One way to help improve the lives of low income people is to focus on how the government can give them more. Sometimes this can be very effective, and even desirable. But a far less common way is to look at how the government can stop doing stuff that is making them worse off. Occupational licensing is a great example of this. In the 1950s, around 1 out of 20 jobs required a license. Now the number is around 1 in 3. This red tape keeps a lot of low income people out of better jobs with better income. This issue receives the discussion it deserves in an excellent new report from Angela Erickson and John Ross at the Institute for Justice. They looked at 102 occupations that are licensed in at least one state and where incomes are below the national average. As an important improvement on past research, they document the difficulty in getting licensed by looking at the five main costs of licensing: fees, education and training, exams, minimum age and minimum grade completed. This allows them to measure not only how widespread licensing is, but how much of a cost it imposes. The following are a couple of facts worth noting from the report, but you should read the whole thing
1. Those receiving licenses have lower income than the average worker ($30k vs $47k), more likely to be minority, and more likely to be a high school dropout or have just a high school education than the general population. Importantly, those crowded out of these jobs probably have even lower income and even less educated than those who actually got the licenses.
2. Forty-seven states find it unnecessary to license interior designers, and yet the four that do find it necessary to receive 2,190 days of training to become one. This is a joke, and congressmen in those four states should be ashamed of themselves for this obvious and egregious handout.
3. Defenders of licensing regularly point to safety concerns, but for a large proportion of the occupations that are licensed somewhere, there are other states where they are not licensed, and in these states we do not witness of epidemic of wildly untrained barbers accidently cutting off ears, for example. In addition, some jobs that clearly do involve safety often require vastly less training than others where the argument is much more tenuous. For instance, cosmetologists on average require 372 days of training, while EMTs only require 33.
4. States should have commissions with the power to strike down these laws unless evidence is presented that the licenses provide a significant health and safety benefit that justifies the cost. For many occupations if one wished to be a tedious contrarian one could say “well, you see florists are a public health concern because…” and then Slate your way into a convoluted argument in defense of a license, but the beauty of this study is that it shows other states where licensing isn’t required. Angry and concerned citizens of 26 states should be saying “South Carolina doesn’t require a license to be a taxidermist, so why the fuck do I have to have one?”
5. If you appreciate this study, you should donate some money to The Institute for Justice. They do excellent and essential work in areas that go ignored far too often. Sometimes people hold charitable donations up to a high standard by asking “is there some charity I should donate to that would increase welfare more, like giving money to starving kids?”. But this is incorrect framing. You don’t ask that question every time you go to buy something at the store, and if even if you do, you answer “no” enough to buy lots of stupid unnecessary things (don’t lie, you do). But if you’re going to ask that question, why should you only do so for charitable donations rather than for all spending? Donations are consumption, so let them compete with your other consumption, don’t put them in an isolated and elite league of consumption that pits them against starving children in Africa. Pit them against an extra large container of popcorn at the movies. A donation to The Institute for Justice increases welfare way more than an extra large popcorn.
25 comments
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Tuesday ~ May 8th, 2012 at 8:03 pm
Becky Hargrove
Thank you for highlighting The Institute for Justice. While much of this information has certainly been out there, it was highlighted this time in a way that really made people take notice.
Wednesday ~ May 9th, 2012 at 3:40 am
FT Alphaville » Further reading
[…] – You need a licence to drive a car, to catch a fish, and (in one out of three cases) to have a job. […]
Wednesday ~ May 9th, 2012 at 7:59 am
BSEconomist
2 things…
First, occupational licences may be bad, but they are also a response to America’s de-unionization. For my part this helps illustrate the difficult politcal economy problems that unions helped to solve, without them low income workers are left to raise barriers to entry in order to protect their incomes.
Second, I really don’t think you should be pawning off the institute of justice on your readers. Really. I did some quick reserch. They may have picked one good enemy, but after some quick research on their website I find that they are an extreme libertarian group. They are currently bragging on their latest newsletter about suing the IRS on behalf of tax preparers. I think your readers might have wanted to know that this inoccuous sounding group was just another in a long line of extreme right-wing libertarian think tanks with innocent sounding names before they click on the link to donate.
Wednesday ~ May 9th, 2012 at 8:49 am
Adam Ozimek
These are mostly service sector industries, in contrast to manufacturing which predominated unions, so I don’t think the line between the fall of unions and the rise of licensing is so tight as you think. This are mostly different people, in different industries.
With respect to IJ, I don’t think suing the IRS because they passed a dumb licensing rule that prevents you from making a living in your line of work is “extreme right-wing”. I don’t understand how you think that adjective applies at all. You should do more research before you start slinging mud like that. I know this is “just a comments section”, but your slandering a very good group pretty thoughtlessly and inaccurately, and I think you are too sensible for that.
Wednesday ~ May 9th, 2012 at 11:28 pm
govt_mule
Really? Expressing one’s opinion is slander and mudslinging? Any opinion counter to yours is thoughtless and inaccurate?
Thursday ~ May 10th, 2012 at 7:31 am
Adam Ozimek
Um, no. This opinion is slander and mudslinging, because it makes an unfounded charge against the integrity of the organization. And this opinion counter to mine is thoughtless and inaccurate, because he has put little thought into it, as he acknowledged, and it is not accurate.
Saturday ~ May 12th, 2012 at 12:04 pm
martin gale (@mgale15)
Whoa whoa whoa. I looked IJ over, and while not exactly Heritage or Cato, they are libertarian, and do aggressively support some pretty pernicious things, like Citizens United. They are also funded in part by the Koch brothers — not that there’s anything wrong with that! Perhaps on this one issue they do good work, but that isn’t enough to get me to pool my money with people like the Kochs, moreover, it isn’t “slander” (BTW, please learn the difference between “slander” and “libel”) to describe a libertarian organization as “extreme right wing;” as I recall, libertarianism IS extreme right wing, by definition. Anyway, I can certainly find better things to do with my money that give it to these people, and your overreaction here was kind of … oh, we’ll say odd. Also, please get a better commenting system for your blog. The one you have sucks.
Saturday ~ May 12th, 2012 at 12:34 pm
Adam Ozimek
Your recollection that “libertarianism IS extreme right wing” certainly explains why you might think these things, but you’re recollection is completely false. There are many books and blogs by moderate and liberal libertarians, for instance this blog.
Saturday ~ May 12th, 2012 at 3:33 pm
martin gale (@mgale15)
Sorry to bust your bubble, but American libertarianism is a right wing movement, one whose tenets now dominate a right wing Republican party and indeed have pushed it to become the most right wing major party in the history of our country. I can, and will, applaud the efforts of people like yourself and a few others (we apparently have different definitions of “many,” in addition to our different definitions of ‘slander”) to reclaim it from the Ron Pauls and the Tea Partiers and the Kochs, but I’m not willing to pretend that you have succeeded, Libertarianism is, as it stands, a pernicious, radical, right wing movement dominated by some of the craziest figures to achieve national prominence in American history. That not all libertarians are crazy or radical doesn’t change what the movement, as a whole, is, or is being used to help “achieve.”
Wednesday ~ May 9th, 2012 at 8:01 am
Today, NC and I disagree – Tyler’s AM Reads – May 9, 2012 « Blog of Rivals
[…] …And licensing regulations. Share this:EmailTwitterFacebookLike this:LikeBe the first to like this post. ▶ No Responses /* 0) { jQuery('#comments').show('', change_location()); jQuery('#showcomments a .closed').css('display', 'none'); jQuery('#showcomments a .open').css('display', 'inline'); return true; } else { jQuery('#comments').hide(''); jQuery('#showcomments a .closed').css('display', 'inline'); jQuery('#showcomments a .open').css('display', 'none'); return false; } } jQuery('#showcomments a').click(function(){ if(jQuery('#comments').css('display') == 'none') { self.location.href = '#comments'; check_location(); } else { check_location('hide'); } }); function change_location() { self.location.href = '#comments'; } }); /* ]]> */ […]
Wednesday ~ May 9th, 2012 at 10:00 am
Minimum Wage, part 2 « azmytheconomics
[…] reading: Government red tape keeps the poor unemployed. Share this:TwitterFacebookLike this:LikeBe the first to like this post. from → […]
Wednesday ~ May 9th, 2012 at 4:00 pm
Soho
Because a good rule of thumb for success in life is to take a look at whatever is happening in South Carolina and do the exact opposite.
/snark
Thursday ~ May 10th, 2012 at 1:08 am
govt_mule
I’m glad that’s settled. Here I thought that the poor were unemployed because all the good-paying, low-skilled jobs had been sent overseas. But in fact, there is a vast pool of good jobs and business opportunities that sit unfilled because the government has imposed all these crazy requirements. If there’s one thing poor neighborhoods need more of, it’s barber shops, nail salons, taxidermists, street vendors, and unlicensed contractors and cabbies.
Thursday ~ May 10th, 2012 at 2:30 am
jaredg
All my colleagues in Cosmology have far more training than 372 days. Cosmetologists, on the other hand…
Thursday ~ May 10th, 2012 at 9:02 pm
waakaa
Clearly, you and your colleagues got ripped off. It’s a big black thing with little white dots that you just look at. How much training do you need?
Thursday ~ May 10th, 2012 at 10:31 am
simon
Good article, well done
Thursday ~ May 10th, 2012 at 9:50 pm
Frank Knarf
Untrained cosmologists might result in an uncontrolled big bang. Very dangerous.
Friday ~ May 11th, 2012 at 3:37 pm
PA Should Stop Licensing Barbers - Keystone Politics
[…] Should Stop Licensing BarbersShare With Friends Tweet   Posted on May 11, 2012 by Jon #Adam Ozimek has a great post on the new Institute for Justice report, about how out-of-control occupational […]
Sunday ~ May 13th, 2012 at 10:11 am
Teacher Bashing « Modeled Behavior
[…] people who would otherwise be teachers, or will become teachers. This is true of a wide range of occupational licenses. For instance, maintaining rules that make it hard to become a barber make incumbent barbers better […]
Monday ~ May 14th, 2012 at 8:30 pm
govt_mule
Long, but this thread is dead anyway….
“License to work” is a slick, simplistic, inadequately documented and poorly argued piece based on the premise that “Finding a job or creating new jobs should not require a permission slip from the government”. Not a shred of evidence is presented that jobs or opportunities exist for low-income people that are being blocked by licensing.
One of the major arguments is that licensing of an occupation by some states but not others demonstrates that licensing does not protect any significant public interest. This argument, though weak**, might hold some water if the authors could actually show that licensing is significantly different in, say, Memphis and Miami. But while the authors acknowledge that many occupational licenses are issued by local bodies, they present only state-level licensing requirements. Without knowing what requirements are actually faced by individuals in two different cities, one can draw no reliable conclusions about the effect of licensing. Residents of Miami and Memphis may face exactly the same licensing ‘burdens’, with Florida simply doing most of the regulation at the state level and Tennessee regulating at the county or city level.
** By this (il)logic, public employee unions must be harmless since some states allow them and some states don’t.
A second major argument is that requiring licenses for many occupations, including auctioneers, interpreters for the deaf, and music therapists “defies common sense”. Does this argument (also weak) hold up? Suppose you hire an auctioneer in another state to dispose of your grandmother’s house and farm. You are completely dependent on the auctioneer to accurately appraise a wide variety of items, bring in willing buyers and conduct a sale that generates fair prices for your goods. Tens or hundreds of thousands of dollars could be lost by an incompetent or dishonest auctioneer. Interpreters for the deaf are hired when a deaf person requires medical attention or must appear in court. Failure of the interpreter to accurately translate complex medical or legal words and concepts could have severe ramifications on the client’s health, wealth, and liberty. Music therapists typically work individually with autistic or emotionally disturbed children, mental patients, and the elderly. A poorly trained or abusive therapist could very seriously harm these vulnerable individuals. These are precisely the types of occupations (where clients are highly vulnerable to mistakes or malfeasance by practitioners) for which training and licensing requirements were originated.
Would relaxing government licensing requirements suddenly produce a significant number of new jobs and businesses? Or would it simply flood the job market with less qualified candidates, driving down wages and lowering the quality of services? The authors address this question with one piece of evidence: when Mississippi relaxed its requirements for hairbraiders, 300 braiders registered with the state. Some “moved to Mississippi from neighboring states… but others came out from the shadows of the informal economy and will now formally contribute to the economic and social health of their communities”. In other words, existing businesses became legit and began paying taxes, business fees, etc. , but no new jobs were created.
Sunday ~ May 20th, 2012 at 8:07 pm
Paul Mineiro
“For instance, cosmetologists on average require 372 days of training, while EMTs only require 33.”
My first thought was: people are more likely to (mis)represent themselves as a competent cosmetologist than a competent EMT.
My second thought was: ok, but we have Yelp now so the government can withdraw.
Wednesday ~ January 9th, 2013 at 12:16 pm
Javaid khan
I need job i,m poor.
Sunday ~ June 1st, 2014 at 3:06 am
Tarah
Write more, thats all I have to say. Literally, it seems as though you relied on the video to make your point.
You definitely know what youre talking about, why
throw away your intelligence on just posting videos to
your weblog when you could be giving us something informative to read?
Monday ~ September 1st, 2014 at 6:46 pm
Jim Rose
Reblogged this on Utopia – you are standing in it!.
Monday ~ September 15th, 2014 at 11:48 am
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