Got a permit for that? A patchwork quilt of state licensing stalls job growth
Almost a third of workers today need permits to do their jobs States are “all over the map in terms of what they regulate”
Jasmine Cumbo was schooled on the ins and outs of hairstyling at the Suffolk Beauty Academy in Virginia. Basic course work included shampooing and conditioning; intermediate classes focused on techniques such as braid extension. Ten months after
enrolling in 2013, she walked out with a diploma in cosmetology. Ready to start cutting hair for a living? Nope. Cumbo still needed a state license, which took her two more years to earn. The gap cost her time, money, and clients, as her beauty-school regulars moved on. “I feel like I lost out on a lot of things,” says the 22-year-old. In the 1950s, only about 5 percent of workers needed permits. Today, that’s risen to almost a third. Occupational licensing is required not just for people in highly technical professions, such as airline pilots or doctors, but also for auctioneers, bartenders, exotic dancers, florists, and tour guides. According to a report released last year by the White House, more than 1,100 occupations are regulated in at least one state, but fewer than 60 are regulated in all states.
Different licensing rules are enforced by federal, state, or local authorities. Most are imposed at the state level. The result is a “weird patchwork quilt of licenses,” says Brink Lindsey, vice president for research at the Cato Institute, a libertarian think tank in Washington that supports free-market policies. Many of the rules, he says, have never undergone detailed scrutiny, and authorities are “all over the map in terms of what they regulate and how they regulate.”
Some of the growth in licensing reflects a shift in overall employment from manufacturing, where more workers were covered by unions, to services, where state licensing bodies help set standards and monitor working conditions. Critics say the system is draining the job market’s dynamism by raising the barriers to entry for young people or stopping qualified workers from moving from one state to another in search of better opportunities in their field. For those who want to move up the ladder, says Richard Reeves, a senior fellow at the Brookings Institution in Washington, licensing is “effectively putting a brake on the escalator.”
Getting into a licensed profession translates into higher pay and improved employment prospects, according to research by Princeton
economist Alan Krueger and Morris Kleiner, a professor of labor economics at the University of Minnesota. But those advantages for individual workers come at a social price, Kleiner says. Licensing burdens depress job creation, and consumers pay more for licensed services. “It’s good for the people who become licensed,” Kleiner says, but overall “the costs are greater than the benefits.”
Some professional restrictions have been blocked in recent years: In 2015, Idaho’s Republican governor vetoed a bill that would have required sign-language interpreters to obtain permits, while the U.S. Supreme Court effectively opened up the market for teeth-whitening services in North Carolina to people who aren’t licensed dentists. Louisiana courts ruled in 2013 that Benedictine monks could sell handcrafted coffins without being licensed funeral directors.
The monks’ victory was won with help from the Institute for Justice, a Virginia-based nonprofit libertarian law firm. In the past two months it’s successfully challenged restrictions on casket sales in Alabama and hair braiding in Kentucky. The institute was unsuccessful in a 2012 attempt to eliminate licenses for interior designers in Florida, one of only three states that requires them. In defending their exclusive status and the investment they’ve made to get it, licensed professionals “want to push the fence out further and further,” says Dick Carpenter, the Institute for Justice’s director of strategic research.
That’s what Cumbo found when she finished beauty school. After spending more than $18,000 and clocking 1,500 hours of lessons, she ran into financial constraints and family problems—including her father’s death— that delayed her efforts to acquire her license, which cost $300 and involved written and practical tests. Yet, now that she’s in, she’s eager to maintain the status quo: “I went through so much to get this license. Now if they told me they were going to end it, I’d be really ticked off.”