Your License Please!

Great article in Barron's by Gene Epstein, July 10, 2017, P. 27.

Paraphrasing:

The pressure on legislature to license doesn't come from the public but the members of the occupation. (Milton Friedman).  55 years later two other commentators observe licensing having negative effect on employment (since it restricts access to the field).  It's also the case that occupational licensing "widens the gap between rich and poor by squelching employment opportunities at the lower end of the socioeconomic scale, and by inflating the compensation of highly skilled professionals at the top of that scale."  (The Captured Economy, How the Powerful Become Richer, Slow Down Growth, and Increase Inequality, by Brink Lindsey and Steven Teles).

No study has been done on degree to which occupational licensing has widened income inequality but we do know that since 1970, the share of workers subject to licensing has jumped from 10% to almost 30%.  There are lots of occupations paying reasonably well which people at the low end might normally be able to fill with minimal on-the-job training, but they may be out of reach due to money and time required for the license - beauticians, manicurists, barbers, preschool teachers, athletic trainers, gambling dealers, bartenders, massage therapists, interior designers, and florists.

Those who defend licenses confuse it with branding, meaning branding makes us better-informed consumers.  Private market already performs this in various ways, online evaluations for example.  The advantage of branding is the market doesn't place restrictions on people's right to enter a field.

Studies of licensing show little connection between quality and licenses.  Louisiana requires florists to be licensed which Texas doesn't.  An experiment involving florists from both states revealed no difference between floral-arranging skills of the licensed professions vs. unlicensed.  That's because licensing is mainly about barriers to entry, not enhancing skill.  

I agree with this but I would be concerned about skills at the higher end professions.  Licensing does force you to keep up with studies and updates that normally would languish.  Also, some things might lack adequate oversight or market pressure to weed out inferior people (sounds like I don't believe in market efficiency in some fringe cases) whereas routine testing or re-licensing should help that.  But I definitely do agree that there are some professions requiring licensing that are just way too much nanny state.


Also somewhat related from the Editorial Commentary by Thomas W. Hazlett

The Radio Act of 1927, the brainchild of then-secretary of commerce Herber Hoover, created a regulatory regime for carefully parceling out airwaves according to a "public interest" standard.  It was said to be necessary to prevent chaos - "etheric bedlam."
In fact, it was not.  Rather, it reflected Washington politics that favored incumbent interests - the first few visionaries who opened radio stations and enjoyed commercial success.  The scheme hamstring competition and flummoxed innovators for generations"