How Licensing Laws Kill Jobs

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Why does a manicurist in Alaska go through three days of training, while one in Alabama goes through 163?

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Hair-braiding and fish pedicures are two barely-taught aesthetic procedures -- but to perform them in most states, you still have to go to beauty school. (Reuters)

Jestina Clayton is the type of entrepreneur we should be encouraging if we want to put more Americans back to work. Instead, the state of Utah shut her down.

Her offense? To help support her young family while her husband was in school, Jestina turned to a skill she learned growing up in her native Sierra Leone: African-style hairbrading. But Utah said that braiding required a cosmetology license, which requires 2,000 hours of training at a cosmetology school -- which, in turn, teaches little or nothing about African hairbraiding.

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Roadblocks like these are the reason many people can't break into the job market or switch careers when hit by hard times. Nearly one in three U.S. workers now needs an occupational license, up from just one in 20 in the 1950s, and more than 800 occupations are licensed in at least one state. A recent national study found the burdens these laws impose on would-be workers and entrepreneurs to be substantial -- of the 102 low- to moderate-income jobs examined, licensure required, on average, $209 in fees, nine months of education and training, and one exam.

And those figures do not account for wages lost while training, or tuition for required schooling, which can be steep -- as much as $18,000 for cosmetology school in Utah. That's a lot of time, money, and effort spent earning a license instead of a living.

The dirty little secret of licensing is that no one likes it more than the licensed. Rarely, if ever, do consumers clamor for protection from unlicensed providers, nor should they. Licensing costs consumers billions a year in higher prices and does little to improve service quality.

Instead, licensing typically results from industry interests lobbying for laws to limit competition. And once those laws are in place, established interests will use them aggressively to target unlicensed competitors.

A 2011 strategy document for the Academy of Nutrition and Dietetics (formerly the American Dietetic Association) identified a "significant competitive threat" to registered dieticians from nutrition professionals, nurses, pharmacists, and others providing nutritional advice and urged dieticians to "increase our vigilance in reporting unlicensed competition" to state authorities. Interior designers have done the same: 95 percent of complaints to interior design regulatory boards were licensure-related, one study found, while just 1.6 percent were for fraud or other genuine consumer complaints.

Licensing vests enormous power in such regulatory boards, usually filled by law with members of the licensed occupation. Boards have tremendous incentives to curb competition, particularly innovative techniques or business models, and to expand their reach.

Thus, Western-style cosmetologists claim dominion over increasingly popular services like African-style hairbraiding, South Asian and Middle Eastern eyebrow threading, and Asian fish pedicures, even though cosmetology schools rarely teach such practices. And dental boards in North Carolina, Connecticut, and elsewhere demand that entrepreneurs providing over-the-counter teeth-whitening products become licensed dentists.

The result of all of this special-interest politicking is a tangle of licensing laws that makes little sense. For example, it seems reasonable that most states require about a month of training to become an emergency medical technician, an occupation with clear health-and-safety implications. But it is implausible that barbers and cosmetologists need 10 times as much training as EMTs, as most states require.

Imagine the effect on employment if more occupations were freed from barriers erected to protect special interests from honest competition

Similarly, manicurists need only about three days of training in Alaska and nine in Iowa. Surely the 10 states that require four months or more could get by with less. Only five states license shampooers. Is there an epidemic of dangerous shampooing everywhere else?

Reform should start by repealing or reducing such needlessly burdensome barriers. States should review existing and proposed occupational licenses to determine whether licensing is truly needed or whether there are less burdensome and perhaps more effective alternatives.

For example, permitting and inspections can verify safe practices without creating excessive barriers to employment. State registration or certification allows some practitioners to demonstrate credentials by being listed on official state registries while leaving others free to enter the occupation.

Even better, private organizations can perform the certification role. Auto mechanics, for example, are certified through the nonprofit National Institute for Automotive Service Excellence. The ASE insignia is hard to earn and much valued in the industry. Such private certification may even be more effective than state licensing: Interior designers in California, where certification is private and voluntary, receive fewer Better Business Bureau complaints per firm than those in states that license.

And, of course, consumers are plenty capable of judging the quality of many service providers for themselves, especially in an era where services like Angie's List, Yelp, and Yahoo! Local proliferate.

In addition to rolling back licensing requirements in favor of less restrictive alternatives, states could create a statutory right to an occupation. Such a law would require the government to show a real threat to public health and safety before it enacts new licensing laws or enforces existing ones. More importantly, it would provide statutory grounds for would-be workers and entrepreneurs to challenge arbitrary and irrational licensing laws in court.

This is useful because courts too often disregard constitutional grounds for striking down unjust licensing laws, turning a blind eye to the naked protectionism behind them. But unlike legislatures, courts are independent of the political machinations of interest groups and are supposed to check special-interest legislation in defense of individual rights. Courts ought to be where arbitrary and irrational licensing schemes go to die.

Fortunately, sometimes they are. After Jestina Clayton's pleas to the Utah cosmetology board and legislature went nowhere, she sued. Last month a federal judge struck down the license requirement for braiders as a violation of "the right to work for a living ... the Constitution was designed to protect."

The ruling frees Jestina to get back to work--and hopefully others as well. Soon after Mississippi replaced its license requirement for braiders with simple registration in 2005, more than 300 braiders registered. That's the result of eliminating one license in one state. Imagine the effect on employment if more occupations were freed from barriers erected not to protect the public, but to protect special interests from honest competition.

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Lisa Knepper is a director of strategic research at the Institute for Justice and co-author of License to Work: A National Study of Burdens From Occupational Licensing. More

 

Knepper helps manage the Institute’s strategic research initiative, which creates policy and social science research on issues central to IJ’s mission: school choice, private property rights, economic liberty, and free speech. She previously served as the Institute’s director of communications, after joining the Institute in December 2001 from Hill and Knowlton, a global communications firm, where she specialized in public relations for technology companies. Knepper also worked as a media relations and promotions adviser for several entertainment and technology companies in Los Angeles and, before that, for the Institute for Humane Studies as a program coordinator.

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