A bipartisan coalition in Minnesota has introduced a new bill to repeal some occupational licensing laws. Called the Licensing Relief and Job Creation Act (SF 1629/HF 2002), this would protect "the right to engage in a lawful occupation free from any substantial burden."
Since these regulations tend to heighten income inequality between the licensed and unlicensed, University of Minnesota Professor Morris Kleiner even calls occupational licensing a "reverse Robin Hood." By eliminating "unnecessary regulations," some legislators have suggested that this law could create over 15,000 new jobs in Minnesota.
Due to the growth in the service economy, a surprisingly high number of Americans need a license to work. According to the Institute for Justice (IJ), 29 percent of American workers are licensed by state or federal government. In the 1950s, that number was 5 percent. In fact, there are more licensed Americans than Americans who are union members (12 percent) or earn the minimum wage (2.5 percent).
Defenders of licensing laws argue that these laws are essential to defend consumers' health and safety from unscrupulous businesses. However, there are two major problems with this reasoning. First, many occupations that require licenses are hardly threats to public health, like masseuses, tour guides, hair braiders, and tree trimmers, among many others. Furthermore, the process to obtain a license can be unnecessarily arduous and complex. For example, a manicurist in Alabama needs 700 hours of training before she can be licensed.
Second, consumer protection is better accomplished through other means. Lee McGrath, a staff attorney for the Institute for Justice, explains:
If you want to protect consumers, vigorously enforce existing laws against fraud, but don’t limit entry in to the marketplace, especially by imposing academic tests that often have nothing to do with the services provided.
In addition, occupational licensing creates a significant economic burden. Everyone, except for the incumbent cartel, suffers. Since licensing artificially restricts competition, on average, Minnesotans pay 15 percent more for licensed goods and services. These higher prices cost consumers more than $3.6 billion each year, just in Minnesota, according to a legislative brief published by IJ. Nationwide, the occupational licensing is responsible for 0.5-1 percent of the unemployment rate, according to research conducted by Professor Kleiner, Alan Krueger, chairman of the White House Council of Economic Advisers, and Alexandre Mas, a former Chief Economist at the Office of Management and Budget under President Obama.
Reason's voluminous coverage of occupational licensing. Damon Root on why these licensing laws are unconstitutional (short answer: the 9th and 14th Amendments). And be sure to check out the Institute for Justice for more on defending economic liberty and property rights.
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