Rolling back occupational licenses could help low-income workers leap ahead.
There’s a dubious and ridiculous form of regulation holding back the U.S. economy, some would-be reformers say, and it’s lurking in your local hair salon.
Occupational licenses have proliferated in recent years. Back in the 1950s, fewer than 5% of jobs required a license; but today, economists say, that figure is closer to 25%. And we’re not talking about licenses that are unambiguously necessary to protect public health and safety, like those for medical doctors and nurses, or commercial airline pilots. Rather, these are licenses for jobs ranging from auctioneers and make-up artists, to hair-braiders and even fortune tellers.
Economists, including some of former President Obama’s top advisors, have argued over the years that these regulations are often inconsistent from state to state, and create an unnecessary burden on jobseekers. President Trump’s administration, which has been broadcasting its commitment to job creation, clearly agrees.
In a speech Thursday, the new acting chairwoman of the Federal Trade Commission, Maureen Ohlhausen, announced the launching of a task force to tackle the issue. The “Economic Liberty Task Force” will start by launching a web site devoted to the topic. “I challenge anyone to explain why the state has a legitimate interest in protecting the public from rogue interior designers carpet-bombing living rooms with ugly throw pillows,” Ohlhausen said.
Her speech didn’t offer many specifics about how exactly the FTC will crack down on overburdensome licensing requirements, but Ohlhausen did say the agency seeks “to partner with stakeholders, including state elected leaders and other officials, to eliminate and narrow overbroad” restrictions that do little in achieving health and safety goals.
The move comes as Republican governors in Nebraska, Arizona, Missouri, and Wisconsin are also seeking to remove licensing restrictions. In his State of the State address last month, Missouri Governor Eric Greitens pointed to a Missouri law that requires hair braiders to undergo 1,500 hours of training for a license. “That’s 30 hours per week of training for almost a full year…to braid hair,” he said. “We need to end frivolous regulations like these so that our people can start their own businesses and create jobs.”
Licensing requirements vary widely from state to state, according to research presented to the Senate last year by President Obama’s former top economic advisor, Jason Furman. In Iowa, Washington and Nevada, over 30% of the workforce carries a license.
It takes three years of training to become a licensed security guard in Michigan, but only 11 days in other states. Cosmetologists are required to train for 16 months before they can get a license in South Dakota, Iowa, and Nebraska, while New York and Massachusetts require less than 8 months, Furman said.
So why do these requirements exist in the first place? Advocates of the regulations argue that they add a needed layer of consumer protection, and that they can boost an overall agenda of vocational training for workers who don’t quality to go to college. But critics note that licensing regulations are often pushed by industry groups as a way for incumbents to protect themselves from new competitors.
These restrictions are also worrisome because they hold back worker productivity and the job market in several key ways.
First, the more stringent requirements reduce mobility of workers from state to state. Military spouses, who frequently have to move across state lines, are often impacted. So too are immigrants, who may be unnecessarily prevented from applying their past work experience to similar jobs in the U.S.
More importantly, overly burdensome training requirements often impose expensive upfront costs that low-income workers, in particular, can struggle to shoulder. As a result, these people can become excluded from the job market or perpetually stuck in low-wage jobs.