This article on Occupational Licensing first appeared on Medium.
As the market continues its slow growth, one need look no further than local and state policies as a cause for concern. Over a century, policy makers have erected department after department to deal with a self-imposed strain on the economy — occupational licensing. In so doing, occupational licensing has deterred entrepreneurship, severely undermined the free market, and shackled thousands of would-be producers in the economy.
Occupational Licensing: Stymying Competition and Restraining the Free Market
Among other things, essential to the free market is competition. Competition provides a force driver for entrepreneurs in a particular industry. In turn, this competition drives down cost, consequently pushing down price. In the end, the customer derives the largest benefit with more product, and cheaper prices.
Yet, today, policy makers have turned up occupational licensing to reverse these trends. Consequently, competition continues to be in an entrepreneur drought with less and less ideas hitting the market.
Oddly, though, policy makers continue to turn a blind eye to the desperate need to stimulate the market; instead, policy makers have become the flag bearers of industry protectionist.
Here, policy makers have open ears and a ready pen toward incumbent business owners hell bent on staving off new competition. Even a simple cursory look would evidence such stances, where municipal and state governments continue to erect borders instead of breaking them.
Consider the continued banning of Uber in taxi rich cities with powerful lobbies, and deep purses. In another example, Airbnb sees continued resistance by municipal governments interested in housing protection, and keeping certain classes out.
Further still, cosmetology boards continue to be the largest setback to a entrepreneur with little cash, a skill, and a set of scissors. At the same time, yogis and Crossfitters across the nation have begun to see the beginning of a licensing push that was sparked by existing yoga studio owners and Crossfit “box” owners with the sole purpose of slowing the flow of competition in the market.
Some have speciously argued that occupational licensing is required for safety, and industry standards. But, nothing is more pervasive, complex, and outright draining on the free market than occupational licensing. At the same time, the converse is true: a free market provides the self-corrective means.
If the free market was left to its ends, it would itself correct these so-called problems with the customers’ voices. In today’s online world, a customer’s voice has the largest impact on a business and the subsequent customer through sounding boards like Yelp, Google reviews, etc. Moreover, public policy can be used to fill any safety gaps, instead of outright licensing occupations. In so doing, policy of this kind would protect public safety, while also encouraging the free market to grow by keeping costs and redtape at a minimum.
Disproportionally Affecting Lower-Wage Earners
Arguably one of the most damaging effects occupational licensing has is on lower-wage earners.
Here, most occupational licensing is geared toward non-professional jobs. For example, consider the aforesaid, barbers, taxi drivers, etc. At the same time, these jobs are on the lower end of the wage spectrum, and saturated by High School Diploma or GED holders, and immigrants.
Thus, occupational licensing is a war against the lower class and immigrants, keeping them out of the economy as productive entrepreneurs, contractors, or employees. Unfortunately, this could be the biggest mistake of occupational licensing as it limits an otherwise scare commodity: human capital and thought.
In sum, occupational licensing is often sought by incumbent business owners, where policy makers have become pseudo industry protectionist. Consequently, our current set of policies are disproportionally effecting lower-wage earners, stymying entrepreneurship, and hindering the free market.
Oddly, though, many policy think tanks — both liberal and conservative — have addressed the need to unshackle occupations, and rethink occupational licensing. Moreover, the White House recently voiced its concern vis-a-vis a white paper. Thus, the only question left is if we have bi-partisan support to change occupational licensing, then why has there been such inaction at the local and state level.
Authored by: Jonathan J. Cianfaglione