Professional Licensing Rules Prove Unnecessary, Raise Consumer Prices

Published February 26, 2015

In the 1950s, my dad taught himself to cut hair on an Army troopship sailing between Tokyo and San Francisco. Later, when he attended college on the G.I. Bill, he kept my older brother and sister fed by cutting his classmates’ hair on Friday nights, in my family’s tiny apartment.

Today my father’s entrepreneurial spirit would be stifled by the many government-mandated regulations and license requirements added in the decades since then.

Barriers to Entry

Illinois now requires barbers to have 350 days of training and pay a $142 fee. So much for teaching yourself to cut hair and setting up shop in your own living room.

These type of restrictions have become all too common. The Institute for Justice reports one-third of the jobs in the United States now require state licenses.

If most license restrictions were eliminated, the employment rate in the United States would increase by as much as 1 percent, or about 1,387,000 newly employed people, according to Lee McGrath, a lawyer with the group.

Professional licensing is filled with much more intrigue than one may assume.

Regulation often is the product of a chummy relationship between elected officials and those in business, who want to cut down on their competition to maximize profits. Every year, a parade of people in various vocations comes to the state capitol asking for their fields to be licensed and regulated.

Grandfathered In

It usually works like this: the state requires extensive training for those who want to enter the field, but it exempts everyone already in the field from the new regulations, “grandfathering” them in.

This process creates an artificial shortage of “licensed” individuals in the profession, by reducing the supply of people who can legally do the job. That enables those still in the field to be paid more. 

Costing Consumers More

Other research by the Institute for Justice shows it costs consumers 15 percent more to receive a service from a licensed vocation, compared to the price in states where that same job isn’t licensed.

Thus consumers pay more for something that provides us with little to no benefit.

Insurance companies don’t believe professional licenses help ensure public safety, McGrath says. Liability insurance rates are the same in states requiring certain professions to be licensed and in states without those requirements, he says.

Consumers are the best regulators, not government. If a roofer, barber, auctioneer, hair braider, or other licensed professional does lousy work, he or she will soon go out of business. Those who do good work may prosper.

Ultimately, the endorsement of consumers carries far more weight than that of government.

Scott Reeder ([email protected]) is executive editor of the Illinois News Network, a project of the Illinois Policy Institute. An earlier version of this article first appeared at Reprinted with permission.