Occupational licensing keeps many from driving toward prosperity

You shouldn’t have to get government’s permission to pursue your dreams.

Texas Gov. Greg Abbott recently noted in his State of the State speech that people move to Texas because they’re “fed up with big government policies increasingly running their lives and imposing burdensome regulations.”

Texas’ entrepreneur-friendly economic environment supports almost limitless opportunities to flourish. But as in other states, Texas should expand opportunity by eliminating unnecessary occupational licenses.

Sometimes occupational licenses make sense. Too often, they don’t. Occupational licenses exist — in theory — to protect the health, safety, and welfare of the public. But in many cases, they only serve to exclude workers and harm consumers.{mosads}

Americans who want to work in a licensed occupation must complete requirements that allow them to participate — once the government feels they have paid enough money and been adequately trained. For consumers, this labor restriction inflates prices so they can’t afford as much, which decreases their satisfaction.

For example, Texas requires that a cosmetologist receive 10 times more training than an emergency medical technician (EMT). Cosmetologists need around 350 days of training, while an EMT can be certified after about 35. Which seems more important?

This high cost of entry keeps would-be barbers and stylists out of the cosmetology market, inflating prices for the rest of us, as additional compliance and overhead costs are passed on to the consumer. To reduce the market impediments, Texas is considering abolishing the regulation of the practice of cosmetology (and barbering).

Occupational licensing acts much like unions do, oftentimes creating unnecessary barriers of entry into certain labor markets. The Texas Public Policy Foundation recently released a paper noting an inverse relationship (with a 93 percent correlation) between the declining share of the workforce in a union and the increasing share with a license.

These labor market impediments lead to fewer workers and higher prices, while failing to provide meaningful information about the service itself.

Many critics argue that occupational licensing is needed to ensure “quality control” or to “make sure the consumer is safe.” While the intent may be genuine, the fact is that the effect of licensing on quality in many occupations is questionable at best.

According to a Mercatus Center study, the effect of licensing has shown neither to be greatly positive or negative, rather “unclear, mixed, or neutral.” This is not the affirmation needed to show licensing as a necessary conduit between workers and consumers.

Instead, occupational licenses too often are an unnecessary government regulation imposed by legislators to collect fees and create monopolies.

We should also rethink licensing rules regarding criminal records. Too many occupational licenses bar those with certain criminal convictions from working in a particular field.

Criminal justice reform has been an issue garnering bipartisan support, as we saw when Congress recently passed the landmark First Step Act. Occupational licensing reform is an important component in reducing recidivism, because those with a criminal record who find steady employment in a field they enjoy are less likely to return to crime.

Bringing down these barriers of entry for those with a criminal record, particularly in occupations without a close relationship to a prior conviction, would make for an easier reentry to society. 

Unsurprisingly, Steve Slivinski at Arizona State University found a statistically significant relationship that the “states that had high occupational licensing burdens also saw increases in their three-year, new-crime recidivism rate while those that had low licensing burdens saw declines.”

There are better ways to ensure public safety while not creating bars to employment.

Laws have been passed in Arizona and Tennessee that instruct legislators to find less obstructive means to protect the health and safety of the public rather than a license. Free markets can better determine prices and allocate resources, while still making sure the public is safe.

Deregulating and removing many excessive, unnecessary licenses would be a huge relief for those needing employment and for employers seeking scarce workers.

That’s a license to drive toward prosperity. 

Vance Ginn, Ph.D., is senior economist and director of the Center for Economic Prosperity and Derek Cohen, Ph.D., is director of the Center for Effective Justice and Right on Crime at the Texas Public Policy Foundation.