Regulatory Reform

The Artificial Barriers of Occupational Licensing

By Theresa Boyd

A West Virginia nail artist must rethink her dream of starting her own business because of onerous licensing requirements and regulations imposed by her state. After spending $3,000 on a nail tech program that taught her skills she didn’t need, the young would-be entrepreneur is still discovering legal impediments that only serve to protect the jobs of other manicurists and do nothing to ensure the health and safety of her potential clients. On average, a manicurist must pass just as many exams as an emergency medical technician and receive more than twice the number of days of training to legally beautify fingertips in states across the county.

A recent study by the Institute for Justice looks at the state licensing requirements for 102 lower-income jobs. The study found that the job aspirants of these professions postponed work for an average of nine months to receive training. They also had to pay an average of $209 and pass one exam. While the alleged purpose of occupational licensing – to ensure the quality and safety of services offered to consumers – appears noble, this government intrusion really serves to create barriers to entry for certain occupations. The creation of these regulations is driven by professionals already in these industries who want to limit competition. Occupational licensing, then, does little to protect consumers, but rather prevents many individuals from becoming gainfully employed in order to advantage an influential minority.

Advocates of occupational licensing argue that it is a necessary hurdle to ensure the quality of services offered to consumers and to protect them from dishonest, incompetent providers. While this may seem like a logical argument for occupations such as nurses and doctors, many of the requirements of licensed occupations do nothing to protect consumers. This is evidenced by the fact that most low-income occupations are only licensed in a handful of states. Only 15 of the 102 occupations were licensed in 40 states or more.

For example, Louisiana is the only state that requires florists to be licensed. It is highly unlikely that flower arranging in the Pelican State poses a risk to consumers’ safety that is absent in the other 49 states. Also, occupational licensure requirements widely vary across states. The training requirements for vegetation pesticide handlers range from zero days in some states to four years in others. If assuring the health and safety of the public really was the goal of these burdens, one would expect to see consistency in requirements across states.

Many licensing requirements do nothing to guarantee quality and are often unrelated to the skills necessary for a particular trade. In 1983, consultants to the California Board of Landscape Architects studied a national exam for landscape architects. They found that fewer than half of the exam questions tested knowledge directly related to public health or safety, and that the exam contained a history section where 89 percent of the questions were unrelated to the job. This test is one example of a barrier to entry that does little to protect consumers.

In Utah and other states, African-American style hair braiders must be licensed cosmetologists, even though cosmetology schools don’t teach the skills necessary for those jobs. Experienced eyebrow threaders in Texas are also being told that they must spend thousands of dollars and hundreds of hours in beauty school where eyebrow threading is not taught. Clearly, these requirements do nothing but reduce competition for those already in the beauty industry.

Because of onerous licensing laws, many professionals are obligated to make a substantial investment of time and money in order to enter a particular industry. Jobs that, by nature, require little up front capital suddenly become extremely hard to enter because of government regulations. Such occupations include barber, taxi cab driver, and painting contractor. Licensing laws can crush the aspirations of individuals with an entrepreneurial spirit but not much disposable time and income.

The poor are, typically, the most likely to enter these industries in order to create productive employment for themselves. Unfortunately, they find these regulatory obstacles difficult to surmount because they are the least likely to be able to pay fees and suspend work to fulfill training requirements. They are, therefore, pushed into low-skilled, low-wage jobs or remain unemployed.

Many would agree that these burdens are unnecessary and irrational. Why, then, are occupational licensing requirements still so widespread? It is because they favor out-spoken groups of professionals that have a big incentive to encourage lawmakers to raise the barriers to entry in their industries. Consumers must then suffer higher prices and fewer options, and would-be entrants must find an alternative way to earn a living. Though these negatively effected groups do not have a concentrated voice, lawmakers should not impose unnecessary regulations in order to pander to self-interested professionals.

It was true when the 10th U.S. Circuit Court of Appeals observed, “[W]hile baseball may be the national pastime of the citizenry, dishing out special economic benefits to certain in-state industries remains the favored pastime of state and local governments.” Lawmakers should let consumers and workers profit from the competition of the free market instead of trying to manipulate it to benefit a select few.


In Depth: Regulatory Reform

In his first inaugural address, Thomas Jefferson said that “the sum of good government” was one “which shall restrain men from injuring one another” and “shall leave them otherwise free to regulate their own pursuits of industry.” Sadly, governments – both federal and state – have ignored this axiom and…

+ Regulatory Reform In Depth