Licensing often serves to limit competition and choice

An average college student in Texas lacking funds needs a quick haircut. Fortunately for him, a friend offers to cut his hair for $5, a fraction of the cost of a barber. The student accepts his friend’s offer and all was well, except one thing: By this transaction, his friend was in violation of state law since he did not possess a barber’s license in the state of Texas.

Occupational licenses may not seem like a hot topic, but with 29 percent of all jobs in the United States now requiring some form of license, the time has come to take a long and hard look at the heavy costs of these licenses on the economy and Texans.

Supporters of occupational licensing claim that they are necessary to safeguard the quality of licensed services, hold practitioners to safety standards, and prevent unethical and dangerous practices. The evidence, however, paints a different picture; licensing laws act more as a form of protectionism for those in licensed professions while blocking access to jobs, stifling job creation, and hindering technological development and access to information. Similarly, increasing technology and market advances are making governmental regulation of occupations increasingly obsolete.

Licensing is the most restrictive form of occupational regulation. It requires an individual to meet some level of training, experience, or other qualifying criteria before the government issues a permission slip for the individual to legally perform the tasks of a specific licensed profession for compensation.

In the United States, occupational licensing has seen a steady rise since the 1950s, when only about five percent of occupations required licensing and were generally confined to the medical and legal field. More recently, interior designers and even florists have made concerted efforts to secure licensing for their professions.

Without a determined effort to stop this trend, the push towards occupational licensing will likely increase as more and more groups of professionals organize to petition legislators to protect their trades from competition.

Perhaps some reduction of protectionism might be acceptable if licensing served to protect consumers. However, the fallacy of consumer protection in many areas of licensing is being debunked.

The majority of licensed occupations, especially those with average to low incomes, are only licensed in certain states. For instance, fire alarm installers — a field where there is some danger associated with incorrect procedure — are licensed in 34 states including Texas.

However, there is nothing to suggest that states that do not license fire alarm installers suffer from an abundance of harm associated with incorrectly installed fire alarm. One would expect that if these licenses were indeed necessary to ensure public safety that there would be a greater consistency of these licenses across state borders; that simply isn’t the case.

Licensing alone does not necessarily prevent unethical practices from occurring. On the other hand, competition in the market will often correct these problems by simply forcing unwanted services out of business without the added threat licensing.

If Texas wants to protect consumers, improve consumer choice, and expand the economy, it should remove these barriers to employment and rely on market-based solutions to market problems.

Peacock is the vice president for research and director for the Center for Economic Freedom at the Texas Public Policy Foundation. Barr is a research associate at the Center for Economic Freedom at the Texas Public Policy Foundation.