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.
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.
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.
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.