I have written before about occupational licenses and I may have given the impression that I am against all occupational licenses.
Let me clear up that notion. I think that many occupational licenses are necessary
to protect consumers' health and safety. On the other hand, I also think that governments commonly
require licenses for jobs that do not seem to meet the health and safety
standards. Using common sense, most of us would not consider some of these
licenses necessary.
Occupational licensing is meant to be a beneficial exchange
between the proper balance of freedom and order. Licensing is something that is
done to advance public health and safety and to prevent fraud but it has been
and is increasingly being used by old-guard interests to restrict entry into
business of new competitors and reduce competition. This reduction in
competition leads to higher prices and fewer options for consumers.
Some examples of business that must have licenses to operate
are shampoo apprentices, florists, salvage vehicle dealers, equine massage
therapists, and natural-hair braiders. Requiring licenses in this and many
other fields is a misuse of public policy which favors the politically-connected.
The most recent attempt to block competition involves the
ride-sharing services Uber and Lyft. Across the U.S. (and in Europe) the
existing taxi and limo companies are attempting to use local government to keep
Uber and Lyft out of the market. Miami, Chicago, Denver, Oklahoma City, are
being asked to block or restrict ride-sharing by the incumbents. In Pittsburgh
the only two taxi companies pushed the Mayor and the Public Utility Commission (the licensing
authority) to have police write tickets to anyone giving a ride for pay that
was not certified by the PUC. The Mayor, for the present time, has blocked this
move. The PUC has granted temporary permission to operate.
The 2012 study “License to Work” detailed how licensing “often does not line up with the public health or safety risk it
poses”. In the study of the 102 occupations licensed in the 50 states and D.C.,
“66 occupations have greater average license burdens than emergency medical
technicians. The average cosmetologist spends 372 days in training; the average
EMT only 33.”
Aside from costing consumers' more for some services and
reducing the choices of the consumers, workers are hit with costly requirements
including government-determined schooling, test, and paying fees before
entering into a business. Several studies show that female-dominated business
have some of the biggest and most irrational licensing requirements which prevents
low and middle income women (financially-vulnerable) from starting to work
their way up the economic ladder. An example of this is a new business in Iowa
that does hair blow-drying. It may be closed because the workers do not hold a
cosmetology license (2,100 hours of education and training and state testing
required for the license). Other examples are a number of African hair-braiding
business across the U.S. that have been shut down because of the same
cosmetology requirements and licensing as a florist before one can arrange
flowers for pay.
An interesting report from Jared Meyer at e21 (The Manhattan
Institute) states that when small business owners are surveyed the top
complaint is government licensing and permitting (even more so than taxes).
One way that licensing and permitting impacts the economy,
according to economist Morton Kleiner, is that “licensing results in 2.85
million fewer jobs with an annual cost to consumers of $203 billion.”
What can be done? Under Ronald Reagan new rules at the
federal level were instituted that demanded “Evidence-based justification” for
any new rule. This review process is not perfect and has not been used as much
as it should but it has encouraged efficiency and it has prevented more harm
(somewhat). It seems to me that this type of regulatory review law should be
passed in each state. Maybe you could suggest it to your state Representative,
or someone who is looking for a job as your state Representative, the next time
he or she shows up at your door looking for your vote.
Will this solve all the problems? No! But maybe it will start
the ball rolling?
Jerry
Make sure and download a copy of Lucky and Good: Risk, Decisions and Bets for
Investors, Traders and Entrepreneurs.
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