Excessive licensing rules may just protect cartels

Melony Armstrong wanted to be an African hair braider, practicing a skill passed down from generation to generation. In Tupelo, Miss., where she lived, government licensing rules meant she had to take 300 hours of course work to start her salon: 300 hours, she notes, “none of which covered hair braiding.”

In testimony before a U.S. House subcommittee on Wednesday, Armstrong explained that her “ultimate goal” was to teach others how to braid. Getting the needed licenses to do that would have taken 3,200 hours. None of them taught students how to braid hair, either. That’s more hours than it would have taken her to get licenses to become a firefighter, emergency medical technician, hunting instructor, ambulance driver or real estate appraiser. It’s longer than it would have taken her to get licenses for all those things combined.

The subcommittee — led by New Yorkers Richard Hanna, a Republican, and Grace Meng, a Democrat — was considering the excesses of state occupational licensing. More and more jobs fall under these regulations. In the 1950s, according to one study, only about one in 20 jobs required a license. By 2006, about 29 percent did.

While Armstrong helped get her state to scale back the requirements for hair braiders, the trend is toward more stringent regulation. Patti Morrow, who runs an organization fighting licensing for interior designers, says, “These bills come back year after year like zombies.”

Strict libertarians argue against any kind of government licensing. The great economist Milton Friedman made the case that states shouldn’t even limit the supply of doctors. Patients should be free, he argued, to get cheap treatment from practitioners who lacked the American Medical Association seal of approval. Our society, needless to say, has reached a different consensus.

You don’t have to go as far as Friedman, however, to think that licensing ought to be drastically scaled back. Even when it comes to medicine there is debate among experts about how tough the rules are, with some people arguing that nurses should be allowed to do more. In other fields, though, the public-safety rationale for restrictions doesn’t apply at all. Citing requirements for dog groomers, Hanna asks, “What in the heck is government doing involved in these businesses?”

What it’s doing is raising costs to consumers and reducing opportunities for job creation.

This behavior is indefensible, but it isn’t inexplicable. Existing providers in any market benefit when governments impose restrictions on new competition, and they lobby for them. The government restrictions turn the industry into a cartel, and not an especially subtle one. In many cases, state governments let boards composed of providers determine who will get to compete with them. But it’s worse than the typical cartel, testified Rebecca Haw of Vanderbilt Law School, because it’s a cartel “backed by the police power of the states.”

Another witness, Timothy Sandefur of the libertarian Pacific Legal Foundation, said that Tennessee had let moving companies lodge objections to proposals for new companies — and when they objected, permission to open those new companies was always denied. (Sandefur offered one of the rare moments of comic relief in the hearing when he observed that some states license fortune tellers “even though it is literally impossible to be a competent fortune teller.”)

The Institute for Justice, another libertarian group, has compiled a report on how states restrict low- and moderate-income occupations. The variability of those regulations is in itself a telling indicator of the interest groups at work. Only five states license shampooers, for instance. Presumably, that’s not because shampooing is exceptionally dangerous in those states.

There was bipartisan agreement at the hearing that state licensing needed sunlight. Neither Hanna nor Meng was sure, however, what the federal government should do. Hanna said that he didn’t want to intrude on “states’ rights.” Haw suggested that the Sherman Antitrust Act could be deployed against restrictive state boards. Sandefur urged Congress to pass a law protecting the “civil right” to make a living, which would require state governments to show in court that their restrictions were necessary.

Morrow, the interior designer, closed her testimony with another example of how little these legal restrictions benefit the public. The institute’s report shows that the few places that require licenses for interior designers have made the burden of getting one extraordinarily heavy. The District of Columbia is one of those places. When President Barack Obama wanted the living quarters of the White House redesigned, however, he turned to an unlicensed designer from California.

“If it’s OK for the most protected person in the world to hire an unlicensed interior designer, shouldn’t it be OK for everyone?” she asks. Good question.