Skip to main content

What’s So Bad About Occupational Licensing?

Why does accepting payment for a service make an otherwise-benign activity suddenly illegal? Accepting money is what distinguishes cutting a friend’s hair for free from a criminal mastermind who takes money for illegally performing cosmetology or barbering without a license. Have you ever paid for a bad haircut? Did the cosmetology license prevent it? Have you ever had a bad meal in a restaurant (which is, by law, highly regulated)? Have you ever had an outstanding home cooked meal prepared by someone without a license? So how much do licensing and regulation do to ensure high standards? 

Occupational licensing is something of a pet peeve for us here at the 1889 Institute. We devote a whole section of our website to it. Why do we care so much? 

The Institute for Justice estimates that occupational licensing costs consumes an average of $203 billion per year nationally.  Licensing undeniably hurts the economy through deadweight loss - when the labor market is distorted leading to inefficiencies such as people being in suboptimal jobs. 

But there is a simpler case against licensing, and it doesn’t involve complicated math or economic reasoning. It’s simply wrong. One of our most fundamental freedoms is the right to earn a living. It is explicit in the foundational document of our republic: “among these are life, liberty, and the pursuit of happiness.” That final phrase encompasses both the right to own property, the right to make use of it, and the right to one’s own labor. While there have always been limits to what one can take money for (murder for hire has always been off limits) by and large, people should be able to pay a professional - or an amateur - for services they would prefer not to perform themselves. And people should be similarly free to offer these services without a permission slip from their state government. 

In Oklahoma, our constitution makes even more plain the idea that people should be free to work. Section II-2 declares that “All persons have the inherent right to life, liberty, the pursuit of happiness, and the enjoyment of the gains of their own industry.” This should be read as both a protection against socialism, and a right to earn a living. 

Licensing puts up barriers to entry into the licensed field - that is, it makes it harder to start a new job. It takes time and money to get a license. These barriers disproportionately impact those who already have a low income. Think of it as a tax on the American dream. 

While licensing arguably provides a shorthand way for consumers to know who is good at a job - or at least who was once competent enough to pass a government test at least tangentially related to a job, there are better ways of informing consumers that do less harm to the economy and actually provide consumers with better information. There are already websites that review professional service providers. This should be sufficient for any number of currently licensed occupations where the stakes are low. If your only fear is a bad haircut, good reviews should be enough. 

For higher stakes services, something like 1889’s proposed Private Certification legislation would allow consumers to see different levels of proficiency - a private certifier would have incentives to offer testing that shows a practitioner is actually able to do various tasks related to their job. This would also give practitioners options when it comes to certification. Competing certifiers will stake their reputations on the level of service their practitioners provide, and they will have ample incentive to ensure their licensees offer outstanding service, lest their certifications be seen as worthless to consumers, and then to practitioners who will turn to a competitor with a better reputation. 

The Oklahoma Legislature should work harder to reduce occupational licensing, and end this tax on the American Dream. 

Mike Davis is Research Fellow at 1889 Institute. He can be reached at mdavis@1889institute.org.



Popular posts from this blog

Lies We Tell in Government, and Our Debts to Truth

HBO’s mini-series,  Chernobyl ,  is a drama depicting  the disastrous  1986  explosion ,  and  hero ic efforts to control the  resulting  meltdown ,  of the Chernobyl nuclear power plant in Ukraine  (then part of the Soviet Union ).  A flawed man, but true hero,  Valery  Alexeyvich   Legasov , worked tirelessly to ameliorate the disaster’s consequences and  chiefly  investigated its cause. He was  Deputy Director of the  Kurchatov  Institute of Atomic Energ y , a Soviet elite, who  is portrayed at the end of  the  series making a dramatic speech at a trial about how the nuclear reactor exploded, when  such an explosion in that type of reactor  should not have been possible. In the course of the series, the audience  learns  that the reactor had a design flaw that had been covered up by the Soviet State (true).  The audience also learns  that...
Read more

Present Reforms to Keep the Ghost of State Questions Past from Creating Future Headaches

Oklahoma, like many western states, allows its citizens to directly participate in the democratic process through citizen initiatives and referendums. In a referendum, the legislature directs a question to the people — usually to modify the state constitution, since the legislature can change statutes itself. An initiative requires no legislative involvement, but is initiated by the people via signature gathering, and can be used to modify statute or amend the constitution. Collectively, the initiatives and referendums that make it onto the ballot are known as State Questions.   Recently, there have been calls to make it more difficult to amend the constitution. At least two proposals are being discussed. One would diversify the signature requirement by demanding that a proportional amount of signatures come from each region of the state. The other would require a sixty percent majority to adopt a constitutional amendment rather than the fifty percent plus one currently in place. ...
Read more

When It Comes to the Cox Center, “What if I Get to Meet a Movie Star?” Isn’t Good Enough

In a recent   post , 1889 Institute expounded on the fiduciary duty of elected officials “to act in the best interest of the people of the state as a whole,” a “high duty, executed as a public trust … wherein one puts the people’s interest above one’s own.” This fiduciary duty must not stop with elected officials. Once an elected body or an elected official – the legislature, a city council, the governor, or a mayor – has taken final action, the faithful implementation of each enacted law, policy, or program falls to an army of bureaucrats. Thus, a fiduciary duty to execute laws and policies with diligence and integrity, tantamount to that of elected officials, must extend to government employees. Recently, I had a few moments to sit down and watch a show with my children. Unsurprisingly, my son picked a series entitled “The Stinky and Dirty Show.” I was naturally skeptical that the show would yield any real value. However, as I watched, I found myself pleasantly surprised. Each ep...
Read more

AG Hunter Lowers Boom on Barrier to Entry; Legislature Should Follow His Lead

Even as the Oklahoma Supreme Court  struck down  a recent alcohol distribution law, the Attorney General paved the way for the state’s Alcoholic Beverage Law Enforcement Commission (ABLE) to remove an obstacle from the expansion of liquor store competition - finding that Oklahoma’s five-year in-state residency requirement before one can own a liquor store likely runs afoul of the U.S. Constitution and recent U.S. Supreme Court precedent.  The AG’s  opinion , issued at the end of December, informs the state’s alcohol commission that portions of the state constitution (Article 28A, Section 4(A) & (B)) are unenforceable. These provisions require that ABLE issue a Retail Spirits License or Wine and Spirits Wholesaler License only to someone who has been a resident of Oklahoma for the previous five years. Presumably ABLE, who requested the opinion, will now begin issuing licenses to otherwise qualified applicants regardless of how long they have lived in Okl...
Read more