Should people require government permission before being allowed to work? That’s the question today from the Institute for Justice, which fights excessive licensing regulations in many states. In this video, they identify the worst states for licensing low-income jobs, and those might surprise readers. However, the comparison between professions will stun everyone:
License to Work: A National Study of Burdens from Occupational Licensing is the first national study to measure how burdensome occupational licensing laws are for lower-income workers and aspiring entrepreneurs.
The report 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. It finds that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.
On average, these 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 a 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, particularly minorities, those of lesser means and those with less education.
The dirty little secret in licensing, which I’ve mentioned in the past, is that it’s usually pushed by the biggest players in the industries to which they apply. Why? As someone who worked in a significantly-licensed industry (burg/fire alarm installation and monitoring), I can speak from personal experience when I say this: the bigger companies want to burden smaller and emerging competitors with overwhelming compliance costs. It gets even worse when firms work across state lines, as I did in my career, as compliance often means having to get dozens of licenses for each employee, with varying prerequisites and education requirements. Even for small outfits in a single state, though, keeping up with licensing often requires having someone handling compliance as a full-time job. That cost ends up getting applied to a much lower sales volume, which keeps prices higher than a smaller, nimbler competitor might otherwise provide — and allows the bigger players to avoid competing on price or responsiveness as a result.
What does that mean? It means consumers have to pay more than they otherwise would, since licensing artificially suppresses competition. That may be a good trade-off in certain jobs — like EMTs, for instance, as mentioned in the video, and other industries with life-or-death implications. Most of the licensing requirements don’t have anything to do with safety, though, as seen by the ridiculous licensing requirements for interior designers. Perhaps IJ will lead a movement to rethink the assumptions that go into licensing requirements, because it’s an area that badly needs reform.