How Much Licensing is Too Much Licensing?
What is an advocate of the free enterprise system to make of what are often incredibly onerous licensing requirements to perform certain professions in the United States? Surely we all feel better knowing that our physicians, aircraft pilots, attorneys, and civil engineers are licensed. But what about manicurists? Home daycare providers? Yoga instructors? These are professions that require licensing in many states. Should they?
According to the New York Times, "in 1950, fewer than 5 percent of Americans worked in jobs that required licenses. Today, it’s roughly 30 percent, and that number is likely to grow."
I spoke to my father, Tom Ellis, a painting contractor who runs a company that specializes in painting custom homes in Northern California, about his views on licensing requirements for his industry.
"Licensing is no proof of expertise," he explained, "but it puts some minimum standards in place. You can be an incompetent imbecile and still pass the licensing test, but the licensing requirement does weed out those on the margins who have no business being painting contractors.
"I'd rather there be a private alternative to government licensing," Tom continued, "but one reason I think licensing is essential at this point in time, is that there are so many [illegal] immigrants in the construction industry, and they can't become legitimate competitors without licensing."
One failure of a free market is asymmetric information, a situation in which one side of a business transaction is missing important information about that transaction. One reason I love consumer rating websites like Yelp (which I use for restaurants, physicians, and churches) and Rotten Tomatoes (for movies) is that they help correct for the problem of asymmetric information by giving the consumer some idea of what to expect. And government licensing performs a similar function for many industries where consumer rating systems are not in place or not possible.
But surely not all industries should require licensing. For example, this African American hair braider in Utah. Why on earth should she require a license to braid little girls' hair? How does a champion of free markets draw a line between what represents an appropriate use of licensing and an abuse of licensing?
- Comment (40)
- · Quote
- · UnfollowFollow (4)
- Pages:
- 1
- 2
Comments:
Jun '10
Re: How Much Licensing is Too Much Licensing?
I do not oppose licensing laws in total. Air line pilots (yes); physicians (yes); lawyers (maybe); some engineers (yes). But even here Tom Ellis is absolutely right that an incompetent can pass a test.
Just about every other trade or profession: no. For most trades and professions there simply is no significant potential public harm that is protected by licensing laws. Licensing merely empowers bureaucrats.
Nov '11
Re: How Much Licensing is Too Much Licensing?
Licensing is most certainly not a a guaranteeing of competence. A perfect example is the license to drive a car. All it proves is that you can pay a fee and take a test.
I'm against any licensing for any occupation. (There's a case to be made against licensing even doctors.) But if you want to draw a line, I'd say something that directly effects the health and well being of the public.
Nature abhors a vacuum, in the absence of a state imposed licensing regime, something will form to fill the vacuum.
The industry I work in is information destruction (paper shredding). It is (most mercifully) an unregulated industry. Any schmo can buy a mobile shredding truck and start shredding paper. In the absence of a state imposed licensing scheme, the industry has created its own system to separate good actors from bad actors: NAID, the National Association for Information Destruction. Their certification standards are higher than the state could demand and participation is entirely voluntary.
And its also a selling point, I can point to our competitors and then point to our NAID certification and tell any potential customer to ask questions.
Oct '10
Re: How Much Licensing is Too Much Licensing?
The trend towards licensing is very, very bad. It's a large part of the reason why service productivity is stagnating, and why the service sector doesn't produce enough high-paying jobs. We will never bring enough manufacturing jobs back to employ every low skilled worker at a decent wage. On the other hand, if we increased service productivity (by, among other things, repealing most licensing laws) we could get good-paying jobs in the service sector.
The service sector is where the future is. There is no other potential source of middle-income jobs in our economy. But we need to remove barriers to competition, dynamism, and advances in productivity. Otherwise those jobs will never appear; neither will economic opportunity for most Americans.
Edited on June 15, 2012 at 1:09amMar '11
Re: How Much Licensing is Too Much Licensing?
Did a license stop Caltrans civil engineers from falsifying bridge safety tests? Did a license stop a Philadelphia Doctor from committing murder among patients he had sworn to do no harm?
May '10
Re: How Much Licensing is Too Much Licensing?
The problem is the "We're all onboard, pull up the ladder" impulse that kicks in amongst the current licensees where they crank up the requirements to a ridiculous height (like 2 years training for a cosmetology license to do simple hair braiding, or teacher certification) to erect a high barrier to entry for new competitors.
Licensure for hair braiding that required passing a test on equipment sanitation and essential safety practices makes sense. So does passing an exam on disposal of leftover paint and other health and safety practices for a painting contractor. Then let the market decide, if the hair-braider does a lousy job, there won't be repeat business.
Aug '11
Re: How Much Licensing is Too Much Licensing?
I suspect that a big part of it isn't really about licensing, but about fees paid when you apply for those licenses. It's just another way for government to rake in the cash.
Sep '11
Re: How Much Licensing is Too Much Licensing?
Walter Willilams has done a lot on this topic. Here is a column of his.
May '10
Re: How Much Licensing is Too Much Licensing?
Agreed. Licensing has turned "associations" (guilds) into pseudo-legal agencies. They decide the licensing standards, which have the power of law.
Why designate any one association the one and only for a particular industry? Why not allow multiple such organizations to compete for the public's trust by critiquing individual companies, ala the Better Business Bureau?
I suspect the answer is lawyers pushing lawsuits and politicians buying votes.
Oct '11
Re: How Much Licensing is Too Much Licensing?
Any idiot can pass the real estate test and get licensed as an agent (who's got two thumbs and a real estate license? This guy) but 90% of people who get a license drop out of the profession within two years. Ouch.
Nov '11
Re: How Much Licensing is Too Much Licensing?
That's only a small part. Its about establishing a legal regime to limit potential competitors.
Dec '11
Re: How Much Licensing is Too Much Licensing?
Diane Ellis, Ed.:
One failure of a free market is asymmetric information, a situation in which one side of a business transaction is missing important information about that transaction.
This kind of licensing is a form of rent seeking and it is used to create market distortions. It is done because it imposes a barrier for enter into a business. Those who lobby to get the licensing laws passed are doing it to prevent competition. Of course it is said to serve the public good and help consumers, but it mostly serves to limit the number of competitors, and keep prices high.
Apr '11
Re: How Much Licensing is Too Much Licensing?
Milton Friedman was not a big fan of licensing. From Wikipedia:
ix. Occupational Licensure Friedman takes a radical stance against all forms of state licensure. The biggest advocates for licenses in an industry are, usually, the people in the industry, wishing to keep out potential competitors. The author defines registration, certification, and licensing, and, in the context of doctors, explains why the case for each one of these is weaker than the previous one. There is no liberal justification for licensing doctors; it results in inferior care and a medical cartel.
Dec '11
Re: How Much Licensing is Too Much Licensing?
Another Milton Friedman quote:
“With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves.”
Mar '11
Re: How Much Licensing is Too Much Licensing?
The IT field provides a useful contrast to this licensing madness. There are no legal requirements to work in this industry yet there is a list of accreditations one can test for: MCSE, CISSP, A+ Certification, and on and on and on. Some have moderate value, some are necessary just to get in the door for an interview and some are even of negative value for career prospects.
Who decides which is which is which? The person whos' money, business and reputation is on the line for hiring the right individual for the job that is who.
The only results of empowering State and Federal authorities to take this decision away from those who should be making it is to insure incumbents spend their days lobbying the license issuer to keep out new talent and to remove responsibility from those who should be most concerned with making mistakes. Instead this just gives failures an excuse to point to, "Well he had the State approved license. How was I to know he couldn't do the job?"
May '10
Re: How Much Licensing is Too Much Licensing?
I have an Apprentice Electrician license in Texas. There was no test. All it means is that I had to pay the government something like $25 and someone with a more advanced license must be on the premises while I'm working there. Inspectors miss all sorts of things, so it's as much honor as law that prevents an apprentice from working incompetently without direct supervision. Someone with a Master's license is ultimately responsible for the company.
May '10
Re: How Much Licensing is Too Much Licensing?
I like this topic, but I wish, Diane, you had included the question of the pros and cons of guilds -- private, industry-operated licensing -- as opposed to government control. And it would be nice to seem some thoughtful consideration of the pros and the cons -- there are both -- rather than merely libertarian bashing. It seems clear that, regardless of the libertarians devout dreams, we're going to have such things. Maybe even should have such things. So a more intelligent approach would be to try to understand how to optimize the situation to produce the most good at the least cost.
Dec '11
Re: How Much Licensing is Too Much Licensing?
I was once a Texas licensed Unarmed Security Guard. Same deal. These are pretty common. Here is a link to a nation-wide study of the practice for low and moderate income occupations.
Nov '10
Re: How Much Licensing is Too Much Licensing?
Why? Who would ever hire a doctor that doesn't know medicine, or a pilot that doesn't know how to fly? I don't see what value licensing adds, even to these professions.
Apr '11
Re: How Much Licensing is Too Much Licensing?
How was it even determined that hairdressers and barbers had to be licensed by the state? Is it because of hygiene? I suppose with barbers, who used to give shaves, I suppose see it (of course, real straight razor shaves are now essentially banned). So, if Mom trims the neighbor kid's hair I suppose she's breaking the law? (Actually, didn't some town fine a mom for illegal daycare because she was babysitting the neighborhood kids?)
There's no reason why all licensing can't be done by private organizations and consumers can know to look for a seal and decide if they want to assume the risk. If I'm legally allowed to risk my health sitting on a truck stop toilet I can certainly weigh the risks of a $6 haircut behind the adult book store.
What I don't like is the government granting private groups the power over people's livelihoods. This story from England - about a therapist on "trial" for agreeing to treat a gay activist who pretended he wanted to be converted to straight - is a fine example of what happens when such groups have an agenda.
Mar '11
Re: How Much Licensing is Too Much Licensing?
But Tom the force of law is exactly what makes this licensing such an offensive practice. Guilds which could bring pressure but not judicial sanction are a very different beast. It is really not the same question, the two should not be conflated. With that point strictly acknowledged I strongly support your view that a more general discussion on methods to support having confidence in competent labor hired is worthwhile.
This is a large topic.