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Be honest: the last time you got your nails done or toilet repaired, did you ask your manicurist or plumber what kind of license they had?
Those are just two of the many occupations that require a license. The system of getting those official government stamps of approval is hurting the economy, says Morris Kleiner, professor of public policy at the University of Minnesota and a visiting scholar at the Minneapolis Fed. In a New York Times op-ed this week, Kleiner blasts what he calls the "national patchwork of stealth regulation" of state occupational licensing rules.
As of 1970, he writes, 10 percent of American workers needed to be licensed to do their jobs. As of 2008, it was around 30 percent.
Strict licensing standards mobility, as a person licensed to practice her trade in, say, Utah might have to get re-licensed if she moves to Oklahoma. In addition, Kleiner argues, these rules restrict people from entering the professions they want to practice. That hurts both would-be workers and consumers; low-income people may not have the means to go through the licensing procedures, which can involve many hours of classroom training. And low-income people, facing this tighter supply of hairdressers and childcare workers, might not be able to afford those services.
In other words, occupational licensing might in fact make inequality worse.
Not that licensing standards are bad for everyone; they work great for people who manage to get their licenses. Kleiner points to a study in which he and former CEA chair Alan Krueger found that licensing pushes workers' wages up by 15 percent.
There is room for change; members of both parties have voiced opposition to the current system. And these problems could in part be solved by allowing people to more easily transfer their licensure from one state to another, Kleiner writes, though in many cases regulation would be best scrapped. Some occupations, one imagines, may not necessarily need heavy regulation. According to a 2012 study from the libertarian Institute of Justice, 13 states at that time had licensing procedures for bartenders, 21 for travel guides, and one for florists. And yet no one is in an uproar over florists in 49 states selling defective flower arrangements.
