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Thursday, May 17, 2012

Occupational licensing keeps out the competition

 

by Dick Carpenter and Lisa Knepper | May 16, 2012

In the Institute for Justice’s 20-plus years, we have challenged all manner of senseless occupational licensing schemes—from those restricting entry into fields like interior design to tax preparation as well as eyebrow threading and African hairbraiding—all the while showing how they keep ordinary Americans out of work at the behest of more politically powerful competitors.

Now IJ has produced the first national study to measure just how burdensome laws like these are for lower-income workers and aspiring entrepreneurs.

License to Work: A National Study of Burdens from Occupational Licensing documents the license requirements for 102 low- and moderate-income occupations—such as barber, massage therapist and preschool teacher—across all 50 states and the District of Columbia. From this wealth of data, we found that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.

All of the 102 occupations are licensed in at least one state. On average, these government-mandated licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than one year to earn. At least one exam is required for 79 of the occupations.

Barriers like these make it harder for people to find jobs and build new businesses that create jobs. This is particularly true for minorities, those of lesser means and those with less education. And the breadth and depth of these barriers are likely even worse; we did not capture hidden costs, like tuition for required schooling and wages forgone while in training.

Along with the report itself, we put all of our data online at www.ij.org/LicenseToWork. This will serve as a one-of-a-kind resource for the growing number of researchers studying the effects of licensing laws. It also makes it easy for users to see how their states stack up.

For example, Louisiana licenses the most lower-income occupations—71 of the 102 we studied. Hawaii’s laws are, on average, the most burdensome.

Arizona, however, leads the list of states with a lot of licenses and burdensome laws. It is followed by California, Oregon, Nevada, Arkansas, Hawaii, Florida and Louisiana. In those eight states it takes, on average, a year-and-a-half of training, one exam and more than $300 to get a license.
License to Work makes the case for reform of these burdensome and often irrational licensing laws.
Besides licenses with no self-evident rationale—shampooer, florist and funeral attendant, for example—inconsistencies from state to state undermine the purported need for licensing many occupations. Most of the 102 occupations are unlicensed somewhere, suggesting they can be practiced safely without government-created barriers.

In addition, licensing requirements often vary greatly. For instance, in about 10 states, aspiring manicurists must complete about four months or more of training—but only about nine days in Iowa and three days in Alaska. It is implausible that manicurists in other states really need so much more training.

Just as implausible is that cosmetologists need 10 times the training as emergency medical technicians (EMTs), who literally hold lives in their hands. Yet that is what most states require. In fact, 66 occupations face greater average licensing burdens than EMTs.

Irrational and overly burdensome licensing laws do not protect public health and safety. They keep some people out of work so those with licenses face fewer competitors and command higher prices. That is why consumers rarely advocate for licensing laws, but industry insiders do.

License to Work provides another weapon in IJ’s fight for economic liberty. It shows that IJ’s clients—casket-sellers, teeth whiteners and others fighting for the right to earn an honest living—are not alone. Occupational licensing continues to grow more pervasive, and the burdens it imposes on would-be workers and entrepreneurs are substantial.

The report also points the way forward. As millions of Americans struggle to find productive work, one of the quickest ways lawmakers could help would be to simply get out of the way and reduce or remove needless licensure burdens.

Dick Carpenter and Lisa Knepper are IJ directors of strategic research.