Let Market Forces Regulate Occupations

Yesterday presented me two articles on occupational licensing, one unsatisfying, the other very satisfying indeed.

The first was “Why License a Florist,” a New York Times op-ed. Here are the first paragraphs:

IN Minnesota, more classroom time is required to become a cosmetologist than to become a lawyer. Becoming a manicurist takes double the number of hours of instruction as a paramedic. In Louisiana, the only state in the country that requires licenses for florists, monks were until recently forbidden to sell coffins because they were not licensed funeral directors.

These regulations are not just unusual cases of state laws run amok but deliberate policies from one of the fastest growing labor market institutions in the United States: government licensing of jobs. This form of regulation — largely established by state governments and implemented through their licensing boards — is often referred to as “the right to practice.” Under these laws, working in a licensed occupation is illegal without first meeting government standards.

The article describes the plague-like spread of occupational licensing:

In the 1970s, about 10 percent of individuals who worked had to have licenses, but by 2008, almost 30 percent of the work force needed them.

It presents the selfish, crony-capitalist sources of occupational licensing. Note that consumers don’t want it; they are hurt by it. The ones who want it are the cronies, the practitioners already in the field who want to limit the competition they face:

There is good reason for workers in licensed fields to push for the laws. [Licensing] raises wages by about 15 percent…. This is largely because of the ability of regulated professions working through state legislators and regulatory boards to limit the supply of practitioners and to drive up costs to consumers.

The article points out how licensing makes it harder for low-income, lower-skilled people to make a living:

Many of the jobs that require licenses are relatively low-skilled, like barbers and nurse’s aides, and licensing creates a barrier that might keep low-income people out of those positions.

(“Might”? There is no question about it.)

The article presents the logic (well set out in “public choice” economics) by which relatively small groups of providers manage to prevail politically over their much-more-numerous customers:

From the time of medieval guilds, service providers have had strong incentives to create barriers to entry for their professions in order to raise wages.… In contrast, consumers who will be affected by the higher fees of, say, a licensed manicurist are unorganized and arguably underrepresented in the political process.

The article does not, however, follow through on its own logic and advocate freedom of exchange. It’s wishy-washy. While it mentions certification, a robust free-market alternative to government licensing, it does so only “for jobs whose potential harm to the public is minimal, like tour guides,” and it concludes with this whimper:

Ultimately, we all would benefit from wiser, not more, occupational licensing.

No. The political logic of occupational licensure virtually guarantees that it will be unwise, driven by special interests at the expense of customers and would-be competitors.

Frustrated by that article, I was gratified to find in my new, July edition of Reason magazine another article on occupational licensing that does draws the logical conclusion and states it boldly. The article, by Veronique de Rugy (as of this writing still unavailable online) is entitled, “Free the Horse Masseuses! Occupational licensing must go.” It describes some of the great work both documenting and fighting occupational licensing being done by the Institute for JusticeDe Rugy concludes this way:

It is high time to let Americans work. Abolish all occupational licensing laws and end the practice of entrenched businesses using government to impose higher costs on consumers while thwarting upstart entrepreneurs.



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