Liberty vs. License

by Ian Tuttle
Texas gubernatorial candidate Greg Abbott leads the charge.

A fun fact: The emergency medical technician (EMT) responsible for aiding the victim of a car accident undergoes, on average, 33 days of training. The cosmetologist whose salon that driver just left studied for 372 days.

That the typical rescue worker requires fewer hours of training than the typical manicurist, barber, and interior designer is the upside-down result of occupational licensing, the wormhole of training courses, examinations, fees, and other hoop-jumping required by many states to ply a number of trades. As unions decline, occupational-licensing requirements are on the rise, facilitated by back-scratching among industries and legislators both state and federal.

In 2012, the Institute for Justice (IJ) released a study identifying 102 occupations that require licensing somewhere in the nation and in which practitioners made less than the national average income: EMT and cosmetologist are on the list, as are preschool teacher, vegetation-pesticide handler, florist, and a host of others. According to economists Morris Kleiner and Alan Krueger, just over one-third of jobs in the United States today require some sort of licensing.

And, of course, occupational licensing has its place: Health and safety concerns are often genuine, as is the instinct to protect consumers from fraudsters — hence all states and the District of Columbia require licensing for city-bus drivers and EMTs, and 39 states license mobile-home installers.

But licensing frequently serves as a regulatory mechanism to bar new competitors from entering a market and to drive up employees’ wages. As Kleiner and Krueger reported in the British Journal of Industrial Relations in 2010, “having a license is associated with approximately 15 percent higher hourly earnings.” Current players in a given industry, angling to safeguard their market share and to keep earnings high, have incentives to adopt or toughen licensing requirements.

The result, says Texas’s attorney general Greg Abbott, is “reduced job growth, decreased competition, higher prices, and discouraged innovation and investment.” Abbott, who is the Lone Star State’s Republican gubernatorial candidate, has a plan to fix that.

Texas requires licenses for only 34 of the 102 occupations IJ names, but IJ ranks the state’s overall licensing requirements — which apply to some 150 trades — 17th most burdensome in the country. “On average,” Abbott’s plan notes, “Texas’ regulation of the 102 identified professions requires an average of $304 in fees, 326 days of training, and two examinations.” Those requirements lock many people out of the job market, especially minorities, who already tend to be at an economic disadvantage.

Additionally, if, say, an unlicensed 22-year-old goes to work as an interior designer in Texas, she could go to prison. Willful violations of interior-design licensing requirements are Class C misdemeanors — of a piece with criminal trespass, disorderly conduct, and issuing bad checks, under Texas law.

Abbott’s plan would abolish criminal penalties for licensure violators and deregulate several occupations — interior designer, school athletics coach, auctioneer, and cosmetologist, among others. The plan would also require that future licensing regulations pertain only to those occupations having to do with health and safety (e.g., doctors in, florists out), and prohibit grandfather provisions.

The economic benefit to states would be significant. Job-seekers barred from the market by current licensing procedures could enter, as could entrepreneurs previously excluded by extensive red tape. Increased competition would drive prices down and spur innovation. Abbott’s is a simple plan that could occasion big gains.

The attorney general’s likely victory in November’s general election — his opponent, Democratic flash-in-the-pan Wendy Davis, has been trailing by an average of 13 points since April — means that most eyes are focused elsewhere. But candidates looking for a straightforward, actionable plan to give their state’s economy — and the national economy — a boost would do well to look to Texas’s future governor.

— Ian Tuttle is a William F. Buckley Fellow at the National Review Institute.