NCPA - National Center for Policy Analysis

Licensing Regulations Hurt Small Business More Than Taxes Do

May 27, 2015

Occupational licensing, the requirement that people pass tests to gain government permission to work, is making it harder for young people to begin their careers. By keeping young people out of certain industries, or by making it prohibitively expensive and time-consuming for them to work, occupational licensing increases costs for all Americans and limit opportunity for those looking to enter the field of their choice.

When Melony Armstrong, featured in the documentary Locked Out: A Mississippi Success Story, wanted to open an African hair-braiding salon, she had no idea that a long, hard battle against the State Board of Cosmetology lay ahead. It took her four years to realize her dream.

Melony was required to spend $10,000 and several years in a cosmetology schools that would not teach her any of the skills she needed to braid hair. After the first of her many fights with the state government, she was required to complete 300 hours of coursework. As her business expanded, she would have needed to complete another 3,200 hours of classes and apply for a cosmetology-school license to hire younger workers and train them.

Results of annual "Small Business Friendliness Survey" show small business owners care almost twice as much about licensing regulations as they do about taxes when rating the business-friendliness of their state or local government. The burden of professional licensing regulations was found to be the only statistically significant non-demographic variable for predicting states' business environments.

By protecting established, older workers, the government's occupational licensing requirements make it hard for the young to enter the workforce as entrepreneurs - leaving them with fewer job opportunities.

The decline in entrepreneurship is leading to the aging of American businesses.  

Source: Diana Furchtgott-Roth, Jared Meyer, "How Occupational Licensing Harms the Young," Economic Policies for the 21st Century, May 22, 2015.


Browse more articles on Economic Issues