The Cancer of Government Regulation
How occupational licensing laws hurt the poor
Politicians care about poor people. I know because they always say that. But then why do they make it so hard for the poor to escape poverty?
Outside my office in New York City, I see yellow taxis. It's intuitive to think that government should license taxis to make sure they're safe and to limit their number. It's intuitive to believe that if anyone could just start picking up passengers, we'd have chaos. So to operate a taxi in NYC, you have to buy a license, a "medallion," from an existing cab company (or at a once-in-a-blue-moon auction). Medallions are so scarce, they now cost hundreds of thousands of dollars.
Licensing prices poor people out of the business.
"Compare New York City, where a license to own and operate a taxi is $603,000, to Washington, D.C.," George Mason University economist Walter Williams told me. "There are not many black-owned taxis in New York City. But in Washington, most are owned by blacks." Why? Because in Washington, "it takes $200 to get a license to own and operate one taxi. That makes the difference."
Regulation hurts the people the politicians claim to help.
People once just went into business. But now, in the name of "consumer protection," bureaucrats insist on licensing rules. Today, hundreds of occupations require expensive licenses. Tough luck for a poor person getting started.
Ask Jestina Clayton. Ten years ago, she moved from Africa to Utah. She assumed she could support her children with the hair-braiding skills she learned in Sierra Leone. For four years, she braided hair in her home. She made decent money. But then the government shut her down because she doesn't have an expensive cosmetology license that requires 2,000 hours of classroom time—50 weeks of useless instruction. The Institute for Justice (IJ), the public-interest law firm that fights such outrages, says "not one of those 2,000 hours teaches African hair-braiding."
IJ lawyer Paul Avelar explained that "the state passed a really broad law and left it to the cosmetology board to interpret."
Guess who sits on the cosmetology board. Right: cosmetologists. And they don't like competition.
One day, Jestina received an email.
"The email threatened to report me to the licensing division if I continued to braid," she told me.
This came as a shock because she had been told that what she was doing was legal.
"When I called (the commission) in 2005 on two separate occasions, they did tell me that, but then when I called (again) … the cosmetology lady told me that the situation had changed and that I needed to go to school now and get a license."
No customers complained, but a competitor did.
One cosmetologist claimed that if she didn't go to school she might make someone bald.
But this is nonsense—hair-braiding is just … braiding. If the braid is too tight, you can undo it.
The cosmetology board told Jestina that if she wanted to braid hair without paying $18,000 to get permission from the board, she should lobby the legislature. Good luck with that. Jestina actually tried, but no luck. How can poor people become entrepreneurs if they must get laws changed first?! Jestina stopped working because she can't afford the fines.
"The first offense is $1,000," she said. "The second offense and any subsequent offense is $2,000 each day."
"It is not unique to Utah," Avelar added. "There are about 10 states that explicitly require people to go get this expensive, useless license to braid hair."
Fortunately, IJ's efforts against such laws have succeeded in seven states. Now it's in court fighting for Jestina, which, appropriately, means "justice" in her native language.
Once upon a time, one in 20 workers needed government permission to work in their occupation. Today, it's one in three. We lose some freedom every day.
"Occupational licensing laws fall hardest on minorities, on poor, on elderly workers who want to start a new career or change careers," Avelar said. "(Licensing laws) just help entrenched businesses keep out competition."
This is not what America was supposed to be.
John Stossel is host of Stossel on the Fox Business Network. He's the author of Give Me a Break and of Myth, Lies, and Downright Stupidity. To find out more about John Stossel, visit his site at johnstossel.com.
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