This morning we wrote about Isis Brantley, a Texas hairbraider who is suing the state over what she sees as excessive licensing regulations. Her case is focused on what she and her lawyers say is a violation of her constitutional rights, but it also touches on a decades-long policy trend: the explosive growth in occupations that require government approval.
Nearly two in five workers—38 percent—said they needed or eventually would need a government license or certification to do their jobs, according to an April study of 2008 survey data. But it hasn’t always been that way. The data reflect “striking trends” in occupational licensing, according to the authors Morris Kleiner, a University of Minnesota professor, and Alan Krueger, a Princeton University professor and the former head of President Obama’s Council of Economic Advisers.
In the early 1950’s, less than 5 percent of the workforce required state licenses (federal and local data were unavailable then). But by the 1980s, that number grew to almost 18 percent—higher still if you include federal, city and county licensing. Today, 29 percent of workers said they needed a government license to do their job. Throw in those who needed a certification or said they would eventually need some form of government approval and the share grows to 38 percent.
In early 2012, the Institute of Justice—the nonprofit representing Brantley in her Texas lawsuit—released a report focused on state licensing requirements for low- and moderate-income jobs. Louisiana licensed 71 low-income occupations, more than any other state. Hawaii had the highest hurdles, the Institute found. And it took an average of 1.5 years of training to get a license in eight states—Arizona, California, Oregon, Nevada, Arkansas, Hawaii, Florida and Louisiana. The occupations counted included massage therapists, dental assistants, shampooers, travel agents, florists, cosmetologists, bartenders and funeral attendants.
The growth in such requirements is driven in large part by industry, Kleiner says.
“[The growth] tends to come from the occupations themselves,” he said. “They organize, they pay somebody to be the head of an organization, they lobby the legislature.”
And such rules are often attractive to local lawmakers because they represent new revenue streams that typically more than pay for the cost of regulating the industry. Plus licensing was associated with 18 percent higher wages. And it creates barriers to entry and benefits those already in the profession.
“The people who tend to pay the price tend to be individuals at the lower part of the [income] distribution,” Kleiner said.
In a way, occupational licensing is a new form of unionism—as seen in Kleiner’s chart below—in that it enables control over the service-sector labor supply, which can drive up the quality of the workers in a profession as well as the wages, Kleiner said.