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Licensing Laws Continue to Drain U.S. Economy

How might politicians address voter anger at vanishing economic opportunity for working people that helped push unexpected numbers of Americans to Donald Trump’s corner on election day? Immigration and trade have dominated the discussion thus far, but it’s important that policymakers don’t lose sight of more subtle ways the government has distorted the economy to favor the politically connected.

One example: Onerous occupational licensing laws that force people to undergo thousands of hours of often redundant and gratuitous training to perform jobs like auctioneering, tree trimming, and hair styling. The Wisconsin Institute for Justice reports:

Occupational licenses are “one of the most substantial barriers to opportunity in America today,” a new study by the Wisconsin Institute for Law & Liberty (WILL) found. According to WILL’s estimates, licensing laws raise prices for consumers by $1.93 billion each year and results in roughly 31,000 fewer jobs. Over the past two decades, the number of license holders has jumped by 34 percent in Wisconsin. Meanwhile, the number of occupational licensing categories has soared by 84 percent.

“While some credentialing serves to protect public health and safety,” report authors Collin Roth and Elena Ramlow note, “much is rank protectionism – a device to ‘fence in’ those who already have permission to work and ‘fence out’ those who do not.”

Often, licensing laws are the result of higher-skilled professionals seeking to protect their market share at the consumers’ expense. For example, the New York Times reported over the summer on a state veterinary board that threatened an animal masseuse with a lawsuit unless she went to veterinary school. And Brookings has described the way that dentists lobbied to prevent qualified people from offering teeth-whitening services at a lower price.

Licensing regulations have grown steadily over the last few decades thanks to interest group pressure. This not just a minor concern for a few key industries; it is a weight dragging down the entire economy, raising prices while blocking access to less-skilled trades. The Obama administration has already recommended that states look at ways to loosen these requirements. If governors and legislators are interested in responding to voter anger over an economy tilted against ordinary people, this would be a good place to start.

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  • Dale Fayda

    In other words – there is too much government in our lives, yes?

  • FriendlyGoat

    When we have any Republican-controlled state making this a priority on any occupation of greater responsibility than hair braiding and flower arranging, TAI will report the good news, right? I just don’t recall hearing anything about this in the “make America great again” themes.

    • SDN

      Well, other than the proposal, recently stated again, to roll back two regulations for every new one. None so blind as those who choose not to see.

      • FriendlyGoat

        Happy Thanksgiving. (The licenses are mostly at state level.)

        • SDN

          But you would be amazed (or not) how many of them are justified by Fed laws / regulations.

  • Disappeared4x

    The paradox in New York is that Managing Agents and Building Managers only require a realtor’s license. The slow destruction of multi-family housing ‘managed’ by these not-qualified people is a scandal that does not affect the rich, who can demand qualified Managing Agents.

    Thousands who bought middle-class apartments in the outer boroughs need their own caulking guns to stop the leaks.

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