On July 21, the New Jersey Division of Consumer Affairs boasted of busting "eight unlicensed moving companies that targeted Asian and Latino communities." By "targeted" they meant that the companies advertised their services in Korean and Spanish, but let's allow the bureaucrats their moment. Or their latest moment, anyway. This wasn't the first roundup of sweaty guys with trucks and dollies. In February of this year, New Jersey officials shut down 19 unlicensed moving companies. They scored 26 of the scofflaw businesses in January 2014. And they bagged another 25 in August 2012.
Officials billed their triumph as a win for the unsuspecting public. But it might more accurately be seen as an attack on entrepreneurs—especially newcomers to the country who see a way to make a buck with a strong back and a truck. And it's an equal headache for the people who want to hire them.
"[C]onsumers are largely unaware that these unlicensed companies are in violation of the law and are avoiding requirements designed to protect consumers from fraud and deceit," acting Attorney General John J. Hoffman said in a statement.
That the unpapered fraudsters were taking advantage of unsuspecting customers is apparent from the flood of complaints—
Whoops! Actually, all eight of the companies busted this month "were identified either through Internet postings or newspaper advertisements in which moving services were advertised exclusively in Spanish or Korean," says the Division of Consumer Affairs.
And the 19 companies scooped up in February were stung by investigators who posed as potential customers. They were taken down when the moving crews showed up at the agreed upon place and time.
That's the same way 26 companies were nabbed in January 2014, in the course of "Operation Mother's Attic."
And the 25 in August 2012.
The clever state investigators perused the companies' own websites, Craigslist, and Angie's List to track down the… umm… criminal mastermind movers. Operation Mother's Attic apparently consisted of 15 minutes of web browsing and a couple of phone calls to book appointments.
New Jersey officials didn't respond to a query as to whether any actual customers had complained about the movers' performance—or even posted negative reviews on Angie's List.
Why would small-scale movers risk the wrath of the state, disruption of business, and stiff fines ($2,500, reduced to $1.250 if they apply for a license within 15 days)?
The latest announcement provides a handy clue. Most of those movers "targeting Asian and Latino communities" were owned by people with very obviously Hispanic and Korean names. U.S. Immigration and Customs Enforcement openly participated in the February 2015, January 2014, and August 2012 stings.
Licensing requirements are onerous enough for startup small businesses. New Jersey's Public Movers and Warehousemen License Application requires $400 just to apply, plus $35 for each truck and warehouse, disclosure of educational loan status (really), and child support status. These might be tough hurdles to surmount all by themselves if you're starting a moving business to get out of dire financial straits so you can pay your bills and maybe settle some debts.
Applicants must also disclose criminal records, and regulatory violations. And entrepreneurs with a truck (maybe a rental), a dolly, and aspirations of not being broke must attest that they have liability insurance to cover injury and property damage.
Whatever the good intentions behind these requirements, meeting them might be impossible for a new business. The fees and insurance could well be affordable only by illegally moving a few loads first. When I painted houses and did home improvements in Massachusetts 20-odd years ago, I took one look at the red tape and expense of going legal and decided to stay under the radar. New Jersey is no easier an environment, providing plenty of incentive for choosing the same course I took.
But if you're an immigrant, especially the kind pursued by U.S. Immigration and Customs Enforcement, there's another requirement that's a deal-killer. License applicants have to reveal their citizenship/immigration status—and the only prize for revealing that you're in the country illegally is a pair of steel bracelets. That is, even if they could raise the capital and jump through hoops that already impede startup businesses, many of the movers targeted by New Jersey probably can't get licensed.
Entrepreneurs suffer when they have to start businesses under the table and risk official wrath, but so do we all. Red tape not only limits competition, but also kneecaps productivity. "From 1997 through 2010," writes Antony Davis, an affiliated scholar with the Mercatus Center at George Mason University, "productivity in the least regulated industries grew almost twice as fast as in the most regulated industries."
Immigrants facing language barriers and, perhaps, iffy legal status can have special problems navigating red tape. In a 2011 article recognizing that immigrants punch above their weight in starting small businesses—foreign-born New Yorkers make up a third of New York City's population but own 48 percent of its businesses—the New York Times acknowledged that regulation is a "major barrier" for immigrants entrepreneurs who "often misunderstand or are unaware of the rules regarding tax filing, permits and practices."
Regulation may be tough in New York, which is ranked at 47 in regulatory freedom among the states, but it's a hair worse across the river in48-ranked New Jersey. That's a problem. A 2010 Organization for Economic Cooperation and Development report on entrepreneurship and migrants points out that burdensome red tape is lousy news for any aspiring business person, but that "[r]egulatory impediments on entry and contract enforcement can be particularly burdensome for migrants" and can "can influence a migrant's decision to become an entrepreneur and how successful they are at it."
Immigrants aren't just especially hardworking in New York – they make up 16 percent of the labor force across the country, 18 percent of business owners, and 28 percent of Main Street businesses, according to the Fiscal Policy Institute. Truck transportation services are among their most commonly own businesses, perhaps explaining why the 26 moving companies busted in January 2014 were equivalent to almost 10 percent of the 290 moving companies licensed in the state at the time.
New Jersey might boast about shutting down businesses that operate unlicensed, but its red tape and enforcement of the same is nothing to be proud of. Those "requirements designed to protect consumers from fraud and deceit" kill productivity by choking off the creation of new businesses to compete with existing operations. They force ambitious and hard-working immigrants who disproportionately create businesses and jobs to labor in the underground economy. And they hobble economic opportunity for us all.
The Garden State—and plenty of other places—needs to cut out this crusade against prosperity.