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Here's a fun fact: "In 1950, fewer than 5 percent of Americans worked in jobs that required licenses. Today, it’s roughly 30 percent, and that number is likely to grow."

That's from Jacob Goldstein, who notes that, at least in Utah, one of those jobs is "African hair-braider," which falls under the jurisdiction of the state's "Barber, Cosmetology/Barber, Esthetics, Electrology and Nail Technology Licensing Board" -- nice name -- and has been judged to require a cosmetology license at a cost of almost two years of school and $16,000 in tuition.
All too often, a license is a mixture of protection racket and backdoor tax -- and it comes at the cost not just of jobs, but of new business formation and economic experimentation.
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13 comments
 
Backdoor taxes...alive and well in Texas.
 
Has anyone done a study on the regulations facing small and medium businesses and how they break out between federal, state, and local levels of government? I've a sneaking suspicion that it's the latter two that makes up the bulk of them, although Mitt Romney seems to think that its an important issue to talk about at the national level.

EDIT - I only mention Mr. Romney to point out that his focus on this issue in his campaign for the presidency implies that he believes that this is a national issue, whereas I suspect that it's probably more of a state/district issue. I don't have evidence to support that claim, and I could have it wrong, so I thought it a good idea to pose the question of whether or not any studies examining this exist. 
 
+Patrick Gillespie Licensing regulation is generally pushed by established businesses to prevent new competition.  Rules that keep the rich rich are not the sort of thing that bothers Mitt Romney.  
 
Thanks for this libertarian post, +Ezra Klein . Licensing is directly killing competition (thereby raising prices), employment, innovation and customer choice. Throw it all out.
 
+Tim Roberts Agreed.  + byzantine corporate tax code that provides anti-competitive advantage for big businesses that can afford to bribe congressmen. 
 
I love how we pitch the glories of competition then stifle it at every turn.
 
What about the good paying middle class jobs that licencing creates. I would like to see how the wages for the 25% of jobs were affected by the licensing increase.
 
+Tim Roberts I think his point is that it results in better paying jobs for those that meet the licensing requirements. Due to if nothing else reduced supply.
 
If you are using potentially harsh chemicals or sharp objects near a person, it might be good to have some qualification that you know what you are doing but the out of pocket cost is up for debate and should be kept low so it doesn't form a barrier to entry by itself. I dispute the op ed author last point that there is a huge demand for hair braiders and interior designers that displaced factory workers can fill if only they didn't need a license.
 
+Tim Roberts I am surprised by that point. There is no standard mandated salary for an entry level position so it doesn't make sense to me. If there are less people offering a service, price competition is less and people will be able to charge more(up to a point). License holders also start with training that they need to get the license so that can be pointed to when justifying a price.
 
Credentialism/licensing has been pushed beyond any reasonable support.  You should see what it takes to be licensed as an architect these days.  The professional organizations extract fees for the tests, the credentials, and of course there have to be that many more instructors to teach to those tests at the profession's schools.  There seems to be no interest group that will push back on the licensing organizations, so the scope and depth of such requirements always grows, never shrinks.  Some balance would help.
 
"Barriers to entry" is a ubiquitous concept in business, with some sectors and segments having high barriers to entry and some having low ones. Barriers to entry limit supply, which increases price. Some industries (mining, shipping, auto manufacture) have barriers to entry based on the capital requirements to get into them. Some industries have barriers to entry based on access to raw materials or supply lines. Some have barriers to entry based on specialized knowledge. And some have barriers to entry based on licensing requirements. Other business endeavors, such as mopping floors, have very low barriers to entry, almost anybody can do those things, and in turn the price of those things is very low.

The high quality practitioners in a field with few barriers to entry always have a problem in differentiating themselves from the low quality practitioners, who not only drive the price down, but the public's perception of the quality that is available. By convincing a government to require a license, and then controlling the licensing body, high quality practitioners can set a minimum quality bar AND restrict the supply, so both price and quality go up... not necessarily on par with each other.

But once they are in control of the accreditation body they can, also, create barriers to entry that don't necessarily increase quality and only serve to restrict competition and increase prices. One of the legitimate roles of government seems to be not only to watch over, but to watch the watchers.

We should be careful about only allowing licenses to bar entry to fields of endeavor where there really is a pretty significant risk associated with low quality. And even then, we should be ever vigilant against artificial barriers that don't benefit consumers and only serve to limit supply and increase prices. Government should help US accomplish that. Of course... every licensing body also has a lobbying arm and now, I'm sure, a SuperPAC. Which makes me wonder who ends up actually speaking for the people.
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