The occupational licensing “protection racket”
“Occupational licensing is, put simply, government permission to work in a particular field,” reads an Institute for Justice report. Requirements for such licenses often include advanced education, the passage of state exams and paying the state fees—all for the privilege of being allowed to work in a particular field. When people think of occupational licenses, they generally think of professions like doctors and lawyers, but it goes far beyond this.
Georgia, which has some of the country’s more burdensome occupational licensing laws, requires a license to work as an auctioneer, a travel guide, animal breeder, cemetery plot salesperson, librarian and a host of other professions. Failure to acquire such a license before practicing can result in severe penalties.
More often than not, the justification for such licensing requirements is to protect consumers from unqualified or unscrupulous practitioners, which sounds noble. But like 11 Alive pointed out, something doesn’t add up. Consider this: It takes 1,500 hours of education and two state exams in order to work as a cosmetologist. While it is without a doubt an honorable job, it isn’t the high stakes life-saving sort of role, like emergency medical technicians (EMTs). Yet entry-level EMTs must only complete 110 hours of education, which is reminiscent of the training disparity between hair stylists and 911 dispatchers.
The curiously high training and education levels extends to more than just cosmetologists. Many occupations require an enormous time and monetary investment. Makeup artists—as well as skin care specialists—need 1,000 hours of education, and manicurists must have 525.
So, what’s the deal with many licensing regimes?
“Licensing almost always comes at the behest of the regulated industries themselves rather than in response to consumer demands or some demonstrated need to protect the public,” the Goldwater Institute wrote. In other words, in some ways, it is a “protection racket” driven by self-serving industries to eliminate potential competition and drive up profits.
It’s easy to see why the Goldwater Institute came to this conclusion too. Studies examining licensing in the dental and teaching fields revealed that increased licensing requirements do not result in better products or services—meaning licensing often doesn’t benefit consumers.
Another study noted that licensing may result in nearly 3 million fewer jobs across the country, which should be unsurprising. Many prospective workers cannot afford the time and monetary investment to meet all licensing mandates, which can be significant. On average, Georgia demands “$185 in fees, 464 days of education and experience, and about two exams,” according to the Institute for Justice.
The end result of these restricted markets takes a toll on Americans and increases costs on consumers. In the healthcare industry, for instance, occupational licensing mandates accounted for a 3-16 percent increase on patient costs, and it would be fair to assume that similar effects are found in other industries. Overall, occupational licensing may cost customers hundreds of billions of dollars extra annually.
Given that occupational licensing blunts competition and can increase profits, why wouldn’t some industries support increasingly stringent requirements? This is not to say that all industries are treacherously promoting occupational licensing for selfish purposes and not all occupational licenses are rooted in economic protectionism.
Some were certainly well-intentioned, and there are many industries that absolutely ought to be licensed and regulated—like medical doctors and civil engineers. However, it seems clear that something is amiss with regard to many burdensome and disparate requirements and the recent proliferation of occupational licenses. Around 70 years ago, scarcely 5 percent of jobs required a license. Today, around a quarter or more of all Americans need the government’s permission to work, and the consequences should be alarming.
Rather than creating and maintaining illogical impediments to work, policymakers would be wise to re-examine occupational licensing regimes critically. They need to ensure that they aren’t unnecessarily burdensome and that they do serve a legitimate purpose other than unfairly benefiting industry professionals.