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

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 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 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.

” 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.