Even the pres­i­dent wants to dereg­u­late your job

Al­most a third of work­ers to­day need per­mits to do their jobs States are “all over the map in terms of what they reg­u­late”

Bloomberg Businessweek (North America) - - Pol­i­tics/Pol­icy -

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.” �Sho Chan­dra The bot­tom line Crit­ics of oc­cu­pa­tional li­cens­ing rules say the ex­pan­sion of state reg­u­la­tions de­presses job growth and raises prices.

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