Occupational Licensing

Free the Horse Masseuses!

Occupational licensing must go.

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Celeste Kelly, Grace Granatelli, and Stacey Kollman make their living by providing massage services to horses and other animals. For more than a decade, these three women have supported themselves by doing what they love while alleviating the pain of animals and bringing comfort to their owners. But if established veterinarians and bureaucrats in the state of Arizona and Maryland have their way, Kelly, Granatelli, and Kollman will not only be barred from their chosen livelihood, they could face up to $3,500 in fines and six months in jail.

The therapists are in trouble because they lack official licenses from their local State Veterinary Medical Examining Boards. But obtaining a license is absurdly difficult. "To become licensed, applicants must graduate from an accredited veterinary school, pass rigorous national and state licensing examinations and pay a $400 fee," the Institute for Justice (I.J.), a nonprofit public interest law firm representing the women, explains on its website.

None of the 28 fully accredited veterinary schools in the United States are in Arizona, and getting a diploma from any of them requires several years and thousands of dollars. Adding insult to injury, the schools are not required to teach animal massage, "nor is it necessary to demonstrate knowledge of or proficiency in massage to graduate or become licensed."

Unfortunately, this abusive treatment of American entrepreneurs isn't confined to horse masseuses. Unlicensed hairdressers, barbers, and hair braiders, too, were under attack in Washington, Utah, the District of Columbia, California, Mississippi, Minnesota, and Ohio before I.J. secured justice.

Cosmetology boards around the country tried to lock in the advantages of incumbent salons by requiring hairstylists to undergo months of training and pay thousands of dollars in fees before they could legally work. Many unlicensed hairstylists were immigrants hoping to bring their tradition of African hair braiding to the United States. Infuriatingly, many states' educational and experience requirements did not address African hair braiding at all, thus undermining the safety rationale altogether. After shelling out money and wasting time, would-be hair braiders would emerge into the market with no additional knowledge about how to perform the service they planned to sell. The fight to defend unlicensed hairstylists still rages on in Texas.

Taxi drivers face similar barriers to entry. In many cities, taxi medallion and certification boards are plainly in the pockets of the industry they ostensibly regulate. These bodies restrict the supply of hired cars to raise prices and profits for incumbents. I.J. challenged the taxi cartels in Denver and Minneapolis in court and won. Milwaukee is next.

Even interior designers have been targeted by unfair licensing regimes in Florida, Texas, New Mexico, and Connecticut. The villain in this industry showdown was the American Society of Interior Designers (ASID), probably the world's only interior design-centered mafia.

This protectionist industry association has engaged in a decades-long campaign to push licensing and titling laws for interior designers on several states. (Who else will save us from avocado appliances and bad feng shui?) I.J. has been victorious in these cases as well, but unfortunately this sampling is merely the tip of the iceberg.

Licensing requirements are often justified on the grounds of consumer protection and public safety. Supporters point to the early history of licensing, when many of the first requirements targeted high-risk (and often high-income) professions such as medicine and surgery. But at least these early schemes were limited to a short list of occupations.

Times have changed since then. A 2009 National Bureau of Economics paper by economists Alan Krueger and Morris Kleiner titled "Analyzing the Extent and Influence of Occupational Licensing on the Labor Market" measured that in 2008, nearly 30 percent of the workforce was required to hold a license, up from around 10 percent in 1970. "More than 800 occupations were licensed in at least one state," the authors write. According to I.J., in the 1950s only 5 percent of workers were required to obtain a government license.

The practice has spread to so many harmless professions that paternalist justifications hold less and less water. The potential for serious harm during a haircut or manicure is miniscule, and it's not clear licenses do much to prevent even the limited list of potentially serious screw-ups.

Occupational licensing is just another product of the ugly marriage between powerful private sector interests and the even more powerful government. The phenomenon is called cronyism and its origins are in the dislike of competition that many private businesses share. Competition may be good for consumers, because it keeps prices low while increasing the quality and choice of products and services, but it's hard work for businesses. They have to fight for customers by innovating and evolving in ways that consumers demand.

To avoid the gritty work of fighting it out in a free market, organized private interests, such as Arizona's licensed veterinarians, lobby the government for special regulations, preferential tax treatment, and laws that discourage competitors. They pay lawmakers to constrain the same free markets in which they originally achieved success.

Given the right incentives-campaign contributions, for instance-politicians are more than happy to elevate narrow, special interests over the broad general public and offer them protections from competition. This practice has been around for as long as there have been businesses and governments. The great economist Milton Friedman in his 1980 book Free to Choose cited the example of the Interstate Commerce Commission, which ended being captured by existing railroad interests and used to strengthen their grip on the industry to prevent competition from other forms of transportation.

Incumbent firms and workers in licensed industries are highly motivated to help their systems endure. According to Krueger and Kleiner, government-imposed barriers create a de facto government-sustained monopoly by restricting entry into licensed occupations. The end result: a 14 percent wage hike for licensed workers.

Customers lose, of course, thanks to fewer choices and higher prices. But the biggest losers of all are those workers who never get a chance to enter their chosen occupations because of government-enforced barriers. Many of these occupations -like working as a transit driver or librarian-traditionally offered low-income Americans their first rungs on the ladder to upward mobility. By making entry into the work force more expensive and time consuming, we are making their climb out of poverty that much more difficult.

Economist and Econlog blogger David Henderson did a quick back-of-the-envelope calculation in January to determine how many people are worse off because of occupational licensing laws. "If the laws kept the number of people in those occupations lower by even ten percent (which, along with a 14 percent higher wage, would imply an elasticity of demand of only 0.7)," Henderson wrote, "then 4 million people are worse off and possibly substantially worse off. With a higher elasticity of demand, you get an even bigger number of people who are worse off."

By protecting entrenched interests from competition, occupational licensing makes millions of people worse off, hinders income mobility, and lowers economic growth.

It is high time to let Americans work. Abolish all occupational licensing laws and end the practice of entrenched businesses using government to impose higher costs on consumers while thwarting upstart entrepreneurs.