Economic Regulation (Part 3): I’m on board, Jack. Pull up the ladder!

Liverpool is a port that is the birthright of some great slang.  One of the slogans is, “I’m on board, Jack. Pull up the ladder.”  This essentially means: “I’ve made it.  Who cares about you.” 

Unfortunately, it could be used to describe some occupational regulations in this country. 
 
In the 1950s, less than 5% of workers in the United States needed a license from the government to do their jobs. By 2008, over 30% of nation’s workforce was required to have an occupational license.[1] 
 
We should require occupational licenses in jobs where a license is needed to protect the public.  For example, nobody would want to be operated on by an unlicensed doctor, fly with an unlicensed commercial jet pilot, or get a root canal from an unlicensed dentist.  We don’t want our children taught by unlicensed teachers, nor do we want unlicensed electricians working on power lines. 
 
A report from the Obama Administration notes that while some occupational licensing is necessary and important to ensure high-quality services, occupational licensing in other cases has morphed into a scheme where the main goal is to drive out competitors by setting rigid or unnecessary licensing standards.[2] 
 
The Council of State Governments estimates that about 1,100 occupations are licensed by the 50 states.[3]  One report estimated that unnecessary licensing restrictions cost over 2.8 million jobs and added over $200 billion to the cost of services paid by Americans for personal services.[4]  
 
It isn’t just the money.  Researchers have examined inconsistent requirements for licensure in various occupations.  Professor Morris Kleiner, who holds the AFL-CIO Labor Policy Chair at the University of Minnesota, notes that: “In Minnesota, more classroom time is required to become a cosmetologist than to become a lawyer.  Becoming a manicurist takes double the number of hours of instruction as a paramedic.”[5]
 
Licensing requirements for similar jobs within a state can vary a lot.  Michigan requires 1,460 days of education to become an athletic trainer, but only 26 days to be an emergency medical technician.[6] 
                       
There can also be big differences in the licensing requirements for the same job in different states.  Michigan requires three years of training to be a security guard.  Most states require 11 days or less[7].  Iowa requires 16 months of education for a cosmetologist.  New York requires less than 8 months.[8]
 
Around the country, there are a maze of different license requirements for hair braiders, cosmetologists, barbers, nail technicians, make-up artists, and estheticians.  Example:  a make-up artist must be licensed as an esthetician.  Yet, go into a department store and you will see customers getting makeup applied by people with no licenses.  Is the purpose of the license sanitation?  If so, what about the department store?  Is the requirement of licensure necessary to set a minimum level of expertise? If so, can the government judge the skill of a makeup artist better than a customer? 
 
The fact of the matter is that some licensing requirements inhibit economic mobility and make it harder to get a job or start a business, particularly for entry-level workers.  People like military spouses who frequently move from state-to-state can get caught up in a labyrinth of inconsistent requirements.
 
Borrowing from Professor Kleiner’s proposals, Minnesota should take a hard look at any standards whose aim is just to stifle competition and fence out new people from an occupation. 
 
I don’t claim to have all the answers, but the purpose of these reports is to provide some thoughts about Minnesota as I look to the economic vitality of this state.  Please let me know what you think. 

[1] https://www.brookings.edu/wp-content/uploads/2016/06/THP_KleinerDiscPaper_final.pdf

[2 https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf

[3] https://www.judiciary.senate.gov/imo/media/doc/02-02-16 Furman Testimony.pdf

[4] https://pages.wustl.edu/files/pages/imce/soks/professions.pdf

[5] https://www.nytimes.com/2014/05/29/opinion/why-license-a-florist.html

[6] https://pages.wustl.edu/files/pages/imce/soks/professions.pdf at footnote 2. 

[7]https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf, p. 4.

[8] https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf,p. 4.