Occupational Licensing Puts the Hurt on Consumers

Published May 15, 2018

Left-wing advocates of expanding government say efforts to repeal occupational licensing laws are an attack on public safety. In reality, giving people the “right to earn a living” simply means that all workers should be empowered with the ability to practice their craft without overzealous licensing boards and government agencies harassing, fining, or threatening jail time.

The number of occupational licensing laws has skyrocketed in recent years. To date, these onerous regulations cover more than 1,100 occupations. In the 1950s, government permission was required for less than 5 percent of the workforce. Now, expensive government permission slips are prerequisites for nearly 25 percent of the workforce.

In 2012, the Institute for Justice analyzed licensing requirements for 102 lower-income occupations in all 50 states and the District of Columbia. IJ found these rules, on average, require workers to pay more than $260 in fees, complete a year of education and experience, and pass one exam.

California has one of the worst licensing schemes: It licenses 76 lower-income occupations and imposes burdensome requirements that equate on average to $486 in fees, 827 days of experience or education, and two exams.

Occupational licensing advocates argue these mandates are necessary to protect public health and safety. In some cases, this is true. However, far too often occupational licensing laws are applied to relatively safe jobs. In fact, the overwhelming majority of occupations are practiced in at least one state that does not have a licensing requirement on the books, and state licensing laws vary widely in scope and nature. This shows many overregulated occupations can and do exist without a license and without risking public safety or health.

The contrast between interior designer licensing requirements and an emergency medical technician highlights the system’s arbitrary and draconian nature. In many states, interior designers are required to fulfil more licensing requirements than EMTs. For example, Florida requires interior designers to pay more than $1,000 in fees, acquire six years of education, and pass an exam to obtain a license. On the other hand, Florida EMTs need to pay just $115 in fees and complete about 26 days of education. Apparently, saving lives requires less training than decorating people’s houses!

Oppressive licensing schemes don’t come cheap, either. Economic models suggest“occupational licensing can result in up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.” Excessive regulatory regimes reduce business competition and entrepreneurship, leading to fewer jobs and lower-quality services. Also, inconsistent licensing laws hamper workers’ mobility from one state to another.

Another often-overlooked aspect of occupational licensing laws is their protectionist origins. Special interest groups, not consumers, campaign for and urge legislators to create and maintain licenses as a strategy to diminish economic competition. Licensing restrictions are essentially barriers to entry that result in net wealth transfers from consumers to politically connected groups, such as big business and big labor. This is crony capitalism at its worst.

Fortunately, alternatives to unnecessary licensing laws do exist. Consumer-rating websites, such as Yelp!, TripAdvisor, and Angie’s List contain unbiased customer-based reviews of businesses. Positive comments (and pictures) on social media and word-of-mouth are taken seriously by businesses that cannot afford a bad reputation for inferior products or bad customer service. Other non-government alternatives include third-party professional certification, voluntary bonding or insurance, and market competition.

Because many licensing schemes are unnecessary, legislators should pass bills that explicitly deregulate occupations or trim the scope of current licensing laws. For a more holistic solution, legislators should pass a Right to Earn a Living Act, or RELA, which eliminates all excessive government licensing requirements, leaving only those that are essential for maintaining public health, safety, or welfare. Further, RELA laws allow citizens to petition for the repeal or modification of any regulation that isn’t demonstrably necessary.

When deciding whether to license an occupation, legislators should consider: (1) what public harm, if any, is being safeguarded against; (2) what the least restrictive way to license an industry is; and (3) whether market-based options already effectively regulate a given occupation or industry.

Every American has the fundamental right to life, liberty, and the pursuit of happiness. Earning an honest living should not be encroached upon—especially not under the guise of “protecting” the public.

[Originally Published at the Washington Examiner]