Occupational Licensing Reform Gains an Unlikely Boost from the FTC

In the fight for economic freedom, entrepreneurs and consumers get new support against self-serving interests.

"The health and safety arguments about why these occupations need to be licensed range from dubious to ridiculous," Federal Trade Commission Acting Chair Maureen K. Ohlhausen says about her push to roll back government-mandated licenses for an ever-growing list of jobs. "I challenge anyone to explain why the state has a legitimate interest in protecting the public from rogue interior designers carpet-bombing living rooms with ugly throw pillows."

Federal concern about the proliferation of occupational licensing requirements isn't exactly brand new. Last year, the Obama administration announced $7.5 million in grants to organizations working to reduce licensing requirements. That's a year after the feds published a report noting that "By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars."

Government officials may be honestly interested in the threats to competition, job opportunity, and consumer prices posed by licensing laws, but the issue also hits close to home. "Military spouses are especially affected by state occupational licensing requirements," noted a 2012 report from the Departments of the Treasury and Defense. "About 35 percent of military spouses work in professions that require state licenses or certification. They move across state lines far more frequently than the general population. These moves present administrative and financial channels."

Shuffled from post to post, military spouses may not have the time to retrain, let alone the money to buy permission, to engage in trades in which they're already perfectly proficient. And unhappy spouses make for unhappy troops—a problem when officials have made wide-ranging and seemingly endless military commitments.

But Ohlhausen's commitment to rolling back licensing takes the matter to a brand new level. The acting FTC chair told Damon Root in the January 2017 issue of Reason that her vision is for the commission to "promote greater competition and choices for consumers, but also liberty for people who want to enter these businesses."

Since then, the FTC has launched a new section of its Website devoted to economic liberty. The new pages point out, among other things, that "nearly thirty percent of American jobs require a license today, up from less than five percent in the 1950s." It adds, "Unnecessary licensing restrictions erect significant barriers and impose costs that cause real harm to American workers, employers, consumers, and our economy as a whole, with no measurable benefits to consumers or society."

Not that licensing is primarily intended to benefit anybody other than a select few. "Dishing out special economic benefits to certain in-state industries remains the favored pastime of state and local governments," the 10th Circuit Court of Appeals approvingly noted in 2004. Other courts have since differed on the righteousness of overt economic protectionism, but there's no doubt that many occupational licensing laws are meant to do nothing more than limit competition to existing hairdressers, massage therapists, builders, interior designers, and all sorts of other well-connected business people.

But while that effectively lines the pockets of established practitioners, other people suffer. "Because it limits which workers can enter a field, licensing necessarily excludes people who would work in an occupation if the barriers were lower," noted the 2015 federal report. "Fewer workers means higher wages for those who secure a license, but lower wages for excluded workers and higher prices for consumers."

That said, occupational licensing is a vice indulged in primarily by state governments. What can a federal official like Ohlhausen do to make things better? Well, Ohlhausen gets much of the credit for pushing the FTC toward its 2015 Supreme Court victory over the North Carolina State Board of Dental Examiners, which had barred non-dentists from the tooth-whitening business. That's an indication that the federal government's arm-twisting skills might occasionally be turned in a pro-liberty direction.

And Ohlhausen's ascendance comes at a moment when occupational licensing is recognized as a creeping scourge by people across the political spectrum. Republicans and Democrats, liberals and conservatives, and of course libertarians, recognize that forcing people to beg permission—and pay fees and time–to make a living is choking off opportunity and prosperity.

Last month, Arizona Governor Doug Ducey slapped down the State Board of Cosmetology, which had been investigating Juan Carlos Montes de Oca for giving away haircuts without a license. The former homeless man turned cosmetology student faced fines for his charitable efforts on behalf of people still living on the streets.

Ducey's intervention came less than a year after Arizona eliminated licensing for several occupations and eased restrictions for others. If the state had been more aggressive with its reforms, the governor's act of mercy would have been unnecessary, since haircuts given or sold would have been recognized as no concern of regulators. As it is, the State Board of Cosmetology became a laughingstock and may well inspire its own demise.

Florida lawmakers are already inspired. In a state where licenses to cut hair require 1,200 hours of training and a $223 fee, legislators propose to deregulate about two dozen trades so that new entrants can serve willing customers without first jumping through government hoops.

Perhaps recognizing that protecting existing practitioners from competitors is not a winning argument, Curtis Austin, executive director of the Florida Association of Postsecondary Schools and Colleges, unconvincingly told lawmakers that, "if you look at those places where they deregulate these issues in cosmetology, up to 85 percent of people contract skin diseases."

Really? Is there any evidence of that?

On a related note, many schools have established a lucrative sideline for themselves by selling government-mandated training to would-be workers—and those schools are, themselves, licensed.

Michigan has already eliminated licensing for seven occupations, and the Detroit News is urging state officials to ditch more. The paper draws off new Mackinac Center research demonstrating that requiring people to seek government permission before working "worsens income inequality without improving public safety."

Nebraska's Governor Pete Ricketts (R) also wants to reduce or eliminate licensing requirements for about 20 occupations, though his efforts were thwarted this month. Opposition came both from protected practitioners and schools that make a buck selling required training.

The FTC's Ohlhausen is absolutely right that "health and safety arguments about why these occupations need to be licensed range from dubious to ridiculous."

But self-serving arguments by people who profit from the restrictions are pretty effective all by themselves. It's good to have another prominent voice in place to oppose them.