A New Analysis of the Implications of Occupational Licensing

Everybody talks about occupational licensing, but nobody does anything about it.

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American policymakers are approaching cross-ideological consensus about the use and abuse of occupational licensing. Occupational licensing is a kind of labor regulation that has spread across America's economy; for every union member in America, there are more than two licensed workers. The misuse and overuse of occupational licensing dampens job creation, innovation, productivity, and consumer choice.

Research on occupational licensing continues to demonstrate that, as occupational licensing expands, it is often accompanied by significant costs—such as higher prices and a hobbled labor market—but not by the benefits, like higher quality, that presumably constitute occupational licensing's selling point. Criticism about occupational licensing overreach is recurrent and bipartisan, extending from the Obama Administration to the Trump Administration to the Biden Administration.

One weakness in current research on occupational licensing, though, is that although it emphasizes diagnosis of the problem, it is relatively weak on recommended cures. In this respect, discussion and analysis of occupational licensing bears some similarity to the discussion and analysis we typically see about the federal budget. It is easy to find policymakers and analysts who charge that the federal budget is, in general, too large, too wasteful, and in need of reform generally. It is more difficult to find analyses of the federal budget that identify particular programs or sectors and then explain that those aspects of the federal budget should be shrunk, transformed, or eliminated entirely.

This has something to do with the fact that just about every aspect of the federal budget has created its own defenders who are not only relatively knowledgeable about the subsidies it creates, but also benefit from those subsidies and thus have an interest in being ready, willing, and able to strike back at critics. Indeed, public choice analysis suggests that the defenders of some particular aspect of the status quo can be expected to be at least as knowledgeable as those who seek to reform the system. It is therefore unsurprising that (to paraphrase a remark apocryphally attributed to Mark Twain) everybody talks about occupational licensing, but nobody does anything about it.

That's a bit of an overstatement, of course: in some respects, occupational licensing reformers have produced small victories. Some policymakers have pushed for interstate/cross-jurisdictional licensing recognition, and they deserve credit for this erosion of employment barriers, but this is weak tea.

Imagine that each state in the Union contained a small private club with extremely selective membership requirements, and that you were tasked with figuring out how to give more people access to your state's club. Certainly you could say: let's have interstate membership recognition, so that someone who's a member of an out-of-state club could use our own facilities. That could increase club participation slightly. But there is no getting around the fact that if you really want to admit a significantly larger number of people into the club, you're going to have to consider the prospect of admitting more people who lack any previous club membership whatsoever.

This brings us to the question of why we exclude people from these clubs generally: almost any serious analysis of occupational licensing will necessarily discuss the rationale or justification of licensing in particular cases. The work of the analysts at the Institute for Justice is typically central to discussions of this issue: analysts of reform in this area will often find that the Institute for Justice has gotten there first. IJ's inverted pyramid, which lays out how various regulatory needs might justify various forms of occupational regulation, forces consideration of two big questions: what is the justification of any particular system of licensing, and how efficiently does that system of licensing satisfy that justification?

The implicit policy recommendations in IJ's pyramid are extraordinarily helpful if we want to understand and evaluate justifications of occupational licensing. In a recently published article in the John Marshall Law Review ("Regulating Glamour: A Quantitative Analysis of the Health and Safety Training of Appearance Professionals"), I analyze the state-mandated training requirements for several classes of "personal appearance professionals"—that is, barbers, cosmetologists, and manicurists.

I find that only a small fraction of the required training hours for barbers and cosmetologists can be justified on health and safety grounds. I also find that the majority of these training requirements cannot be justified with any public-interest rationale at all. This suggests that—at the very least—the training hours that the states require for many personal appearance professionals could be cut by around 75% without eliminating any of the training that focuses on the strongest justification for licensing, namely, health and safety concerns.

It is worth emphasizing here that the category of personal appearance professionals exemplifies large problems of licensing. Those who want to practice (for instance) cosmetology must forgo about a year of income, which implies the payment of substantial tuition and/or the accumulation of substantial debt, in order to get permission to practice an occupation that doesn't pay especially well. If this situation does not shock your conscience, I hope that it at least provides noticeable voltage.

Perhaps the above helps to explain why I wrote "Regulating Glamour." In my next two posts, I will go into detail about this paper's argument: the nature of state-required education and credentials for appearance professionals, the kind of mandatory educational requirements these professionals face that could be jettisoned with little or no cost to the public, and the nature of the curricular assessments that the paper performs. Policymakers who actually want to do something to reform occupational licensing should find this discussion especially useful—and it's my hope that some of them will view the paper's findings as an opportunity for reform.

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  1. I see that we are both fans of IJ. When it comes to donations, I'm pretty stingy. But I do donate to IJ because the issues they choose are so deserving, and because they do such a good job when they do take on an issue.

    Here's a shameless plug. http://www.ij.org

  2. Rent seeking should be criminalized as its cousin, armed robbery, is. All regs should proven safe and effective or be void. Regs are rent seeking. The burden should be on the scumbag lawyer regulator. Fail to prove every element, including training times required, go to prison. Everyone is sick of you scumbag lawyers. This is the most toxic occupation in our nation, 10 times more toxic than organized crime.

    1. Everyone is sick of the monotonous scumbag comments mooed by the Behar.

      1. Your profession has to be crushed to save this country, not rule changes, not remedies, not restrictions, arrests. Arrest the 25000 traitor hierarchy, try them an hour, shoot them in the court basement. Repeat every 20 years. To deter.

      2. Donnie, what word do you prefer for an occupation that is 10 times more toxic than organized crime?

        1. Behar, It's Nico to you.
          "10 times more toxic than organized crime"
          Where do you come by such a preposterous claim that show that you know little about the legal profession and even less about organized crime.

  3. Is this really a problem of national proportions?

    Looking at the presidents' policies, how many govt employees (high level sometimes), were involved in their development?

    I dunno, it just seems like there's A LOT of work (and words), for a problem of minor importance.

    And to be clear, I agree there's over-licensing, just not sure we need to make it a national issue.

    1. Most of this occupational licensing is of state or local origin, so it is not a "national issue" in the sense that it requires a national response. The state or local licensing is, however, sufficiently widespread to be an issue throughout the nation.

  4. I liked the proposal in Michigan to license "fact checkers" and think it should be done nationally. Require all those "fact checkers" on social media to put up a bond, get insurance, and possibly some training if we are going to rely on them to be our de facto Ministry of Truth. I can't see how anyone could argue without that being in the public interest.

    1. It is easier and cheaper to get off social media.
      Add hours to each day for enjoyment of actual face to face encounters with real friends.

      1. Assumes a fact not in evidence.

    2. The proposal is yet another occasion of the problem. Eliminate the concept of personal responsibility by relying on the police power of the state.

  5. The talk is always about cosmetologists and the like. IJ and the OL critics never seem to get around to most consequential monsters, such as lawyers, doctors, and dentists. I'll take the critics of licensing seriously when they get serious.

    1. The two are not mutually exclusive. It is possible to say that doctors, lawyers and dentists need to be licensed but cosmetologists do not.

      1. It's also possible that these occupations are low-hanging fruit. It might be much easier to start with these more obvious cases of overreach, before expanding once those easier cases are shown to be well-served, or not leading to disastrous consequence.

        1. I'm a bit curious if currently-licensed cosmetologists, who paid the price of admission and now are able to charge supracompetitive rates for their services, would agree this is an "obvious case of overreach."

          1. You could try talking to some. The folks I know in related occupations ("personal appearance professionals") don't like it. They aren't very free to move, it takes a few years to pay off all the debt, and the schooling and the licensing process sucks. I'm sure that one of them hates it even now that she's finished, as she had to move out of state and is not licensed in that other state to work in her area.

            1. They aren’t very free to move, it takes a few years to pay off all the debt, and the schooling and the licensing process sucks.

              Well, the same is true for lawyers, doctors, &c. And that doesn't really reach my question. In a world where there are reduced barriers to entry, rates will go down. Is that a trade they want to make, or are they thinking the gatekeeping costs will go away and somehow they'll still make just as much?

              1. "Is that a trade they want to make"

                Why should the people benefiting from the artificial scarcity be the ones who get to make that decision? The high barriers to entry has a cost to the rest of us.

                1. Why should the people benefiting from the artificial scarcity be the ones who get to make that decision?

                  Wasn't saying they should get to make it. Just wondering if they factored that tradeoff into their griping about and desire to do away with the licensure system.

                  The high barriers to entry has a cost to the rest of us.

                  Very true, and many would say exactly the same about lawyers, doctors, &c.

              2. You will get very different answers from the individual barbers than you will from the owners of large haircutting chains. Individual barbers (in my admittedly limited experience) dislike the idea of licensing but the chain store owners have the power to lobby for it.

              3. I'm not a lawyer or an appearance professional, but the profession I currently work in (IT) has a lot of certifications though no licensing. Let's look at project management as an obvious example. Anyone can be a project manager just by claiming to be; no license is required. The *legal* gatekeeping costs are non-existent. And yet, there is still a strong trend of requiring a PMP certification to get hired. (It's not even a skill-based cert and it can cost over $1000 plus expensive annual classes to keep the cert.)

                Removing licensing may not dramatically change the income for trained, experienced professionals. It might give rise to an independent certification scheme to squeeze cash out of future job seekers, though.

                I guess removing the government would be considered an upside but the net effect may be more complication and confusion.

      2. With regard to the medical licenses, a license does not insure competence....But it does prevent the incompetent from working, or moving to a new locality and inflicting harm on others.

        WRT lawyers, I see no objective evidence that admission to the guild proves anything.

        And the same with architects. Engineers, maybe.

        But could someone explain to me why a barber requires around twice the training of a paramedic?

        1. "does not insure competence"
          you meant to say
          "does not assure competence"

          1. Or maybe ensure.

            1. "Insure" may be the better answer. As in, you cannot get insurance to cut hair without it.

    2. One difference is lawyers, doctors, and dentists get degrees and certificates but not licenses.

      As I understand it, licensing is a govt approval to operate while a certificate is proof that the person met some standard.

      1. What is the bar?

        1. A ludicrously hard test that a substantial portion of law school graduates cannot pass, and that effectively none of which would pass without multi-month preparatory work after graduation.

          1. "effectively none of which would pass without multi-month preparatory work "
            maybe for the intellectually weak that you know Ben.
            My son passed both the NY and CA bar exam first time with minimal studying

          2. I guess it depends on what you consider to be a substantial portion.

            https://lawschooli.com/bar-exam-pass-rate-by-state/
            It appears roughly 70% pass on the first try. California is a bit of an exception but that has to do with the large number of non ABA Accredited schools that pump out graduates in large numbers. Note that in the article, it states that the pas rate for USCL Grads is 88%.

            1. And I checked. The ultimate pass rate within two years of graduation nationwide is around 90%

            2. I would say a 30% fail rate on a certification test means that either the test does not measure skills properly or law schools do not teach what is required properly.

              Once you add in the multi-month preparatory classes that are offered, that makes the low pass rate absurd. This isn't like the Fundamentals of Engineering test, which can be taken anytime and is often done by students in the middle of the school year as an aside. The bar is given only twice a year and aspirational lawyers often do not work while studying for it.

              1. Just to be complete:
                "To become licensed, engineers must complete a four-year college degree, work under a Professional Engineer for at least four years, pass two intensive competency exams and earn a license from their state's licensure board. Then, to retain their licenses, PEs must continually maintain and improve their skills throughout their careers." National Society of Professional Engineers

                1. Yup. That's my life. The FE is done early and is comprehensive. The PE is done after your years of training, and it's specific to your discipline.

        2. Passing the bar is part of the process but not the actual licensing.

      2. "One difference is ... doctors ... get degrees and certificates but not licenses."

        Which states don't license doctors?

        A quick google shows lots that do ... WA for example.

        1. The American Medical Association writes:
          All states require physicians to submit proof of successful completion of all 3 steps of the United States Medical Licensing Examination (USMLE). A number of states have also passed legislation that empowers medical boards to have jurisdiction over the practice of medicine across state boundaries or the treatment decisions made by medical directors of managed care organizations.

      3. One difference is lawyers, doctors, and dentists get degrees and certificates but not licenses.

        Abroska knocked out doctors -- here are lawyers.

        Can't do 2 links in a post, so do the 5-second search for "dentist licensing" yourself.

        So 0 for 3 -- not bad.

        1. * Absaroka -- sorry for the anagram.

      4. All 50 US states license doctors, lawyers, and dentists.

      5. Sorry, not true. Doctors and dentists do get degrees and certificates but those alone are not enough to open a practice. They also need licenses.

    3. I do very much hope they get to those groups as well, but the policy lift should probably start on the margins.

    4. The public owns the law. The scumbag lawyer profession has converted it, and taken $trillion by its rules. In return, they provided nothing of value, and are totally disruptive. They allow massive criminality, and then crush any attempt at self help by crime victims.

      When I send a friend a link to an IRS rule to answer a tax question, that is not even lawyer work, it is internet courtesy. Yet, I could be prosecuted by the local lawyer scumbag prosecutor for the unauthorized practice of law. This scumbag allows a massive surge in murder and in crime, yet can prosecute me for sending a friend an internet link.

    5. Nicmart -- in that case, you should be taking the critics of licensing seriously! See, e.g., https://reason.com/volokh/2021/04/26/the-legal-profession-and-the-case-for-fundamental-reform-introduction/

  6. i think the public wants people with sufficient training which means hours of practice to obtain a license. I think we also want to make sure that plumbers, electricians etc are properly trained so that their homes dont blow up or go up in flames. this focus on over-licensing is silly.

    1. While doctors can kill person one at a time poorly trained and unknowledgable engineers can do it thousands at a time.
      Hence the Professional Engineering Certification exam

      1. Which only a very, very small number of engineers take. So they can apply their stamp to projects that affect large numbers of peoples.

        That doesn't always work, however - witness the FIU bridge collapse.

        The air transport industry is an interesting outlier. Airline pilots are required to hold (in most cases) an Airline Transport Pilot (ATP) Certificate, but that does not allow anyone who has one to fly an airliner. Nor is one required to fly an airliner-type aircraft: One could legally fly a 747 or Airbus 380 legally with a private pilot certificate, sufficient currency, and a type rating. Just not for hire.

        The safety factor with airliners is that the airlines are not stupid: No matter what certificate someone may hold, the holder must reaffirm his or her skills biannually, and meet significant other standards. A lawyer has far less to lose, which is good: In a trial, half the lawyers lose every single time.

        1. "That doesn’t always work, however"
          Indeed not. There are no guarantees.
          You are correct that few engineers take the PE exam as it covers all the major engineering disciplines.

          " In a trial, half the lawyers lose every single time."
          An empirically solid observation

          1. Ummm. No.

            The PE exam is discipline specific. In fact, it's sometimes excruciating for some engineers which exam to take. If you are between two disciplines, both will require extensive studying for the parts that you haven't used since you left school 7 years ago.

            The FE is the comprehensive one, often taken as a student. I had to re-learn voltage calculations from High School for that one.

            1. That the exam is discipline specific does not preclude it covering important (relevant) aspects of the other disciplines. And withing the subdisciplines it is still quite broad.

    2. "We want electricians to be licensed so masseuses should also be licensed. Those people (damned if I can remember what the poors call their job) who give buzz cuts, too. Can't have homes blowing up!"

    3. If the public wants people with a certain level or training or number of hours practice, they can seek that information and buy from those providers directly. There is no need to use a proxy measure.

      If the public wants to use the proxy measure (test score), they can also seek that information and buy from those providers directly. Think of a Good Housekeeping Seal of Approval for plumbers. And if others want to buy off-brand because saving money in the short term is more important to their family right now, who are you to say they should not? Your argument is not sufficient to justify government-enforced cartels.

  7. My solution would be to modify antitrust law so that state and local governments are no longer exempt. Then anyone (or more likely a class action of many) excluded from a profession could sue the state, which would have to prove an important governmental interest in its licensing policies -- meaning show that the state is actually protecting consumers and not just enabling rent-seeking.

    This is somewhat like the strategy that IJ is already using, but giving them explicit federal grounds to sue can only help.

    The same change in law would also allow needed actions against other forms of rent-seeking, such as urban planning.

  8. Medical rent seeking is 10 times bigger, deadler, and resistant than lawyer rent seeking. End it and millions lose their worthless jobs.

    One way around is to shut down the FDA,replace it with Yelp reviews by thousands of doctors and millions of patients. Then place almost all meds and equipment over the counter. The CPAP is a fan. It blows air. Why is a prescription neede? It even has automated pressure setting.

    1. The medical industry has enough quacks and fraudsters WITH licenses, thank you.

      1. One implication of which is that those medical licenses have done little to nothing to stop the quacks and fraudsters.

        So it's expensive, inefficient, distorts the market and doesn't do the one thing it's supposed to do. And that means we should keep it - why???

    2. Also, medical review scores show extremely poor correlation to long term results.

      A charismatic quack will get good reviews while a grumpy old doctor will get bad ones. However, the happy patients of the quack end up dead while the grumpy doc's patients live to complain about his bedside manner another day.

      Yes, it's an extreme example, but you see the problem.

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