Reason Foundation - Policy Areas > Occupational Licensing

Economy, Bureaucracy, Minimum Wage Hikes Sink Federal Teen Jobs Program

adam.summers@reason.org (Adam Summers) — Tue, 29 Sep 2009 21:51:00 EDT

A federal teen jobs program has not fared well, according to a recent Associated Press article. Almost one-quarter of the 297,169 youths who participated in the $1.2 billion Workforce Investment Act summer jobs program for teens, which was a part of the administration's economic stimulus programs, did not end up getting jobs. Youth unemployment rates for those aged 16 to 24 years soared to 18.5% in July, the highest rate in that month since 1948.

Of course, the recession played a large role in teen unemployment, as layoffs or the desire to earn some extra family income led adults to compete with teens for low-paying jobs.

Massachusetts officials said they had trouble placing teen job-seekers with private employers, many of whom opted out of the program to hire experienced older workers or young college graduates. Labor officials in other states said such problems were common.

"It's kind of hard to convince companies to hire teens for summer jobs when they're laying off their adult workers," Mary Sarris, who heads the North Shore Workforce Investment Board in Salem, Mass. "This is the worst summer we've ever seen."

This begs the question: Why did the administration think it was a good idea to fund an expensive jobs program for teens when adults are struggling to find work?

Economic conditions were not the only problem, however, as the program was also hampered by bureaucratic missteps.

In Pennsylvania and Connecticut, bureaucratic holdups kept some young workers from entering training programs until July, cutting into summer job opportunities, the AP's review found. In California, which received about 16 percent of all funds nationwide, less than half the participants in all stimulus-funded youth job programs reported getting jobs by the end of July, the most recent month for which state and national youth employment figures are available.

"Things are still totally chaotic with this program," said Rachel Gragg, federal policy director for The Workforce Alliance, a Washington-based group that advocates for more national job training funds. "In many communities they will tell you that they are still struggling to understand where the money is and where it is coming from."

[. . .]

In November, California auditors cited a litany of financial problems at the Los Angeles County Department of Community and Senior Services, including overpayments to its director and $1.27 million in questionable costs that the agency still hasn't fully accounted for.

The agency received nearly $15 million in stimulus funds for youth jobs training this summer. Officials said the director's salary had been adjusted, other accounting problems corrected and about 5,400 participants found jobs.

"There are so many passthroughs before this program actually turns into money that helps the population it's intended to help that it's almost criminal," said Laura Chick, who was appointed inspector general by Gov. Arnold Schwarzenegger to watch over California's stimulus funds. "If the local board isn't watching what they're doing, even less money is getting to where it's supposed to go, especially if it is being siphoned off to pay for administrative expenses."

Even setting aside economic conditions and bureaucratic snafus, there is another factor in the jobs program's failure that the AP article neglected to explore: the minimum wage. While the recession is obviously the principal reason for rising unemployment, the minimum wage is a contributing factor, particularly in the restaurant and retail sectors. In a little over two years, the federal minimum wage has increased nearly 41%—from $5.15 an hour to $5.85 in July 2007, to $6.55 in July 2008, and to the current $7.25 rate in July 2009. Some states have increased it even higher.

An increase of $2.10 an hour might not sound like all that much, but it adds up in industries with large numbers of low-skilled workers, and that artificial 41% increase in a portion of a business's labor costs can be the difference between staying in business and having to close down and shed even more jobs. This is especially true during a recession when the business cannot simply pass on the cost increases to consumers.

While the minimum wage might benefit those who are able to get such jobs (and who don't have their hours cut by business owners trying to offset the added costs), what is not seen is all those who are laid off or who cannot get a job in the first place because of the minimum wage. A person who has skills worth, say, $5 or $6 an hour now has to compete with those worth $7.25 an hour for the same scarce jobs. Since the employer has to pay at least $7.25 an hour anyway, why would he ever hire the $5 an hour worker? The minimum wage has made that (potential) worker practically unemployable.

The minimum wage may sound good to those who only consider some of its benefits—and none of its costs—but it is just another barrier to work. (The same goes for mandatory occupational licensing requirements.) Such barriers to work should be eliminated in the name of individual liberty regardless of economic conditions, but their abolition is even more important during tough economic times, when increases in productive employment and entrepreneurship are needed to spur economic growth once again.

Other Resources:

» "Let's end poverty by decree! 'Living wage' laws defy basic economics and hurt intended beneficiaries" (published in the Orange County Register)

» "Minimum Wage Hike Could Hurt Working Poor More Than Help" (published in the Los Angeles Business Journal)

» "Minimum Wage, Minimum Opportunity" (Libertarian Perspective column)

» My previous policy study on occupational licensing, Occupational Licensing: Ranking the States and Exploring Alternatives, which includes a ranking of the 50 states by how many jobs they require licenses for.

California Unemployment Rate Rises to 12.2%; State Must Improve Business Climate to Combat Unemployment, Budget Problems

adam.summers@reason.org (Adam Summers) — Sat, 26 Sep 2009 23:44:00 EDT

California's unemployment rate rose three-tenths of a percentage point to set a modern record of 12.2% in the month of August, according to the most recent data released by the state's Employment Development Department (EDD). The numbers reveal a troubling trend of the continued widening of the gap between the state's unemployment rate and the national jobless rate, which now stands at 9.7% (see the chart below from an Associated Press article derived from EDD data).

Source: California Employment Development Department

California's unemployment rate is the fourth-highest in the nation, trailing only Michigan, Nevada, and Rhode Island. Gov. Arnold Schwarzenegger noted that the jobless rate underscores the importance of addressing the state's economic problems, stating, "While I am pleased to see fewer jobs lost, my administration will not rest until job growth resumes and employment returns to normal."

If the governor is serious about his statement, California must improve its poor business climate in order to foster job creation and economic growth. As George Will reported in a recent column, California's job growth rate since 2000 is nearly 20% below the national average. California has ranked at or near the bottom in numerous business climate and economic freedom indexes. The American Legislative Exchange Council's 2009 Rich States, Poor States study, which reports the results of the ALEC-Laffer State Economic Competitiveness Index, ranked California 43rd in terms of its economic outlook. The state suffered from low rankings in categories such as Recently Legislated Tax Changes (data is for 2007 and 2008 so it does not even include the $12 billion in new taxes passed in February 2009) -- 40th, State Liability System (tort litigation treatment, judicial impartiality, etc.) -- 44th, State Minimum Wage ($8.00/hour) -- 48th, Top Marginal Personal Income Tax Rate (10.3%) -- 49th, and Personal Income Tax Progressivity -- 50th. The Freedom in the 50 States index of personal and economic freedom, published earlier this year by the Mercatus Center at George Mason University, ranked California 47th. The state scored 44th in the Fiscal Policy subcategory, 46th in Regulatory Policy, and 48th in Economic Freedom. Finally, California was voted the worst state in the nation for jobs and business growth for the fourth year in a row in Chief Executive magazine's 2009 "Best & Worst States" survey of hundreds of CEOs.

If the Golden State is to regain its lustre, it must dramatically reduce the tax and regulatory burden that is driving businesses and jobs to states with fewer impediments and more economic opportunities. Moreover, it will not solve its persistent budget problems without encouraging economic growth. For years, the public sector has been consuming more than its share of resources and cannibalizing the private sector that is responsible for economic growth. It is far past time for the pendulum to swing the other way towards smaller government and a freer, more productive private sector. In addition to reducing taxes and eliminating red tape, the state should get rid of policies such as occupational licensing requirements and the minimum wage, which only serve as a barrier to work, raising unemployment and resulting in higher prices to consumers in the process.

Occupational Licensing and the Beard Trimming Turf War in Texas

adam.summers@reason.org (Adam Summers) — Thu, 24 Sep 2009 18:25:00 EDT

A recent post on the New York Times Freakonomics blog discussed the issue of occupational licensing. As author Daniel Hamermesh correctly notes, licensing benefits existing practitioners at the expense of potential competitors and, ultimately, consumers.

A headline in our local paper screams: “Barbers, Cosmetologists in Turf War Over Shaving.” The question is where sideburns end and beards begin.

In Texas, only barbers are licensed to trim beards, and they are unhappy that cosmetologists are cutting into their market.

This fight illustrates the effects of occupational licensing—legal restrictions on workers’ ability to enter certain markets.

Barbers have benefited over the years from the exclusion of cosmetologists in what was essentially a restriction on supply. Along with the high entry costs (nearly a year of required training), this has raised the equilibrium wage of barbers—and the equilibrium price of a haircut. Licensing of medical doctors, where the consumer lacks information on quality, might be sensible. But barbers and cosmetologists?

As one party to this controversy noted, “Most of the rules are so archaic and pathetic. They’re prehistoric.” True—and it’s the consumer who suffers.

The above example illustrates the arbitrary—and sometimes downright ridiculous—nature of many licensing laws. Those that offer bad beard trims, whether they be barbers or cosmetologists, are not likely to stay in business long. Consumers do not need the state to step in and regulate the scourge of bad trims. For that matter, heaven forbid getting rid of licenses for barbers and cosmetologists altogether. Why, people all across the state would be walking around with bad hair cuts and bad nail jobs!

Licensing laws are entirely about protecting a group of businesses from competition, not about "protecting the public." This is why new or stricter licensing regulations are virtually always proposed by the group to be licensed—not because of any public outcry—and why those seeking the regulations are typically "grandfathered" in so that they do not have to meet the tougher standards they impose on their future competitors. Make no mistake, occupational licensing laws are borne of special interests, not the public interest.

As a result of the licensing, competition in the licensed occupation is reduced, allowing licensed businesses to charge consumers more than they would in a free market. Furthermore, mandatory licensing may have other unintended consequences, such as giving consumers a false sense of security about those with whom they do business and leading to the creation of black markets for goods and services.

Voluntary certification is a much better model, as it allows businesses to signal their competence and quality by satisfying the requirements of an independent certification organization while offering consumers the freedom and flexibility to choose certified or uncertified practitioners, depending on their budgetary constraints, risk tolerances, or other preferences. Where there are instances of fraud or negligence, which will occur with or without mandatory licensing laws, the court system can serve as a final check to ensure that consumers are protected or awarded restitution for poor service.

Other resources:

» My column for the Los Angeles Business Journal on occupational licensing and how California tops the list in terms of the most-licensed states in the nation.

» Show-Me Institute brief on occupational licensing.

State Licensing Mandates for Movers in Illinois Increase Prices, Reduce Job Opportunities

adam.summers@reason.org (Adam Summers) — Wed, 16 Sep 2009 23:21:00 EDT

Thank you to David Stokes of the Show-Me Institute for pointing out this horrible Chicago Tribune story on unlicensed moving companies in Illinois. The ostensible "news" story about unlicensed movers in the State of Illinois is heavily slanted in favor of the state's existing compulsory licensing structure and never considers any alternatives to the current system, such as voluntary certification.

Things have been difficult for the moving industry lately, particularly with the collapse of the housing bubble--and the economy in general. This has led penny-pinching consumers to look to cheaper options, and has encouraged some people who have been laid off or are otherwise looking for some supplementary income to enter the business without getting a license. The number of licensed residential movers in the state is down to about 300 from nearly 500 in 2001, and licensed movers are complaining about competition from unlicensed movers.

The Chicago Tribune article cites a licensed moving company sales manager who claims that consumers that utilize the services of unlicensed movers have little or no recourse if there are billing disputes or damaged or missing items. As David notes in his own blog post on the topic, this ignores the fact that a business's reputation and the legal system serve as checks on negligent or criminal behavior on the part of movers. Simply put, businesses don't become successful by treating their customers poorly. Consumers can additionally minimize risk by doing some homework on businesses by asking for references and proof of insurance or looking for other consumers' reviews of businesses. Even with the current licensing system, the Tribune article cited the Web sites movingscam.com and Craigslist as places people can go to see negative reviews of moving companies. If the state licensing body did not exist, there would likely be even more such resources, but its presence may lull consumers into a false sense of security about the companies they do business with simply because they are "licensed." Furthermore, if problems do arise that cannot be resolved by the customer and business (or a third party such as the Better Business Bureau or, in the absence of a state licensing board, a voluntary certification organization), the legal system is available to settle disputes.

Occupational licensing--whether it involves movers or any other kind of business--is typically imposed or expanded for the benefit of the licensed businesses, not the public interest. Licensing requirements make it costly to enter a line of work, which means that there is less competition for the licensed businesses and those businesses can charge higher prices than they otherwise would.

Here is one problem with compulsory licensing. Some have attempted to get around Illinois's moving license requirements by merely packing and unpacking goods for people. The customer must handle the actual transportation by renting and driving the truck containing the items. Such packers/unpackers are still required by state law to have workers compensation insurance, however. According to the Tribune article,

Frank Gomez has run such an operation for two years after spending 15 years working for licensed movers. . . . He admitted being unlicensed and uninsured and said he desperately wants to become a licensed mover and have his own trucks. However, he can't swing the costs. It's $900 to get a license the first time and thousands more in insurance costs.

Here you have someone who wants to provide a legal service to people who need it--and who has quite a bit of experience doing it--but he cannot because the tribute the state licensing authority requires is too high.

In addition to pricing out qualified practitioners, mandatory licensing requirements also set a single standard that is not necessarily applicable to all consumers. People have different needs and different levels of risk tolerance, and they should be free to do business with whoever suits their preferences the best. Even without mandatory state licensing, some businesses would want to maintain certain levels of insurance or satisfy other requirements that an independent certification organization might recommend in order to signal to people that they are well qualified. Others would be content to advertise their services as just "two guys and a truck." Similarly, some consumers would want more peace of mind about those they do business with and look for the "certified by _______" seal of approval, while others, particularly those who could not afford the services of state-licensed practitioners, would be content to use the cheaper services of two guys and a truck.

In any case, the point is that eliminating state mandates and increasing the choices of both consumers and businesses leads to the greatest amount of freedom, the greatest level of commerce, and the greatest benefits for consumers. Particularly during a time of economic difficulty, Illinois and other states should be reducing licensing regulations, which only serve as barriers to work and result in higher costs to consumers.

Other resources:

» My column for the Los Angeles Business Journal on occupational licensing and how California tops the list in terms of the most-licensed states in the nation.

» A column David Stokes and I co-wrote on occupational licensing, with emphasis on regulations in Missouri.

» Show-Me Institute brief on occupational licensing.

Taxi Deregulation in Minneapolis Upheld

sam.staley@reason.org (Samuel Staley) — Sat, 18 Jul 2009 09:38:00 EDT

In 2007, Minneapolis passed legislation eliminating its cap on taxicabs. As a result, the number of cabs licensed to operate in the city will increase by 180 in the coming years. The cap will be completely lifted by 2011.

The existing cab companies, however, sued the city, arguing that the higher than market revenues they received under the regulated system would fall, and they deserved compensation. In essence, they believed they believed they were entitlted to the benefits of keeping competition out.

Fortunately, the Minnesota courts ruled against the taxicab companies.

"In response to the free-market and consumer-friendly reforms, the established taxicab cartel sued the city, demanding the reversal of reforms and proclaiming its owners should be able to keep the spoils of the old law that excluded new competitors from the taxi market in Minneapolis for more than 10 years.

"But the U.S. Court of Appeals for Eighth Circuit ruled that taxi licenses do not “provide an unalterable monopoly over the Minneapolis taxi market.” In rejecting the cartel’s “takings” argument, the Court further held that the “property interest that the taxicab-license holders’ may possess does not extend to the market value of the taxicab licenses derived through the closed nature of the City’s taxicab market.”

"Throughout this case, the Institute represented taxi entrepreneur Luis Paucar, who had tried for nearly four years to provide service in Minneapolis. He has received 22 licenses under the new law. “All I ever wanted to do was to enter the market and compete,” said Paucar. “Today’s ruling protects my right to do so.”

Fortunately, the Institute for Justice's Minnesota chapter was there to not only push for deregulating the market but assist the city in fighting the taxicompanies. Another victory for IJ!

Superman Arrested... For Not Having a License

anthony.randazzo@reason.org (Anthony Randazzo) — Fri, 10 Jul 2009 10:39:00 EDT

Times Square is home to many gimmicks and freak shows, but tourists in the Big Apple got a unique spectacle last night when New York's finest took down capped wonder, Superman. The story is a bit different from the comics, in this tale, Superman is the alter ego of Maksim Katsnelson from the Bronx, not Krypton. And instead of stopping him from saving the life of a little girl, or stopping an out of control taxi, the NYPD took down Katsnelson for... panhandling.

Any visitor to Times Square will encounter at least one, if not a dozen costumed characters wandering around, looking for cash in exchange for pictures or hugs. When I lived in Midtown a few years ago I basically became friends with two Elmos that frequented the pavement. It's like Disney World, only the characters themselves are the capitalists. What parent can resist forking over $10 bucks to let their begging, captivated child get a picture with Batman (who, incidentally, was also arrested yesterday).

The problem is that New York requires such costumed panhandlers to have a license to walk around exchanging moments of fun for a few dollars here and there. You wouldn't know it, but many of the famous NYC subway performers that often appear to just be homeless, down on their luck musicians, are registered with the City.

When the NYPD approached Katsnelson aka Superman to ask if he and his pal Batman had a license to walk around Times Square, a fight broke out. Reportedly, Superman punched a female cop in the face—most out of character for the Man of Steel. Now, while this lawless behavior should not be condoned, there is a very real question for why this kind of occupational licensing law exists? Why do you need a permit from the city to take pictures with people and have them express their gratitude for making their kids happy with a few greenbacks?

Without the licensing requirement, there would be less barriers to entry for this kind of practice. There would probably be a few more costumed characters in Times Square, but that would just lower the price for tourists. And only so many Big Birds and Joe Bidens can work a sidewalk. This would also mean people could take up the practice causally, traipsing down to Midtown every now and then for some fun and spending cash. (What other things you do with the Megatron outfit when you're not defending New York's tourists from decepticons is your own business.)

In addition to letting more people do this and lowering the cost to tourists, there would be a decreased costs to the City, because NYPD would no longer have to check on occupational licenses, or waste their time taking Superman down to the station for panhandling. And that is less people crowing the prison system. There are plenty of other things police can be focused on, like this stuff.

More from Reason on occupational licensing here and here.

Hair Braiders, Barbers and Interior Designers Need Licenses in Missouri

info@reason.org (David Stokes) adam.summers@reason.org (Adam Summers) — Wed, 10 Dec 2008 00:00:00 EST

"First in shoes, first in booze, and last in the American League" people used to say about the St. Louis Browns. Statewide, Missouri might not be first in booze and shoes, but at least there is one category in which the state can be proud to rank lowest in the United States: the total number of occupational licensing regulations. According to a 2007 Reason Foundation study, Missouri requires licenses for the least number of occupations, out of all 50 states. This is significant, because fewer licensing regulations means that goods and services are cheaper for consumers, and fewer job seekers have to ask the government's permission before working in the occupations of their choosing.

Occupational licensing regulations require those who wish to practice in a particular profession to obtain some type of special permit or license, beyond a general business license, from the government. The Reason Foundation's report on this subject last year found that Missouri requires licenses for only 41 occupations, compared to a national average of 92. Further research has revealed that Missouri's actual number of licensed occupations is somewhat higher than reported, but because the state placed last by a significant margin, and because it's also difficult to determine an exact number in each of the other states, Missouri's position is secure. There are fewer instances here in which someone who merely wants to be productive first needs a permission slip from a board or commission.

The examples of occupational licensing in Missouri range from the common (surgeons and lawyers) to the unnecessary (interior designers), to the silly (barbers), to the ridiculous (auctioneers and hair braiders). It is abject lunacy that young women who would like to perform African-style hair braiding in Missouri must first undergo hundreds of hours of cosmetology training for skills they will never need to use. Absolutely nothing is gained by such regulation, other than protecting the interests of established cosmetologists by enacting barriers to those wishing to perform only hair braiding for a fee. That protectionism is precisely the point.

Licensing laws are virtually always enacted, or made more stringent, because existing practitioners of a profession lobby for the regulations, not because customer complaints or safety concerns necessitate them. Moreover, current practitioners are typically "grandfathered" in, so that they do not have to meet the new stricter standards that are imposed on their future competitors. These regulations increase the costs of entering a profession, so existing practitioners can charge higher prices - and earn higher profits - than they otherwise would in a truly free market. Thus, occupational licensing laws are born of special interests, not the public interest. In short, licensure raises prices and harms consumers.

Some worry that practitioners without a government-granted license would tend to be more reckless, endangering consumers, but numerous economic studies have shown that government licensing standards do not improve consumer health and safety. In fact, licensing often causes consumer safety, and the quality of products or services, to decrease. This is because licensing requirements are often arbitrary and not necessarily related to practical job skills or knowledge, and the false sense of security that a license provides can cause customers to be less discriminating. In addition, the artificially higher prices that licensed practitioners charge have marketwide consequences, causing some people to resort to more dangerous do-it-yourself work, reduce their medical visits, or resort to black markets. This explains why, for example, electrocution rates are higher in places with stricter electrician licensing laws, and why states with stricter dental licensing laws have a higher incidence of poor dental hygiene.

Fewer occupational licenses means more opportunity for employment, lower professional entry costs, more competition, and greater choice for consumers. In this distressed economic climate, it is more important than ever to encourage entrepreneurship and remove regulatory barriers to work. State and local officials should refuse future attempts to license other professions, and should make every attempt to reduce the number of occupations that are currently licensed. This would lead to even more freedom and prosperity for Missourians.

Reining in Job Licensing Laws in Arizona

adam.summers@reason.org (Adam Summers) — Thu, 08 May 2008 00:00:00 EDT

You might have a dream job, but these days there's a good chance that the government has to give you its approval before you can actually do that job.

In Arizona, if you want to be an acupuncturist, a hunting or fishing guide, landscape architect, pre-arranged funeral salesperson, or even a well driller you'll need a license. There is even government registration required to be a geologist.

Once upon a time, the entrepreneurial spirit reigned supreme in America. That spirit still lives, but it is increasingly being stifled by government regulation. One insidious form of this regulation is occupational licensing.

According to a recent Reason Foundation study, Arizona requires licenses for 72 jobs, below the national average of 92 and similar to neighboring Colorado (69) and Utah (84). California topped the list with a whopping 177 licensed occupations.

Occupational licensing affects a larger portion of the workforce than labor unions or the minimum wage, yet it doesn't receive anywhere near the attention received by these other barriers to work.

During the 1950s, only about 4.5 percent of the workforce had to obtain a license to work. Now over 20 percent of workers need some sort of license to do their jobs. By contrast, labor union strength has diminished. Almost 35 percent of the workforce belonged to a union in the mid-1950s, but only 12 percent of the workforce is unionized today. Minimum wage laws have a direct impact on less than 10 percent of the workforce.

Licensing laws are generally sold as a necessary means of "protecting the public interest," but they tend instead to simply protect existing business interests from competition. Just think how comforted consumers must feel to be protected by government regulations against the scourge of unlicensed florists in Louisiana, motion picture projectionists in Massachusetts, and upholsterers in California. More regulation raises the costs of doing business, making it more difficult for others to enter the market, especially since existing practitioners are typically exempted from the regulations they seek to impose on their future competitors. Thus, licensing laws are regulations borne of special interests, not the public interest. This reduced competition leads to higher prices and less choice for consumers.

The poor are doubly hit by occupational licensing because: (1) they must pay higher prices for goods and services performed by licensees and (2) the costs of satisfying licensing regulations limit their job opportunities.

To address this problem, State Sen. Pamela Gordon (R-Anthem) sponsored Senate Bill 1502, which was just signed into law by Gov. Janet Napolitano. The new law restricts potential future licensing laws by forcing the government to consider the costs of new regulations to consumers, businesses, and individuals, rather than just the supposed benefits. It also prohibits regulations based on protecting businesses from competition, forces the government to consider alternatives to licensing like private certification, and requires that any new regulations be the least restrictive possible.

These provisions represent a solid first step in preventing future abuses of economic freedom, but additional measures will have to be taken to roll back the occupational regulations that are already on the books. The creation of a blue ribbon committee to analyze existing licensing laws could help to identify the most egregious cases of unnecessary regulation and economic protectionism.

The City of Indianapolis successfully followed this model in the mid-1990s and repealed many regulations that didn't pass the "laugh test," affected too few practitioners to financially justify the existence of the licensing board, or had little or no history of enforcement activity, suggesting that either the licensing board was not doing its job or there was no cause for action, and thus that the board was unnecessary.

Private-sector alternatives such as voluntary certification encourage entrepreneurship and allow consumers to obtain valuable information about product and service quality while leaving them free to choose to do business with practitioners that best meet their needs.

Selling Bacon-Wrapped Hot Dogs Lands Los Angeles Woman in Jail

Fri, 25 Apr 2008 00:00:00 EDT

Los Angeles (April 25, 2008) - Selling bacon-wrapped hot dogs in Los Angeles can land you in jail. Seriously. Last year, licensed hot dog vendor Elizabeth Palacios got 45 days in County Jail for 'health code violations' stemming from the sale of her bacon-wrapped hot dogs. In order to stay out of jail, Palacios now sells plain hot dogs.

The newest Drew Carey Reason.tv video examines Los Angeles' over-the-top regulation of hot dog vendors (Palacios needs three permits just to sell hot dogs) and catches the cops protecting and serving LA's citizens with a vital bacon-dog bust.

The Reason.tv report details how Palacios' business has suffered since she was forced to stop selling these famous downtown delicacies. It turns out there are plenty of unlicensed vendors more than happy to meet the high customer demand for bacon-wrapped hot dogs.

The government's solution to this crime wave? If Palacios buys a government-approved cart that is much more expensive than her current cart, the health department will sanction the sale of bacon dogs. If she doesn't upgrade, more fines and jail time await Palacios.

Full Video Online

The full Reason.tv Drew Carey video, Food Fight: Battle of the Bacon Dogs, is online at: http://reason.tv/video/show/392.html.

An archive of Drew Carey's Reason.tv videos is here: http://reason.tv/featuredvids/.

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Occupational Licensing Laws Protect Special Interests, Not the Public

adam.summers@reason.org (Adam Summers) — Tue, 01 Apr 2008 00:00:00 EDT

Good afternoon, Mr. Chairman, members of the committee. My name is Adam Summers and I am a policy analyst at Reason Foundation. Reason Foundation is a nonprofit national think tank that has advised presidential administrations and state and local governments on competition and government reform issues for 30 years. I should mention that I signed up as "neutral" for this bill [S.B. 1502] since it is Reason Foundation's policy not to take positions on legislation, but I thank you for giving me the opportunity to address the issue of occupational licensing reform. It is an important issue that usually does not receive the attention it deserves.

More and more often, if you want to work or start a business, you have to seek permission from the government, pass arbitrary requirements, and pay fees to the state. More than 1,000 occupations are currently regulated by the states, and many others are regulated at the federal and municipal levels. Occupational licensing affects a larger portion of the workforce than labor unions or the minimum wage, yet it doesn't receive anywhere near the attention received by these other barriers to work.

Licensing laws are generally sold as a necessary means of "protecting the public interest," but they tend instead to be designed simply to protect existing business interests from competition. More regulation raises the costs of doing business, making it more difficult for others to enter the market, especially since existing practitioners are typically exempted from the regulations they seek to impose on their future competitors. Thus, licensing laws are regulations borne of special interests, not the public interest. This reduced competition leads to higher prices and less choice for consumers.

It is estimated that occupational licensing results in a cost, or "dead-weight loss," to society of between $34.8 and $41.7 billion per year (in 2000 dollars), compared to a labor market without licensing. Furthermore, by restricting competition, licensing decreases the rate of job growth by an average of 20 percent.

Occupational licensing requirements are arbitrary and may vary widely from one jurisdiction to another-even for the same occupation. There are often dramatic differences in the number of jobs requiring licenses even between neighboring states, for example. This begs the question: if some places work just fine with minimal or no regulations, why must others be burdened with restrictive laws? Are things so drastically different just across state lines that this disparity could be justified? I think the answer is clearly "no."

In addition to all of the practical economic reasons why occupational licensing laws are destructive, perhaps their greatest sin is that they violate economic liberty by preventing people from working in the occupation of their choosing. Licensing laws require people to jump through various regulatory hoops and seek the approval of a government licensing board just so they can work.

Thus, the poor are doubly hit by occupational licensing because: (1) they must pay higher prices for goods and services performed by licensees and (2) the costs of satisfying licensing regulations limit their job opportunities.

In light of the enormous economic losses to society inflicted by occupational licensing regulations, and the destructive effects these laws have on consumers, aspiring workers, and business owners-not to mention individual liberty in general-occupational licensing laws should be abolished. Private-sector alternatives such as voluntary certification encourage entrepreneurship and allow consumers to obtain valuable information about product and service quality while leaving them free to choose to do business with practitioners that best meet their needs.

While I believe that the elimination of occupational licensing regulations and other laws that restrict economic liberty should be the ultimate goal, I recognize that in many, if not most, cases, this may not be feasible in the near term. Thus, allow me to suggest a couple of "second-best" options that may have a better chance of making a more immediate impact.

First, conduct periodic occupational licensing reviews. In addition to abolishing occupational regulations in obvious cases of political favor, licensing laws should be subject to removal if:

Few other jurisdictions (say, fewer than one-third or 40 percent) have seen the need to license the occupation,
Too few practitioners are licensed to financially justify the existence of the licensing board, or
There is a history of little or no enforcement activity, suggesting that either the licensing board is not doing its job or there is no cause for action, and thus that the board is unnecessary.

The City of Indianapolis successfully employed this strategy through its "Fair Fees for Small Business" initiatives in 1994 and 1996. The city's regulatory study commission helped to eliminate the most blatant special-interest licensing regulations, including rules governing shuffleboard tables and milk cows. A similar process should be undertaken at the state level in Arizona and elsewhere.

And second, enact sunset provisions in licensing laws. Sunset provisions cause the law in question to expire after a certain period of time unless they are specifically renewed by legislators. Enacting such provisions in occupational licensing laws would improve accountability by forcing occupational licensing boards to periodically justify their existence. Rather than allowing more and more confusing licensing codes to pile up and be forgotten, as they have a tendency to do, legislators would have to take a more active interest in the scope and effectiveness of licensing laws.

That concludes my remarks. Now I'd be happy to take any questions you may have.

California Licenses Most Jobs in Nation

adam.summers@reason.org (Adam Summers) — Mon, 24 Sep 2007 00:00:00 EDT

Los Angeles Business Journal

California has topped another list, although it is a very dubious honor. According to a new Reason Foundation survey of U.S. Department of Labor data on occupational licensing, California requires licenses for more job categories than any other state in the nation. More and more often, Californians have to pay fees, take exams, fulfill education requirements, and cut through other red tape just to work in the occupation of their choosing.

The whole notion of the American Dream is that with hard work and determination, anyone can take advantage of the freedoms afforded here and make whatever he wants of himself. We have come to take the right to control and utilize our labor for granted, but, many people now have to seek the government’s permission in order to work in the occupation of their choice.

Over 1,000 occupations are regulated at the state level—and still more are regulated at the federal and municipal levels. In addition to occupations such as law and medicine, which are regulated by every state, California requires licenses for jobs such as butter graders, cabinetmakers, court reporters, fence erectors, locksmiths, paperhangers, recreation guides, tree trimmers and pruners, and upholsterers.

Living up to its over-regulated reputation, California leads the nation with 177 licensed occupations – nearly twice the national average of 92. Rounding out the top five are Connecticut (155), Maine (134), New Hampshire (130), and Arkansas (128). Missouri is the least licensed state with 41 licensed occupations.

With the striking exception of California, Western states tend to be less regulated than Midwestern and Eastern states. It should not be surprising, then, that California’s less-regulated neighbors such as Nevada (95 licensed occupations) and Arizona (72) are experiencing greater economic growth.

Licensing laws are often very arbitrary, as illustrated by the significant differences in the number of jobs licensed from one state to the next. Are things so drastically different just across state lines in Nevada or Arizona that this disparity could be justified? Of course not.

While occupational licensing laws are often sold as a means of “protecting” consumers from negligent or unscrupulous practitioners, instead they tend to be designed to protect existing business interests from competition. Existing fence repair companies are thrilled when state legislators make it harder for other companies to join the fence-building business. This reduced competition results in higher prices, and fewer choices, for consumers.

Furthermore, numerous economic studies reveal that these occupational licensing laws actually reduce consumer health and safety by providing consumers with a false sense of security about a practitioner’s qualifications or encouraging underground operations. Citizens take on dangerous do-it-yourself jobs (such as electrical work), skip needed medical visits, or seek out black markets to avoid inflated prices.

Courts once regularly struck down licensing laws on the grounds that they violate fundamental personal freedom and property protections included in the Fifth and Fourteenth amendments. But, unfortunately, in recent years, the courts have been more apt to sanction them.

As a result, taxpayers must jump through various regulatory hoops and seek the approval of a government licensing board just so they can work. Thus, the poor are doubly hit by occupational licensing because they must pay higher prices for goods and services performed by “licensed” tree trimmers, while also bearing the costs of satisfying licensing regulations that limit their own job opportunities.

This is not to say that certification is a bad thing. Private-sector alternatives such as voluntary certification encourage entrepreneurship and allow consumers to obtain valuable information about product and service quality while leaving them free to choose to do business with practitioners that best meet their needs.

But in California occupational licensing is being used to help existing businesses keep out competition, restrict consumer choice, destroy entrepreneurship, and drive up prices. That's not good policy and it's time to abolish these requirements.

California, Connecticut, Maine, New Hampshire Restrict the Most Jobs

Fri, 24 Aug 2007 14:40:00 EDT

Los Angeles (August 24, 2007) – Do you want to be a fortune teller in Maryland? Your future better include a license from the state. How about being a hair braider in Mississippi? You'll need 300 to 1,500 hours of training and government permission. Want to sell flowers in Louisiana? Only licensed florists can do that. And almost every state requires certification if you want to move furniture and hang art while calling yourself an interior designer.

In California, there are a total of 177 different jobs that require a special license or credential, the most in the country, according to a new Reason Foundation study examining occupational licensing trends.

Northeastern states aren't much better. Connecticut, Maine and New Hampshire all require job seekers to obtain a license before performing more than 130 jobs. In stark contrast, you can do most of those very same jobs - without a license - in Missouri, where just 41 careers require certification.

Ranking the States on Occupational Licensing
States (Number of jobs requiring a license)

1. California (177)	26. Virginia (89)
2. Connecticut (155)	27. Louisiana (88)
3. Maine (134)	28. Ohio (88)
4. New Hampshire (130)	29. Georgia (85)
5. Arkansas (128)	30. Indiana (85)
6. Michigan (116)	31. Iowa (85)
7. Rhode Island (116)	32. Utah (84)
8. New Jersey (114)	33. Delaware (83)
9. Wisconsin (111)	34. Montana (79)
10. Tennessee (110)	35. Texas (78)
11. Alaska (109)	36. New York (77)
12. Massachusetts (107)	37. West Virginia (77)
13. North Carolina (107)	38. Wyoming (74)
14. Oregon (107)	39. Arizona (72)
15. Vermont (107)	40. Alabama (70)
16. Florida (104)	41. Colorado (69)
17. New Mexico (104)	42. North Dakota (69)
18. Maryland (98)	43. Mississippi (68)
19. Nebraska (96)	44. Hawaii (64)
20. Minnesota (95)	45. Pennsylvania (62)
21. Nevada (95)	46. Idaho (61)
22. Illinois (93)	47. South Carolina (60)
23. Kentucky (91)	48. Kansas (56)
24. Oklahoma (91)	49. Washington (53)
25. South Dakota (90)	50. Missouri (41)

"Most of these licensing requirements are completely arbitrary," said Adam B. Summers, a policy analyst at Reason Foundation and author of the report. "You see that clearly when examining neighboring states. California has 177 job categories licensed. But if you take one step across the state line into Arizona just 72 careers are licensed. In North Carolina you need a license to do 107 jobs. Next door in South Carolina, only 60 jobs require certification."

Proponents claim these licensing requirements are needed to protect the public from unscrupulous, incompetent, or dangerous practitioners. However, numerous studies show these laws actually reduce consumer protection and public safety, according to the Reason Foundation report.

"These laws are created under the guise of 'helping' consumers," Summers said. "In reality, the laws are helping existing businesses keep out competition, restricting consumer choice, destroying entrepreneurship, and driving up prices."

Full Report Online

The full study, Occupational Licensing: Ranking the States and Exploring Alternatives, is available online at www.reason.org/ps361.pdf. A summary of the study is available at www.reason.org/ps361polsum.pdf.

About Reason

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason produces respected public policy research on a variety of issues and publishes the critically acclaimed monthly magazine, Reason. For more information, please visit www.reason.org.

Contacts

Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109

Occupational Licensing: Ranking the States and Exploring Alternatives

adam.summers@reason.org (Adam Summers) — Wed, 01 Aug 2007 18:00:00 EDT

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