Reynolds: White House leans right on licensing

Last week, I wrote in these pages about how politicians use regulation and licensing to protect their supporters from competition at the expense of the public welfare.

A few days later, the White House essentially endorsed this point with a new report on how occupational licensing hurts the economy, and in particular the working poor. This isn’t a new point, of course. Libertarians (like me) have been making it for decades, and the Institute For Justice, a libertarian public-interest law firm, has been suing on behalf of licensing’s victims for many years. But it’s one thing for libertarian economists and lawyers to argue for a position, and it’s another for it to be endorsed by a Democratic White House.

The White House report, entitled Occupational Licensing: A Framework for Policymakers, raises some important points. First, “more than one-quarter of U.S. workers now require a license to do their jobs, with most of these workers licensed by the states. The share of workers licensed at the state level has risen fivefold since the 1950s.” Where a license used to be required only for unusual jobs, now licensing requirements take up a major part of the employment sphere — and not just for physicians, but also for florists or funeral attendants.

Many of the jobs subject to licensing are the sort of entry-level or near-entry level jobs traditionally occupied by poor people trying to better themselves. Forcing them to undergo testing, apprenticeships, etc., in order to occupy these jobs makes bettering themselves much harder, reducing social mobility.

Though the licensing requirements are supposedly for the protection of the public, the report notes that they vary wildly from state to state, which suggests that they’re more about protecting existing businesses from competition, or generating licensing fees for the states, than about consumer welfare. As the report notes, “Empirical work suggests that licensed professions' degree of political influence is one of the most important factors in determining whether states regulate an occupation.”

In fact, when a profession is licensed, the number of practitioners falls — so we have fewer jobs — while prices for consumers increase, though the quality of services does not. Like any cartel, licensing is good for the insiders — the people already in the profession, with licenses, and the bureaucrats who regulate them — and bad for everyone else, both consumers and people who would like to work in the field but can’t afford to meet the licensing requirements (which, remember, don’t actually make them any better at their jobs).

Licensing also limits mobility across state lines: You might have put in years of time and effort to get a license in your home state, but if you want to move to another you might have to start over at square one, or at least sit for an exam and pay a (often steep) fee. Making it harder for people to move promotes economic stagnation, something we have quite enough of already.

The White House report is a good start, but for anything to change we need to see legislative action. Sometimes, the courts will strike down particularly egregious state barriers, but only in worst-case scenarios. If anything is to be done, it will probably take action by the states — which could be difficult to achieve, as entrenched interests try hard to block such changes — or by Congress.

There’s no question that Congress, under the Constitution, has the power to ban state protectionism via its powers under the Commerce Clause and the 14th Amendment. In fact, controlling state protectionism was one of the main reasons the Constitution was originally adopted. We now have a Republican House and Senate that purport to stand up for small businesses and entrepreneurs, and a White House report that would provide bipartisan justification for such action. Will Congress do its part? Or, when it comes to promoting opportunity, is it all just talk?

Glenn Harlan Reynolds, a University of Tennessee law professor, is the author of The New School: How the Information Age Will Save American Education from Itself.

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