Recently, a colleague of mine was asked to research the impact of professional licensing laws and to report her findings to a legislative study committee. Licensing laws have steadily proliferated—in1970, about 10% of the American workforce required a license of some sort in order to earn a living; by 2000, that percentage had doubled to 20%. It is now estimated to be around 29%.
Lest we think of these requirements as evidence of “big brother” or the much-deplored (and largely fanciful) triumph of an insatiable governmental regulatory fervor, most of these rules are the result of lobbying efforts by the occupational groups being regulated. The result is that Indiana—like many states—requires that workers be licensed before they can shampoo or braid your hair, hypnotize you, or decorate your family room.
Licensing laws are justified by concerns for public safety. We license doctors because most patients lack the knowledge to spot charlatans, and the consequences of what academics call “information asymmetry” can be fatal. We license architects and engineers because building collapses are similarly consequential. This justification seems weaker when we get to shampoo girls and interior decorators.
There is statistical evidence that licensing acts as a barrier to entry into a profession, and also as a barrier to labor mobility (since states have different requirements, licenses are considerably less portable than one might imagine). There is also clear evidence that licensing raises consumer prices—depending upon the profession, those increases range from 4-35%.
The study committee was weighing these benefits and burdens, and considering whether other means of protecting consumers in lower-risk situations might be more cost-effective. Certification, for example, might offer a middle ground. Physicians with specialties use this approach—they have numerous board certifications that are administered by professional organizations. Government isn’t involved, and taxpayers don’t pay the administrative costs, but consumers have the benefit of information about that particular doctor’s training and expertise.
Enter political reality.
Facebook postings warned of disease spread by unclean cosmetic instruments. Tweets went out to rally those in the affected occupations. On the day of the hearing, swarms of scissors-wielding hairdressers (and for all I know, livid interior designers and angry hypnotists) descended on the Indiana Statehouse. My colleague, somewhat shell-shocked, reported that those whose scissors were confiscated by security were furious—evidently it hadn’t occurred to them that weapons couldn’t be taken into the Statehouse. She may have to leave town to get her hair cut after this, and she wasn’t even there to advocate de-regulation; she was just reporting what the relevant research showed.
I am not a betting woman, but I’d give odds against any change in the status quo. As any political scientist can confirm, it is easier to stop change than to effect it.
There are a couple of lessons here, for those interested in reality, rather than the ideologies of Right or Left.
The Right needs to admit that government regulations are just as likely to be a product of the economic self-interest of the regulated industry as the expression of authoritarian impulses. At the state level, much of the drumbeat for licensure reflects the (understandable) belief that one’s occupation should be elevated to the status of a profession; much more comes from a less noble desire to restrict entry and increase profits.
The lesson for the Left is that regulations do, in fact, increase costs, and that they are not always the best way to achieve public goods. The perceived benefits in public safety must be weighed against those costs.
The lesson for my colleague is to avoid angry hairdressers brandishing scissors.