Occupational Licensing Laws are Holding Americans Back

Occupational licensing laws are intended to protect consumers from unsafe services provided by unqualified individuals. Doctors and pilots, for instance, are licensed to guarantee that no one unqualified operates on someone or flies a plane. But recently, the practice of requiring a license has moved beyond consumer protection in highly skilled, high risk occupations, and has morphed into a barrier to entry, protecting established companies from outside competition. As states move to require licenses for more occupations, the consumer is not protected, but harmed by fewer choices, higher prices, and a shift away from customer focus.

A system that guarantees inefficiency

A license requirement disincentivizes individuals from pursuing careers in affected fields. That’s because obtaining a license requires time and money, which limits the number of individuals who would otherwise enter the marketplace. Faced with diminished competition, the negative impact on the consumer is amplified because existing businesses then have less incentive to provide a better service.

Growing trend

In the 1950s, occupational licensing laws only affected five percent of the American workforce. By 2015, nearly one in three workers now need a license to work. Far removed from simply guaranteeing safety, licensing has encroached into non-professional occupations that do not require extensive training.

These laws include licensing requirements for: hair braiding, locksmithing, packaging, auctioneering, being a florist, selling caskets, interior designing, teeth whitening, fortune telling and being a shampooer. Most consumers would unlikely be alarmed to find out their hair was braided by a renegade licenseless hair braider, or that their fortune teller failed to predict they needed a license to practice.

Costly and unnecessary

Not only do many occupational licenses seem unnecessary, but the requirements are often excessive and odd. The publication Rare reported that in Idaho, regulations make becoming a barber more difficult than a bounty hunter. In Washington, D.C., shoe-shiners are required to purchase a $337 permit. Becoming an interior decorator in Florida takes about six years. Sign language interpreter? Several states require a license for that too.

Per the Mercatus Center, preschool teachers, on average, must receive 1,728 days of training and pay more than $100 in fees to get their teaching license. Athletic trainers must pay, on average, $400 in fees. Other occupations that require more than $100 in fees include: Earth driller, cosmetologist, barber, skin care specialist and veterinary technologist. These licenses also require more than 100 days of training or experience.  These examples raise the question: who exactly is supporting this bureaucratic red tape?

Keeping people out of jobs

Unsurprisingly, the groups that lobby for the regulations tend to be the same groups that benefit from the lack of competition. The National Review reported that individuals with a certificate or license make, on average, $200 more per week than someone without one. Furthermore, the unemployment rate for individuals without a certificate or license is much higher than the unemployment rate for someone with one. For individuals who graduated from high school, but did not attend college, the unemployment rate for someone without a certificate or license is almost double that of someone who has one (5.9 and 3.1 percent, respectively). For individuals who did not graduate high school and have no certificate or license, unemployment is 8.2 percent, while for individuals with a certificate or license, it is 5.1 percent. These legal requirements are holding down the poor while artificially keeping unemployment higher than it otherwise would be.

The heavy licensing burden is an ever-growing problem. It is holding back Americans who are already in tough situations. Unnecessary licensing laws should be scaled back. If it turns out society erupts into chaos with unlicensed florists and fortune tellers, then we can re-examine the issue.

Tyler Arnold is a communications associate at Cause of Action Institute