The Institute for Justice (IJ) recently released an updated edition of its report on the state of occupational licensing in the country. The report, which examines the licensing requirements for 102 different occupations across all fifty states and the District of Columbia, illustrates how licensed professionals cooperate with state legislators to make it increasingly difficult for new professionals to enter licensed industries. As such, occupational licensing has transitioned from a policy tool to protect consumers from receiving poor service in dangerous industries to a cronyistic cudgel used to stifle competition and increase the price of services.
Research has consistently shown that employment remains the best anti-poverty tool available to legislators. Just 2.5 percent of Americans with a full-time, year-round job remained in poverty in 2015. With this in mind, legislators should avoid policies that raise barriers to employment without good reason.
Unfortunately, IJ’s report suggests that this is not the case. The report found that the occupational restrictions across the country required an average of $267 in fees, an exam, and almost a year in education and prior experience. This is despite the list of occupations studied including those that pose little danger to consumers such as florists, travel guides, and funeral attendants.
The report also points out the irrationality of some states’ licensing regimes. Most Americans would agree that an occupation most in need of oversight would be emergency medical technicians (EMTs), but 73 of the 102 occupations IJ studied had higher average licensing burdens than EMTs. Cosmetologists, for example, must study an average of almost a year to receive a license — EMTs must complete only about a month of education.
The capriciousness of many of these licensing provisions is illustrated by the experiences of other states. Only 23 of the occupations studied by IJ are licensed in at least 40 states. States that do not have licensing requirements have apparently avoided experiencing a plague of rogue shampooers or taxidermists.
Humorous as some of the requirements may seem, the consequences are far more serious. Increased restrictiveness in entering new occupations costs Americans jobs — an estimated 2.8 million fewer Americans are employed because of overly strict occupational licensing rules, for a total economic cost of $203 billion.
Because occupational licensing keeps some Americans unemployed to the benefit of licensed and protected workers, it also exacerbates income inequality. Preventing Americans from earning a living to benefit entrenched professionals with the ear of local officials should be abhorrent to any American.
Some may argue that occupational licensing prevents consumers from being exposed to shoddy service, even if that shoddy service would not be dangerous to the consumer. However, in the age of internet review sites such as Yelp, such concerns fall flat — a professional offering poor service would soon find his customers flocking to more capable tradesmen. A survey of research on this subject by the White House found that occupational licensing does not improve the quality of services provided or public safety.
Yet a compromise on this matter is available. Rather than requiring tradesmen to obtain a license for non-dangerous professions, state governments should offer non-mandatory certifications. This way, consumers who prefer certainty on the qualifications of the professional providing service to them would have the option of paying the higher rate that a certified tradesman would charge. Other Americans who are confident in their ability to do their own research on a tradesman would have the opportunity to pay a lower fee for an uncertified, yet highly rated, individual.
IJ’s report serves as a reminder of how one of the most entrenched forms of cronyism continues to operate throughout the country. For state legislators, good intentions can no longer be accepted as an excuse for policy that hurts the economy and Americans seeking work. The evidence is clear — occupational licensing is a harmful policy with little to no discernible benefit in return.