Should You Need Government’s Permission to Work?

From Jeff Jacoby in the Boston Globe:

For decades, states have declared more and more occupations off-limits to anyone without a government permit. “In the early 1950s less than 5 percent of US workers were required to have a license from a state government in order to perform their jobs legally,” observed the Brookings Institution in a study last year. “By 2008, the share of workers requiring a license to work was estimated to be almost 29 percent.” To become a barber in Massachusetts, as Leon Neyfakh noted in the Globe last year, a prospective hair-cutter must spend 1,000 hours of study at a barber school, followed by a year and a half as an apprentice. Florida mandates a minimum of six years of training before it will license an interior designer. In Oklahoma, anyone wishing merely to sell caskets has to earn a degree in mortuary science, undergo a year-long apprenticeship in funeral services, and pass a state-mandated exam.

Licensing requirements just as onerous or ludicrous can be found in almost every state. Arizona licenses talent agents. Tennessee prohibits shampooing hair without a license. But the pendulum is finally heading in the other direction.

Reformers left and right have mobilized against laws that pointlessly force Americans to be licensed by the state before they can get a job in their chosen field. To compel would-be surgeons and airline pilots to obtain the government’s imprimatur as a condition of employment is one thing. But when the states impose licensing mandates on locksmiths and yoga instructors and hair braiders and florists, they clearly aren’t being motivated by concern for public safety and the well-being of powerless consumers.

The proliferation of occupational licenses, especially for blue-collar and working-class trades, has been driven by naked rent-seeking. That is the term economists use when narrow special interests use political connections to secure benefits for themselves — in this case, when established practitioners press lawmakers to enact licensing and registration barriers that hold down competition. Thus, as libertarians have maintained for years, occupational licensing aggressively benefits “haves” at the expense of “have-nots.”

The Obama administration has taken up this issue as well. “By making it harder to enter a profession, licensing can reduce employment opportunities, lower wages for excluded workers, and increase costs for consumers,” wrote the Treasury Department and the Council of Economic Advisers in a 2015 report. “Licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars.”

But there’s been progress.

In Arizona, Governor Doug Ducey just signed legislation repealing state license requirements for a number of jobs, including driving instructor, citrus fruit packer, and cremationist. In North Carolina, a bill underway in the legislature would make it lawful to earn a living — without needing government approval — as a laser hair remover, sign-language interpreter, acupuncturist, and pastoral counselor. Nebraska Governor Pete Ricketts recently signed a measure liberating hair-braiders from licensing rules.

Consumers won’t be exposed to the wolves if the state doesn’t supervise every occupation. The private sector is replete with certifying, rating, and accrediting bodies that can attest to the qualifications of almost any occupation and product. The Internet empowers consumers as never before with timely information about vendors, professionals, and service-providers of every description. From Angie’s List to Yelp, from Uber to TripAdvisor, the private market promotes transparency and exposes quality with a nimble persistence no state agency can ever match.

Even libertarian-leaning Jacoby may be conceding more to government regulation than he should. For example: should surgeons be licensed?  The fact that a surgeon has a government license means far less than the fact that he or she is board certified.  Board certification is done by a private association (The American Board of Surgery).   A brand name can be a good guide.  In the Milwaukee market, Columbia St. Mary’s, Aurora and the Medical College are all reputable organizations, with an incentive to maintain a reputation for good care.   And both Milwaukee Magazine and M Magazine rate physicians via their reputation with health care professionals.

As for airline pilots: while the public has fewer means to judge the qualifications of the people in the cockpit, it’s hardly clear that airlines, left to their own devices, would hire unqualified pilots. The loss of a flight due to pilot error imposes huge costs in terms of equipment (the plane), reputation and (if tort lawyers can show the pilot to be unqualified) liability judgments.

While one can argue about specific cases, the overall conclusion is clear. Occupational licensing is, in the vast majority of instances, rent seeking, and not any sort of cure for any sort of market failure.