At the moment, all conversations about licencing and regulating occupations seem to revolve around Uber. While governments across the world fret about safety concerns and the ‘unfairness’ towards conventional taxis, consumers are taking full advantage of the lower prices and increased competition Uber has injected into the market. Much as taxi drivers protest (and they have certainly protested, blocking the streets of Paris and other European cities) the influence of Uber might be benefitting them too – in New York City, the cost of a taxi medallion (necessary for all taxi drivers) has gone down 23% since 2013.
While the world debates everything Uber, from its business model to its ethics, licencing issues in other occupations are starting to emerge. Last month, the Brookings Institution published a paper by Morris Kleiner from the Hamilton Project: Reforming Occupational Licensing Policies. The results of Kleiner’s investigation into occupational licencing in the US can be neatly summarised by the headline of the accompanying Brookings article: Nearly 30 Percent of Workers in the U.S. Need a License to Perform Their Job.
Kleiner’s findings, concerning both the growth and the costs of licencing, are stark. In the 1950s, less than 5% of workers in the US required a licence. By 2008, that was up to nearly 29%. A poll conducted in 2013 found that almost 90% of licenced workers were required to pass an exam, while mandatory continued training and internships were also common.
As if that wasn’t enough red tape, licencing requirements vary hugely from state to state, both in terms of the necessary hoops to jump through to obtain a licence, and the list of occupations requiring one at all – In South Carolina, only 12.4% of workers require a licence; in Iowa, Nevada and Washington, that percentage is over 30. These discrepancies make it extremely difficult for workers to move states or switch jobs, leading to shortages.
The result of this artificially reduced labour pool costs the consumer between 5% and 15% in raised prices, depending on the occupation (with the price for more highly skilled practices like dentistry rising more). On a national scale, restricted worker mobility also warps the labour market and prevents efficient job-matching.
Mostly when people think about occupational licencing, their minds go to ‘professions’: doctors, dentists, lawyers, architects. In these jobs, lacking sufficient training can have serious consequences. The salaries for these educated professions reflect their high status, and the strict licencing requirements serve a clear health and safety purpose (or in the case of lawyers, a financial and legal one). Kleiner finds that licenced workers enjoy at 10 to 15% hourly wage increase, but that this is concentrated among relatively high-earners – the aforementioned doctors and architects.
Often overlooked in the health and safety debate are the myriad of low-paying occupations which also have mandatory licencing. A study by the Institute for Justice, License to Work painstakingly details 102 low-income occupations licenced in at least one of America’s 51 states (including DC).
Below are five of the most extreme and bizarre examples from the report, highlighting the both inconsistencies in state licencing, and the punitive measures which raise costs for consumers and discourage worker mobility.
1. School bus driver
You might think that the only requirement to drive a school bus would be a driving licence. You would be wrong. Every state, including DC requires a licence for school bus drivers, and all require at least 6 exams, including a physical exam, first aid training, and additional practical tests. The job is licenced in more states than that of a preschool teacher, the person actually teaching the children once they are driven to school.
2. Teaching Assistant
On the subject of school, what about teaching assistants? This can be a great way for young people to see if they would suit a career in teaching, or for those considering switching professions. Being a teaching assistant requires energy, determination, quick learning, and an inexhaustible supply of patience. (I should know, I’ve been one.) However, while the role is undeniably worthwhile and rewarding, it is one where classroom experience counts far more than paper qualifications, and the experience is the kind you pick up on the job. Throw an enthusiastic assistant into a classroom, let her observe lessons from a qualified teacher, prepare resources and assist with small-group or one-to-one learning, and watch how fast her skills develop. What teaching assistants shouldn’t need is a licence, as they do in 29 states. 23 states require an exam, to assess a role that is primarily supportive, and 6 states require an incredible 2-years of training. At a time when schools are suffering from a shortage of teachers, this is a sure way to discourage potential candidates from offering their support and learning more about the profession.
The first two jobs at least involve working with children, so extra regulations are to be expected. But what about a job in an explicitly adult-only environment? In the UK and Europe, many teenagers get their first job working behind a bar, and it’s generally considered a flexible way to earn money while studying or pursuing another career. Not so in the US. Along with the federal drinking age set at 21 (3 years higher than most other countries), 13 states demand a licence for bartending. 10 require training, 4 have an exam, and 8 charge a fee, for the privilege of being able to pull a pint or pour a glass of wine. This reduces the availability of casual, part-time work, and also must affect the cost of a drink at establishments in bartender licencing state, even though it is unlikely that consumers care whether the person serving their drink has passed an exam.
4. Make-up artist
The argument could be made (especially by the anti-drinking brigade) that alcohol is a hazardous substance, and therefore some level of training might be required (dubious, but defensible). Nearly three times as many states (36) require a licence to be a make-up artist. Yes, a person who applies make-up to actors or to customers in a shop needs to pay for a licence – and these licences are some of the more expensive, averaging $116, with some higher than $200. 35 of these states require training, and 34 insist on at least one exam, sometimes up to three, presumably since make-up artists fall into the category of cosmetologists and aestheticians, whose jobs veer closer to health-related services. As Jared Meyer points out, “some people may prefer to have a government-licensed make-up artist, but many others would rather pay less for this service”. Given that the risk of medical complications from a session with a make-up artists is far lower than from other beauty treatments (such as laser hair removal or skin care), it does not make sense that they are grouped together for licencing purposes.
From the cumbersome but defensible to the downright bizarre: 5 states require licences from “shampooers”. Not hairdressers, the people who actually cut hair and could conceivably inflict some medium-term damage with a disastrous haircut, but the low-paid and low-skilled assistants who wash a customer’s hair before the hairdresser touches it. Shampooers face this ridiculous hurdle in New Hampshire, Louisiana, Texas, Alabama, and finally Tennessee, where 70 days of training and 2 exams are required. “Does a ‘Shampooer’ Really Need 70 Days of Training?” asks Danny Vinik in a New Republic article from May 2014 about Eric Cantor’s proposed licencing reforms. No, they don’t, especially since (as the article points out) the average number of days of training to become an emergency medical technician is only 33. Vinik also notes how some federally-funded programmes help unemployed job-hunters jump through licencing hoops which serve no benefit and should not exist. If a college student or recently laid-off worker can’t even get a temporary job washing hair without paying for a licence, options are severely limited.
Kleiner’s paper advocates for a system of certifying occupations rather than licencing them. Unlike licences, certificates are not mandatory. By publishing lists of state or federal certified professionals in a particular occupation, these workers can charge a premium, while non-certified workers can still operate. Consumers get to choose whether they’d prefer to pay for a certified provider or not – with tattoo artists (who, despite the risks of inflicting permanent physical harm, are not licenced in every state), they probably would; with shampooers, probably not. The paper also advocates for transferable licences which would allow workers to move without losing their livelihood.
Let me end with one final point to illustrate the contradictions and inconsistencies in the state occupational licencing: Louisiana requires florists to be licenced (and pass an exam), but demands no such thing for opticians. I might be prescribed the wrong glasses and permanently damage my eyesight, but at least I won’t be sold the wrong flowers.
The AEC’s fundamental goal is to promote a free, responsible and prosperous society. Through education and improving public understanding of key economic questions, the AEC promotes the idea of a free market economy and the ideal of a free society.