The Regulated States of America: Occupational Licensing Gone Wild

Investment Watch – by Robert Patrick Shanahan

The United States is far from the land of the free these days. The governments in state capitols and Washington DC have confiscated our rights and are selling them back to us.

American culture has shifted in a frightening way that has expanded the number of professions and industries that now require an occupational license to legally provide a service or start a business. This stifles business creation in many states and disproportionally affects low and middle income individuals the most.  

Executive Vice President at the Goldwater Institute, Christina Sandefur, came on the Armstrong & Getty radio show earlier this week to discuss this alarming trend.

Governments have overreached yet again in requiring a license to perform work that is not in the realm of public safety for consumers. Sandefur stated how it started and what it has become today, “Okay, yeah you gotta get licensing to do something that might be really risky to public health and safety and we accept little by little and eventually we have this growing trend where people are not allowed to work or start a business at all without first getting government permission.” Our insistence on government telling us what to do has hopefully peaked, but recent examples around the country might suggest otherwise.

Over the last 50 years, Sandefur pointed out, 1 in 20 Americans were required to get permission from the government to work by obtaining a license. This included obvious professions in the medical or educational fields. However, today, this number has exploded to 1 in 5 Americans being required to obtain an occupational license, essentially a permission slip from the government, to do their job. Other figures peg the number at closer to 1 in 4.

Is there any reason to believe this grotesque trajectory won’t continue?

Incredibly, over half of all jobs that require licenses are only required in one state. Examples include graphic designers, audio engineers, and travel agents. Consequences of not obtaining permission from the government to work include massive fines and even jail time. This government intervention in the economy restricts liberty and confiscates our freedom to make a living. Many people do not have the money to go to school, so they try to start a business and provide a service, only to run into the pointed gun of government telling them they can’t unless they spend an enormous amount of time and money to get the “proper training.”

Even more disturbing is the fact that when one challenges these licensing laws, they are guilty until proven innocent. Prospective entrepreneurs have to show the government why they should be free to work without permission from the government, but there is no burden of proof for the government to prove why the occupation should be licensed in the first place.

One atrocious example is requiring a license to blow dry hair. To get this permission, one must spend $15,000 in schooling and put in 1,000 hours to be “trained.” This training includes things like perming and drying hair, activities not performed when you are merely blow drying hair.

This outrageous spike in occupational licensing is an obvious example of established businesses colluding with all-powerful government to keep new competition at bay. Those who can afford schooling for the proper licensing work to make it illegal for others to enter the profession, ensuring less competition. In essence, “this license protects their jobs,” Sandefur concluded.

A recent report written by Mark Flatten, an investigative journalist for the Goldwater Institute, titled, Occupational Licensing Laws and the Right to Earn a Living, digs into the government’s outlandish actions to regulate an increasing numbers of occupations.

There is no public cry for these professions to be regulated, Flatten writes, “Licensing almost always comes at the behest of the regulated industries themselves rather than in response to consumer demands or some demonstrated need to protect the public.” This added regulation makes it more difficult for newcomers to enter a profession, allowing existing businesses to charge approximately 15 percent more for their services, according to Morris Kleiner, a labor policy professor at the University of Minnesota and a noted expert on the economic consequences of occupational licensing.

Still, the argument that these licensing measures protect the public from harm is continuously made by industry lobbyists clamoring for additional licensure. Only 30 professions are actually licensed in all 50 states, according to Flatten. This clarifies the fact that since most professions are licensed only in one state, this excessive licensing is completely unnecessary on the grounds of public safety.

Examples of licensed occupations required in most or all 50 states include: cosmetologists, massage therapists, land surveyors, acupuncturists, and real estate agents.

A law in Louisiana mandates florists to have a license. Other professions that require a license that have little to no effect on public health are: interior designers, locksmiths, alarm installers, hypnotists, motion picture operators, parking valets, magicians, landscapers, horseshoers, and furniture upholsterers.

Occupational licensing has given state regulatory boards broad powers over active market participants, leading to a “risk of self-dealing,” Flatten writes. The U.S. Supreme Court in 2015 put a stop to a North Carolina dental board shutting down teeth-whitening companies that were competing with local and licensed dentists. In turn, occupational licensing “has become a protection racket for politically powerful industries that are able to use the force of government to control monopolies, drive out competition, and punish upstarts in ways that would be illegal in other circumstances.”

Republican Senator Mike Lee from Utah echoed this sentiment, saying, “Occupational licensing has grown not because consumers demanded it, but because lobbyists recognized a business opportunity where they could use government power to get rich at the public’s expense.”

This comes at a high cost to the economy, putting a cap on business creation and employment growth. Kleiner estimates that about 2.8 million jobs are lost each year due to licensing with education, training, testing, and licensing requirements creating a barrier to entry.

Below is a list compiled by Flatten of mundane professions that require a license in the U.S.

• Chimney sweepers are licensed in Vermont.
• Parking valets are licensed in West Virginia.
• People who sell, service, or install portable fire extinguishers are licensed in Arkansas and Tennessee.
• Iowa requires licenses for manure applicators and manure service representatives.
• Minnesota licenses animal waste technicians and is the only state to license horse-teeth floaters.
• Arkansas and New York license farriers, commonly known as horseshoers.
• California has eight separate licenses for furniture upholsters, suppliers, builders, and sellers.
• Massachusetts licenses horseback riding instructors and motion picture operators.
• Appliance installers need a license in South Dakota
• Sign installers need to be licensed in California.
• Illinois licenses wardrobe attendants and restaurant busing staff.
• Grease processors are licensed in Wisconsin.
• Kentucky, Mississippi, Wisconsin, and New Mexico license art therapists.
• Wisconsin licenses dance therapists.
• North Dakota and Nevada license music therapists.
• New Hampshire licenses recreational therapists.
• Taxidermists are licensed in 16 states.
• Hunting and fishing guides and outfitters are licensed in 17 states.
• Auctioneers are licensed in 21 states.
• New Mexico licenses animal artificial insemination technicians.
• New York licenses milk testers.
• Arkansas has separate licenses for people who design, manufacture, install, and clean septic tanks

In short, occupational licensing has gotten out of control and it shows few signs of slowing down due to an army of lobbyists lobbying on behalf of existing businesses.

“Ridiculous licensing rules are holding back people who want to work,” Glenn Harlan Reynolds’ opinion column headline read in USA Today. Another example of needless licensing he references is a proposal to require personal training licenses, an investigation Reason TV revealed to be funded by the soda industry.

“Most occupational licensing is corrupt and idiotic,” Reynolds wrote. We don’t need “300 hours of training to shampoo hair.” That does not protect the consumer. It protects current practitioners in the profession. Government power is used to stifle competition in an expansive manner with each passing year.

Reynolds referenced the liberty-lover Milton Friedman who observed in his book, Capitalism and Freedom, “The pressure on the legislature to license an occupation rarely comes from the members of the public who have been mulcted or in other ways abused by members of the occupation. On the contrary, the pressure invariably comes from members of the occupation itself.”

This is all blatantly obvious to anyone who takes 5 minutes to research this issue. But our governments remain oblivious and many consumers hapless to this unneeded government intervention in our free market economy.

Conor Friedersdorf wrote a piece in The Atlantic last year about this crazy occupational licensing. He agrees with the unnecessary nature resulting in self-dealing mentioned above, writing, “Too often, occupational-licensing laws are less about protecting workers or consumers as a class than they are about protecting the interests of incumbents. Want to compete with me? Good luck, now that I’ve lobbied for a law that requires you to shell out cash and work toward a certificate before you can begin.”

Worthwhile reforms a 2017 Institute for Justice report called for were to make it easier for aspiring employees and business owners to bring legal challenges against these onerous licensing laws.

The IJ report references the backward burden of proof Sandefur also mentioned:

“The U.S. Constitution protects the right to earn an honest living free from unreasonable government interference, yet courts have often been reluctant to enforce this right by striking down arbitrary or irrational licensing laws. Under the prevailing legal standard, licensing laws are presumed valid when challenged in court, and individuals must prove that they are unconstitutional. This gets it exactly backward. Governments should have to prove that licensing laws advance legitimate health and safety concerns to justify restrictions on the right to earn a living.”

The government has no right to restrict our freedom to earn a living for ourselves. Occupational licensing must be rolled back. Companies cannot be allowed to raise the barrier to entry for those simply wanting to provide a valuable service to consumers and provide for themselves and their families. There is no need for most of these occupations to be licensed. We need to make our economy great again by rolling back these unnecessary regulations as the Trump administration has done in DC with its pro-business regulatory rollback agenda.

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