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Jewish World Review August 27, 2007 / 13 Elul, 5767 License to Kill Jobs: State certification boards are supposed to help consumers. They often stifle competition instead By John H. Fund
http://www.JewishWorldReview.com |
Americans pride ourselves on being a country that encourages people to work and stand on their own two feet. But over the past few decades there has been a hidden surge in regulations, licensing and monopolies that discourage people from starting the kinds of small businesses that are often the first step toward self-reliance.
In the 1950s, only about 4.5% of jobs required a license to work. Today, that proportion is more than 20%. Many of the jobs that require a government stamp of approval don't involve health or safety. Depending on the state, you need a license to be a hair braider, florist, auctioneer, interior designer or even fortune-teller. Many licensing regulations exist only because business interests lobby for them in order to reduce competition. They then often set up oversight boards that protect incumbents in the industry while excluding newcomers.
Reason Foundation analyst Adam Summers has written a new study of occupational licensing that catalogues some of the absurd requirements to get occupational licenses. Does a hair braider really need hundreds of hours of instruction in all aspects of cosmetology, hardly any of which he will ever use? Is it essential to the well-being of young children that directors of day-care centers possess master's degrees? What's the point of refusing to license a car service unless it has at least 10 cars?
Some states require licenses or credentials for all manner of jobs, while others seem to get along just fine with a much more targeted list. California has been burdened for years with an uncompetitive business climate, and part of the reason is that it requires licenses for 177 different job categories. Next door, Arizona licenses only 72 job categories and Nevada only 95. No wonder job growth is much higher in those states.
In general, states with slower job growth, especially in the Northeast, have far more job licensing requirements than faster-growth states in the Sun Belt. Connecticut, Maine and New Hampshire all require job seekers to obtain a license before performing more than 130 jobs. But in many states one could do most of those very same jobs without a license. Missouri has just 41 certification requirements, the fewest in the nation, and South Carolina just 60.
Most of these barriers to entrepreneurship are invisible to ordinary people, who know they can't find a cab or affordable care for their children, but don't realize it's because state regulations make it hard to go into those businesses. The Arlington, Va.-based Institute for Justice has successfully challenged some of these licensing laws in court and done a great deal to vindicate the right to earn an honest living.
In 2005, it forced Minnesota to admit its licensing scheme was unconstitutional as it applied to hair braiders. The state agreed to write new rules exempting hair braiders from laws requiring them to take 1,550 hours of cosmetology training that could cost up to $14,500 in tuition.
"I never considered going to cosmetology school, because not one minute of the 10 months of classes dealt with braiding," said Ejgayehu Beyene Asres, one of the plaintiffs in the Institute for Justice case. In recent years, similar IJ court challenges have ended unnecessary restrictions on hair braiders in nine states and the District of Columbia. The Institute has also won cases upholding the rights of New York jitney van drivers and Tennessee casket makers. The latter used to have to attend a school for funeral directors.
The Reason Foundation study says it's not unusual for state licensing boards to be captured by the industries they regulate and become barriers to would-be competitors. The boards often don't protect consumers because they are reluctant to police "one of their own." Licensing also forces job holders to comply with rigid and often outdated standards rather than devote time to honing specialized skills.
The higher prices such licensing bodies impose for services can also hurt consumers by creating incentives to do dangerous jobs themselves. "Electrocution rates are higher in states with strict electrical licensing requirements, as more consumers risk performing their own electrical work," the study notes. "Similarly, states with stricter dental licensing laws also have the highest incidence of poor dental hygiene."
There are alternatives to government licensing. Groups such as Consumer Reports, Good Housekeeping and CNET have helped consumers for years with data on product and service quality. No doubt in the absence of licensing, other rating agencies would spring up to set appropriate standards for private certification and grading. Another certification model would allow for different levels of quality and have practitioners subject themselves to inspection, with only the best allowed to call themselves "Grade A." Beyond such private efforts, examples of negligent service, faulty work or dishonesty can always be combated through litigation. The bottom line is that licensing is probably the poorest and least effective method of ensuring that consumer satisfaction and reasonable prices go together.
Licensing laws are but the tail of a bureaucratic dinosaur that has been saved from extinction by the judicial presumption that most economic regulation is constitutional if the state can show a loose "rational basis" for it. That has made it difficult to challenge even those regulations that have little to do with health and safety. Chip Mellor, the Institute for Justice president, says that it's encouraging that more judges are questioning the presumption that state restrictions on the right to earn a living are valid. Some courts are even citing the 14th Amendment's due process and equal protection clauses in striking down protectionist government regulations.
It's time for courts to step up the pace and send bolder and clearer signals that they will no longer tolerate irrational licensing legislation that saws off the rungs of economic opportunity.
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JWR contributor John H. Fund is author, most recently, of "Stealing Elections: How Voter Fraud Threatens Our Democracy". (Click HERE to purchase. Sales help fund JWR.) Comment on this column by clicking here.
© 2006, John H. Fund |
Mitch Albom | |||||||||||
