Unnecessary Licensing Raises Consumer Prices and Kills Jobs

June 2, 2014

Government licensing of jobs leads to higher consumer prices and fewer jobs, according to Morris M. Kleiner, professor of public affairs at the University of Minnesota.

"Right to practice" laws implemented through state licensing boards require workers to meet government standards before they can practice select occupations. Kleiner cites a staggering fact: In Minnesota, it takes more classroom time to become a cosmetologist than to become a lawyer.

Licensing laws have exploded in the U.S. In the 1970s, about 10 percent of workers were required to have licenses. In 2008, that figure had risen to nearly 30 percent.

While there is a role for the government in protecting consumers from incompetent or dishonest service providers, the laws are part of a growing net of regulation that restricts labor markets and worker mobility.

  • Math teachers, for example, must be relicensed when they move to another state. Kleiner writes that reciprocity agreements between states for teachers, and similar occupations, would allow professionals to move between jobs more easily.
  • A potential alternative to licensure is certification, which allows consumers to distinguish between providers but does not bar workers from practicing in their chosen field. Certification, Kleiner says, makes sense for jobs such as florists and tour guides, occupations that present little likelihood of harm to the public.

Workers in licensed occupations like licensing laws because they limit the supply of workers in their field, pushing up wages by 15 percent and raising consumer prices.

Bipartisan opposition to the laws have emerged. Liberals argue that the price inflation hurts low-income consumers, and  conservative critics see the issue as a question of economic liberty. Licenses protect those in licensed fields from competition, without necessarily improving service quality.

Source: Morris M. Kleiner, "Why License a Florist?" New York Times, May 28, 2014.

 

Browse more articles on Economic Issues