Reason.com of August 16, 2015 has a very interesting article on occupational licensing by J. D. Tuccille.  Occupational licensing is the requirement that individuals desiring to enter certain lines of work or service first obtain extensive and expensive training and also pay a licensing fee, sometimes quite high, in order to legally enter.  Failure to do so will make the person subject to significant fines at the very least.  Examples of such occupations requiring these licenses include plumbers, hair braiders (in some cities), lawyers, building contractors, beauty operators, dentists, and many other mundane operations.

The article was particularly interesting because it mentioned that President Obama’s administration is actually concerned about such licensing, as have been many free market economists (Milton Friedman come to mind).  Here is part of what the author of the article wrote, quoting the White House report mentioned:

“’By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer  expenses by over one hundred billion dollars.’ Who said that? Was it a free market think tank or a writer here at Reason? Nope. That line appeared in a report published on July 28 by the U.S. Department of Treasury, the U.S. Department of Labor, and the president’s Council of Economic Advisers”

Look at the number:  about $100, 000, 000, 000.  That is a lot of money consumers have to pay to get services.  And it does not include the services not provided by many would-be entrepreneurs who cannot afford the expense of a license and so never go into business.  Of course some business is conducted anyway “under the table.”  Why then do states and local governments continue to insist on such licensing when it hurts people who can least afford it—the poor who need such services as well as the potential and poorer entrepreneur who now can’t go into business.

The answers vary.  Perhaps the government just wants the revenue.  Many governments today are short of revenue and are hungry for more.  Arguably, the got that way because of their own profligate spending and unwise use of tax money.  But it is difficult to get that message through to local and state leaders who see a “pot of money” in front of them.  Another reason is that the existing individuals in these occupations want to make it as difficult as possible for others to get in, as that would introduce competition, which would drive down the cost/price of the services.  That may seem a bit perverse, but Adam Smith himself recognized the possibility, given that humans are not exactly paragons of virtue all the time.  Finally, it might be because some actually believe these occupations would otherwise be taken up by unqualified and even incompetent or corrupt individuals.  That sounds a little plausible, until one looks at some of the occupations included.  Why does it take hundreds of hours of “official” training and a good deal of money to braid hair, for example?  Licensing a contractor may make more sense, but even here, why does it take so much effort and money to be licensed.  It would be hard to convince me that much cheaper ways cannot be found to help get more people into these businesses—like the practice of law for example.  What about apprenticeships?  What about shorter training periods for some occupations?  I know from experience that it does not take three years of expensive tuition paid to law schools to become a good lawyer.  Yes, you need contracts, torts, property law, procedure courses, constitutional law, and couple of other important courses.  But other than that, which could also be achieved through an apprenticeship, if one wants more esoteric courses, then give another degree for that extra work.  But let the budding lawyer practice law.

The responses for many decades to the kind of criticism I am raising is that my scheme would endanger the public health and safety.  Prove it.  In fact, a few studies have indicated that licensing lowers quality of some services (see Sidney L. Carroll and Robert J. Gaston, “Occupational Restrictions and the Quality of Service Received: Some Evidence,” Southern Economic Journal Vol. 47, No. 4 (Apr., 1981), pp. 959-976).

I may be cynical but I am convinced that most licensing boards/bodies wish to keep the prices charged by their members high and to keep them in business.  They do not really want competition.  This conclusion is no more than a deduction from the premise that individuals are self-interested and that if an opportunity arises to “rent seek” it will be pursued by those who stand to gain.  It is time to stop this extraction of wealth from consumers.  If the President’s office realizes this, then everyone else certainly should.