “Americans are concerned about too few jobs and slow economic growth. In the ‘land of the free’ people shouldn’t have to get anyone else’s permission to work.”