A Government Permission Slip To Work? | Stock News & Stock Market Analysis
ROI investing Jul 2nd, 2019 0 Comment
In the current political climate, bipartisan support for policy reform is fleetingly rare. But it can be found. Case in point: occupational licensing.
No less than the Obama and Trump administrations, California's bipartisan Little Hoover Commission, think tanks like Brookings, Heritage, and Cato, and state governors across the country all agree that occupational licensing needs a drastic overhaul. Results from a report we recently released show how licensing laws are holding back the nation's economy.
An occupational license is, essentially, a government permission slip to work. In the second edition of our ground-breaking study, License to Work, we show how the license requirements for 102 low- and moderate-income occupations are often burdensome. Across all 50 states and the District of Columbia we found that, on average, a license to work takes about a year of education and experience, one exam and $267 in fees to the state. This means aspiring workers in fields as diverse as auctioneering, cosmetology and tree trimming spend significant amounts of time and money earning a license rather than earning a living.
Not only are licensing requirements onerous, more Americans than ever need the government's permission to work. In the 1950s, only about 1 in 20 workers needed a license to work. Now, it's about 1 in 4.
Licensing proponents assert these requirements are vital to protect consumers, but they often have little to do with protecting public health and safety.
First, comparing requirements of one occupation to another vis-a-vis safety risks for those jobs reveals remarkable inconsistencies. On average, it takes 12 times the amount of education and experience to work as a cosmetologist than as an emergency medical technician (EMT). And this is not an anomaly. In our study, 73 licenses have greater training requirements than EMTs.
Second, the majority of occupations in our study are unlicensed in at least one state and often in many states. For example, interior design licensing laws have the most stringent requirements in our sample, requiring six years of education or experience. But interior designers are licensed in only three states and Washington, D.C. Opticians — people who fit glasses to your face — must complete more than 700 days of training, on average, but are licensed in fewer than half of the states.
Third, licensing requirements often vary greatly between states to do the exact same job. Forty-nine states and DC license manicurists. Twelve of those require four months or more of schooling, but Massachusetts demands less than a month. It seems improbable that aspiring manicurists in Alabama, which requires 175 days, or in the 10 states that require 140 days, truly need so much more time in training than their less onerously licensed counterparts in other states.
Such a high degree of variation is prevalent throughout the 102 occupations we studied. Fifty of the 102 have differences of more than 1,000 days between the minimum and maximum number of days of required education and experience. And another eight occupations have differences of more than 700 days.
Despite proponents' claims that licensing protects consumers, there is scant support for that assertion. Moreover, there is ample evidence that licensing imposes significant costs, including higher prices for consumers and reduced job opportunities. Specifically, economists Morris Kleiner from the University of Minnesota and Alan Krueger from Princeton University estimate that licensing results in 2.8 million fewer jobs, with an annual cost to consumers of $203 billion.
Meanwhile, studies on occupations as diverse as florists, tour guides, hair braiders, cosmetologists, dental hygienists, nurse practitioners and opticians have found that licensing raises the cost of services without improving quality. Put differently, research suggests that consumers are paying more without getting better results.
Instead of protecting the public, licenses often simply protect established businesses from greater competition. Legislatures typically create licenses not at the request of harmed consumers or concerned citizens, but at the request of those in the industry to be licensed. As my co-author and I documented in our book "Bottleneckers: Gaming the Government for Power and Private Profit," these requests typically come as part of multi-year lobbying campaigns that include coordinated letter writing efforts, strategic campaign contributions, special awards to legislators, and packing legislative hearing rooms with members of the industry to testify about the purported need for the license.
Fortunately, policymakers and leaders across the political spectrum have launched reform efforts that include, among other things, eliminating unnecessary licenses, reducing irrational licensing requirements, and increasing oversight over licensing boards that have, for too long, demonstrated unchecked anti-competitive behavior.
Licensing reform has never been more necessary. Just as the 20th Century was the era of ever-expanding licensing, the 21st can be the era of transforming licenses into liberty.
Knepper and Carpenter are both directors of strategic research at the Institute for Justice and co-authors of the report, "License to Work."
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