Occupational Licensing

Why Does Hawaii Hate American Workers?

With occupational licensing rules that benefit favored friends, state governments raise barriers to prosperity for millions and raise costs for the rest of us.

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In Hawaii, it takes an average of 988 days and $438 in fees to become licensed to perform one of many occupations under the thumbs of state regulators. Given that the average requirement across the United States to enter such fields as painting contractor, landscaper, or manicurist is an already burdensome year of people's lives and $267 in fees, you have to wonder what officials in the Aloha State have against people trying to make a buck.

But Hawaii isn't the only offender—and in some ways it's not the worst, given that it licenses "only" 63 of 102 mostly lower-income occupations examined in a recent report from the Institute for Justice. Louisiana and Washington are both the worst offenders in this sense, imposing licensing requirements on people seeking work in 77 of the jobs examined in the report. Or you could combine the worst of both worlds, like California which licenses 76 occupations at an average of $486 in fees and 827 days in time, or Nevada which requires an average $704 in fees and 861 days for 75 jobs.

Ouch.

"In 1950, only about 1 in 20 jobs required a license," Labor Secretary Alexander Acosta noted during a speech to state legislators on July 21 of this year. "Today, more than 1 in 4 Americans need a license to legally perform their work." He added, "Taking up this issue is one way that you, as legislators, can have immediate, consequential and measurable impact. You have a tremendous opportunity to help create millions of jobs, without spending a dime."

Acosta voiced rare bipartisan concerns in this politically tribal day and age. The preceding Obama administration was also worried about the proliferation of occupational licensing, warning in 2015, "Fewer workers means higher wages for those who secure a license, but lower wages for excluded workers and higher prices for consumers. Research finds that more restrictive licensing raises prices for goods and services provided by licensed professionals by between 3 and 16 percent."

Bipartisan agreement that occupational licensing is out of control! That means we can make progress, right?

Well, some.

Arizona, where I live, for instance, has eliminated licensing requirements for a handful of occupations. These are "regulations that are often designed to kill competition or keep out the little guy, including the elimination of licenses for talent agents," in the words of Republican Gov. Doug Ducey's office. But explicitly eliminating licensing requirements for more jobs has been challenging—the state still licenses 68 of the 102 occupations examined in the IJ report, at an average of $612 in fees and 765 days. So Arizona has taken a new tack, this year adopting a law that eases the way for people to sue the state government over licensing requirements that restrict competition and create unnecessary barriers. Really, that's all of them, so this could be promising. Another law requires regulatory boards to justify their licensing requirements.

Why the tough battle to achieve reform that enjoys bipartisan support? Apparently, so we're told, it's to save us from doom. Advocates of licensing constantly invoke health and safety concerns.

Without licensing, "Any person without any formal education would be able to practice cosmetology, putting consumers at risk of injuries, burns, infections, and the spread of diseases, such as hepatitis and Methicillin-Resistant Staphylococcus (MRSA), due to unsanitary practices," argued Bridget Sharpe, Manager of Government Affairs for the Professional Beauty Association.

Sure. Except that a 1997 study by Morris M. Kleiner and Robert T. Kudrle, of the University of Minnesota, found that "increased licensing restrictiveness did not improve dental health, but did raise the prices of basic dental services." Yes, that means that licensing hasn't improved the quality of dentistry. So the argument that it saves us from the risks of unregulated cosmetology seem a bit unpersuasive.

Also illustrative is the fact that jobs licensed in some states go unburdened by such requirements in others. Florists are licensed only in Louisiana, for example. The rest of us just have to take our chances with the unlikely perils of floral anarchy. Seven states license tree trimmers. Fourteen states license locksmiths. Are the people in states that don't require licenses in these fields really in more danger? There's no evidence to suggest that's the case—unless you're talking about the "danger" of greater choice and competition. As the IJ report points out, "in 2012, Louisiana had just 32 braiders legally allowed to serve the whole state, while Mississippi had over 1,200." Unsurprisingly, Louisiana licenses hair braiders, while Mississippi does not.

As you might expect, people lucky enough to hold licenses in regulated fields see the barriers to entry as a feature, not a bug.

"Too often, the members of an occupation gain effective control over the quasi-public board that regulates their profession. Once this happens, private actors wield their government-granted power to block potential competitors from entering 'their' market," writes Maureen K. Ohlhausen, Acting Chairman of the Federal Trade Commission, in a foreword to the IJ report.

In raising barriers to competition, regulators and the industries that capture them also create hurdles to mobility between states.

"When a worker has made large investments of time and money in obtaining a license from a particular state, she will be understandably reluctant to move to another state and again pay the costs of becoming licensed, even when job conditions are better elsewhere," wrote Ryan Nunn last year in a separate report for the Brookings Institution. That locks people in place, hurts prosperity, and puts two-income families in a bind when opportunity across state lines for one partner may require another round of expensive licensing challenges for the other.

The Brookings report suggested interesting alternative means of addressing licensing advocates' alleged health and safety concerns. "Some are purely private: third party organizations with relevant expertise can attest to the competence of a worker, often through a private certificate or reputational markets like Yelp can help consumers share their experiences with particular workers."

Good reviews and seals of approval could accomplish the screening that licensing is supposed to give us without barring go-getters from starting new jobs or denying choice to customers. Of course, established businesses could no longer bar competitors from their fields.

Too bad.

There aren't too many issues on which Americans agree these days. That occupational licensing is completely out of hand is one of the few points of accord—with the exception of the grifters who benefit from such barriers and don't care about the impact on other people's opportunity, choice, and prosperity. Reforming the rules is a fine means by which government officials in Hawaii—and Louisiana, and Washington, and every other state in the union—can demonstrate that they don't actually hate American workers. They might even make life freer and better in important ways.

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  1. “The Brookings report suggested interesting alternative means of addressing licensing advocates’ alleged health and safety concerns. ‘Some are purely private: third party organizations with relevant expertise can attest to the competence of a worker, often through a private certificate or reputational markets like Yelp can help consumers share their experiences with particular workers.'”

    But if the services were voluntary, some poor people might choose not to use them because it was too expensive! And since we middle-to-upper-class regulator types have all sorts of degrees and titles and suchlike that they don’t, clearly we need to make that risk/benefit analysis of “increased safety but not being able to afford it” vs. “greater risk but actually being able to access the service in question at all” for them (in favor of the former, always, end of story). The very suggestion that we might shove the decision off onto the little dears themselves is simply inhumane…

    All government is based in condescension. Always, end of story.

    1. Degrees are great things, and jobs that require degrees are the best things. Licences are kind of like degrees, so they are at least good.

      1. So, that was a great joke. We can all see that, it was funny and timely. It really pierced the situation, and maybe even made us all think a little. That’s all well and good.

        To be serious for a moment though. Paternalistic behavior is rampant. I wonder if this is not the natural state of affairs? In traditional days with monarchy and landed lords and such, it was very explicit. The masses were to be controlled. Few things are as paternalistic and bothersome to me as the concept of Noblesse oblige. That is exactly what we are seeing right now. I think the US and perhaps the new world more generally tends to be more egalitarian, but we are still not immune to those impulses.

        Now, I don’t know if after the revolution or something we had some miraculous century without condescension, but in modern times the paternalism is the same as in the olden days. Only now, technology enables finer grained monitoring and control of many details. We can define rules strictly, and we can detect variation outside that with greater efficacy than ever. This is the dark side of technology we should all keep in mind.

        1. Oh, I don’t think the paternalism ever left. Or that it ever will, either. It can’t- and doesn’t need to. Condescension is as natural a human emotion as avarice and rage, and can no more be abolished than those impulses can be. The problem with government is not that it creates or even encourages the will to place ourselves above another; it’s a natural extension of our competitive drive, the drive to acquire social status and material advantage. The problem is that government allows that will to escape our imagination into reality.

          1. I’m making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life.

            This is what I do… http://www.onlinecareer10.com

  2. The advantages to those that hold or grant licenses seem obvious, and (mostly) mercenary. Fine.

    So what are the claimed advantages for the rest of us? Does licensing improve quality of engagement or outcome? And even if it does, can other less-restrictive mechanisms do the same? Or are we just pandering to people too lazy to make independent assessments? And also establishing some formal foundation for future legal actions? My inclination is to rely on my own judgement in most cases.

    The other big issue revolves around safety, either for a specific customer or for the public at large. I will admit that I feel less certain, pondering the range from licensed civil engineers to truck drivers (and ignoring licensed hair braiders). Yelp might be effective for pizza, but not what I want to rely on for highway bridge construction consumer advice.

    1. If you want a bridge build, there’s a pretty good chance you know what needs to be done, you’ve probably had similar projects completed, and you know the players in the field, by reputation if not personally. Now, if you just want a bridge built for jobs/stimulus/votes, the lowest bidder will do fine.

  3. TripAdvisor has completely changed my experience travelling. It used to be a complete crapshoot as to whether I’d get a hotel that was going to be unbearable and possibly hazardous.

    I’ve booked more than a hundred hotel rooms after reading the reviews on TripAdvisor, and I always have a pretty good idea of what to expect. An additional benefit is that hotels are seriously upping their game to get good TripAdvisor ratings.

    Because it’s private, there is plenty of competition in the review space. If they fail, I have options…

    If the government has any role in business, it’s protecting reviewers from lawsuits over ‘bad’ reviews.

  4. I thought bipartisan meant one looter party trains a gun on you while the other goes through your pockets then breaks your fingers. Bipartisanship is conspiracy in actual practice!

  5. Hawaii is fucked for so many reasons that it’s impossible for me to point at any particular shitty policy without going down a dozen other tangential shitty roads.

    1. Ooh, I LOVE going down tangential shitty roads! (It’s an artifact of my having been raised by a Romani caravan that considered GPS to be black magic).

  6. Doug Ducey is da man!

    Keep ya coconuts & jellyfish/shark attacks.

  7. Locksmith licensing is understandable. Some guys are amazing. I once watched a locksmith open two locks that I couldn’t open after an earthquake, because my keys were locked inside. It took him about ten seconds, including a tap from a small hammer to bend the pick. They could potentially be the AK-47 of burglary, if so inclined.

    1. Locksmith licensing is a systematic attempt at eliminating the mobile service providers which make up 80% of the trade. Bonding, as opposed to licensing, would address any security issues while still allowing the free market to best serve the consumer.

  8. As another commenter noted, Hawaii is fucked for so many reasons. I remember visiting the tobacco fields of the Kauai Cigar company a few years back. They grow the tobacco there, but ship it to Nicaragua to have the cigars rolled. I asked about that and it was explained to me that as farmers, they paid a small amount of income tax to the state. But if they were to roll the cigars there, they would be a manufacturer, and taxed as such. The tax was so great that the cost of shipping tobacco to Nicaragua and then out from there was cheaper than paying the manufacturing tax.
    BTW, if you visit their website, they require you to be 21 (enter birthdate registration). I’m pretty sure that’s Hawaii’s government in action, once again.

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