NCPA - National Center for Policy Analysis

Licensing Laws Raise Prices, Hurt Consumers

February 2, 2015

There are occupational licensing laws across the 50 states, and while it seems sensible to require doctors to have licenses, does it really make sense to require florists to have licenses, or auctioneers or interior decorators? Writing at Vox, Timothy Lee highlights the problems with occupational licensing.

The NCPA has reported on these problems before. Occupational licensing has ballooned in recent years; just 5 percent of the workers were in jobs that required licenses in the 1950s, a figure that had reached 29 percent of workers in 2006. These requirements raise costs, reduce job growth and have significant impacts on the economy: according to a Reason Foundation study, licensing decreases the rate of job growth by 20 percent and costs the economy an estimated $34.8 billion to $41.7 billion per year, in 2000 dollars.

Lee offers a few statistics on licensing laws:

  • According to a 2012 Institute for Justice study, 39 states require massage therapists to have licenses.
  • Thirty-four states require licenses to install security alarms.
  • Twenty-four states require licenses to be a coach.

Licensing is touted as protecting consumers, but does it? Lee cites a 2009 study on dental licensing regimes, as some states allow hygienists to provide care, while others restrict dental services only to licensed dentists. According to the study, states with strict licensing rules actually had more residents with missing teeth. Why? Licenses raise prices, which limits access to services.

Source: Timothy B. Lee, "Obama has a modest plan to tackle one of the most underrated economic problems in America," Vox, January 30, 2015.

 

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