More States are Ditching Occupational Licensing

 

I remember my first “job” as a kid; I was 12 years old, and wanted to buy the latest Madden game for my Playstation 2.  When I had asked my father for the money to buy the game, he refused; he wanted me to earn that money myself, and recommended I knock on some doors offering to cut some of my neighbors lawns for $10 a piece.  I was already cutting our grass, my father stated, may as well cut the McKenna’s grass as well.  After a few weeks I had saved up more than enough for my video game; it was a great way to make some extra money, while learning the value of hard work.  

My story is hardly unique; millions of kids across the country undertake similar endeavors every summer; this summer, however, the kids of Gardendale, Alabama  are learning another lesson: occupational licensing is expensive.  Gardendale, a northern suburb of Birmingham, recently passed a city ordinance demanding that kids pay $110 licensing fee in order to cut grass in their hometown.  

This type of occupational licensing is hardly uncommon; in fact, the “Bureau of Labor Statistics” reports that nearly a quarter of all professions in the United States requires some form of occupational licensing, that’s 20% higher than 1950, where only 5% of all professions required some sort of license.

Occupational licensing is a government regulation that requires people to receive some sort of state mandated training before they are allowed to enter a given profession.  While it may be understandable for a doctor or a lawyer; these licenses have expanded to cover everything from beauticians to taxi drivers.  

These licenses have had a profoundly negative effect on America’s low-skilled labor force, many of whom are immigrants or ex-convicts who cannot afford to, or simply are not allowed to, receive the proper licenses to legally practice their profession.  This forces these workers to make a difficult choice: pay to get licensed and possibly bankrupt yourself, or practice illegally and become a criminal.  

Let’s look at California, for example.  By 2000, 41% of manicurists in the state of California were Vietnamese immigrants, many of whom spoke very little, or no English, so they chose to enter an industry where they don’t necessarily need to speak English to effectively do their job.  According to state laws, however,  in order to become a licensed manicurist in the state of California, you need over 100 hours of training at a state approved school, plus at least 7 years of formal education in order to legally perform a manicure.  These classes are expensive and time consuming. Performing a manicure isn’t heart surgery, so why should society treat it like they’re similar?

In their book, “Bottleneckers: Gaming the Government for Power and Private Profit” authors Chip Mellor and Dick Carpenter lay out a compelling argument; occupational licenses are not created by concerned citizens, but by a “bottlenecker” who lobbies for more regulation, not for consumer protection, but to make it harder for competition to enter a certain occupation, giving the “bottlenecker” an economic advantage by crushing potential competition. If you own a taxi company, for example, your primary goal for wanting occupational licenses to remain in tact isn’t your concern for the consumer, but concern for your bottom line.  If just anybody were allowed to charge people to take them home from the bar, then it would increase competition, driving down price, making their once profitable taxi company, a lot less profitable.  

Proponents of occupational licensing, like Iowa State Rep. Bobby Kaufmann (R), who recently tore up a bill that was meant to drastically reduce the number of occupational licenses in the state, claim that these licenses are necessary to protect the consumer from fraudulent, dangerous proprietors that are looking to harm the public.  Without these licensing boards, people like him seem to believe that a bar without a liquor license would be the downfall of society.

Others, like Libertarian Nebraska State Senator Laura Ebke, whole-heartedly disagree.  Ebke recently introduced Legislative Bill 299 to the Nebraska state legislature.  Her legislation would phase out all licensing statutes on a 5 year cycle. Before those licensing statutes could be renewed, there would be an analysis of said statute to determine the effectiveness of the law. Her legislation would strive to find more market-friendly ways to deal with these labor issues.  While speaking to Authentic Liberty, Ebke told us the reasoning behind her bill:


“The assumption is that the market, or private certifications would be sufficient for most of the occupations out there, and that registration would be prudent to prevent fraud and things like that, and that only in a few instances would you need to have full-on licensing (and usually, like with medical professionals, because it’s necessary under federal law in order to be able to receive reimbursement).”

And Nebraska isn’t the only state that has made occupational licensing a priority for 2017, 19 states have introduced similar bills aimed at drastically reducing the power of state licensing boards.  

The issue of occupational licensing has, in the last few years, received bipartisan support.  Both President’s Obama and Trump have vocally supported these reform efforts, and in 2015 the Supreme Court ruled in North Carolina Board of Dental Examiners v. Federal Trade Commission  that state licensing boards were no longer exempt from federal antitrust legislation. In his majority opinion, Justice Kennedy writes:

“Because a controlling number of the Board’s decisionmakers are active market participants in the occupation the Board regulates, the Board can invoke state-action antitrust immunity only if it was subject to active supervision by the State, and here that requirement is not met. “

Essentially, what Justice Kennedy is pointing out, is fairly obvious: if you are working in a particular profession that requires licensing, and you sit on a Board that decides who does, and does not receive said licensing, than you have a vested interest in denying licensing requests.  Which, in hindsight, is exceptionally obvious.  Why would you grant an occupational license to a potential competitor?

Hopefully, in 2017, we will see Nebraska, and 18 other states, take measures to drastically reduce these prohibitive practices. 

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