Occupational Licensing: Another Government Obstacle to Earning a Living

Occupational Licensing: Another Government Obstacle to Earning a Living
August 15, 2012

Do you have a love of fabric and furniture and a talent for decorating? In some states, it’s tough luck if you want to start a decorating business—unless you have a license. Most states actually have laws limiting the use of the title “interior designer.”

It’s a result of the growing problem of occupational licensing, which creates obstacles to people working and earning a living in occupations they may enjoy and in which they may excel. Economic research shows licensing makes services more expensive for consumers and more difficult—often unnecessarily so—for people to enter a new profession. That’s no small matter in these years of persistent high unemployment.

Estimates of the number of licensed occupations in the states vary depending on who does the counting. Washington, at 32, licenses the fewest occupations. California, at 285, licenses the most. This interference in liberty is why the Goldwater Institute recently published “Six Reforms to Occupational Licensing Laws to Increase Jobs and Lower Costs.”

The report shows occupational licensing has a long pedigree, with its modern roots going back to the medieval guilds that were formed specifically to limit competition with local artisans.

Limiting Competition

Modern-day advocates for licensing claim the laws are necessary for public health and safety. But the public safety argument is undermined by states’ occupational licensing of professions such as librarians, craft artists, and animal caretakers. It’s further undermined by the fact that new licensing laws almost always exempt current practitioners from obtaining licenses, including bad actors.

When cosmetology boards harass African hair braiders or shut down fish pedicure services where the fish cannot spread infection because the service providers never invade live skin, the boards betray their real mission: to limit competition.

The Goldwater report makes the case that professional licensing reduces the availability of services, raising consumers’ costs by more than 2 percent. This results in earnings premiums of up to 10 percent for licensed professions while reducing the number of people who can afford licensed services, such as medical care. Economists estimate the loss of economic value due to licensing at $35 billion to $40 billion per year in the United States.

Erecting Roadblocks

Professional licensing also blocks opportunity for those who cannot afford the time (1,450 hours of experience for cosmetology in Arizona) and money to meet educational and training requirements that are often needless. Licensing discourages innovators from entering licensed fields and encourages even more licensing because people in related professions sometimes seek licensing because they fear prosecution for practicing without a license.

Because of occupational licensing, Remote Area Medical, a private charitable health service, cannot serve low-income individuals in most states.

According to a study by the Canadian government, 80 to 90 percent of work performed by general dentists could be performed by high school graduates with less than two years of postsecondary school training. A recent Institute for Justice study highlights licensing of low-income occupations, pointing out how this blocks economic opportunity. The state of Arizona, currently with the 11th lowest per capita personal income level in the nation, is the worst offender among the states.

Recommending Reforms

The Goldwater report suggests six policies to contain occupational licensing and then roll it back.

First, no legislative committee should consider a new licensing requirement until it has been vetted to identify a real need. Likely effects of the requirement on consumers and the economy also should be considered.

Second, each existing license should be vetted and repealed if it does not pass muster.

Third, licensing boards should have only a minority of their membership made up of individuals practicing the licensed profession.

Fourth, market forces should discipline professional quality. A system of private certification whereby a false claim of certification is prosecuted for fraud could be encouraged.

Fifth, right-to-earn-a-living legislation should be instituted.

Sixth, the scope of practice for paraprofessionals such as dental hygienists, physicians’ assistants, and paralegals should be expanded.

The ultimate aim of occupational licensing reform is to expand liberty and economic opportunity.

Byron Schlomach (bschlomach@goldwaterinstitute.org) is director of the Center for Economic Prosperity at the Goldwater Institute.

Internet Info

“Six Reforms to Occupational Licensing Laws to Increase Jobs and Lower Costs,” Byron Schlomach, Goldwater Institute: http://news.heartland.org/policy-documents/six-reforms-occupational-licensing-laws-increase-jobs-and-lower-costs