Excessive Occupational Licensing Regulations Hurt Consumers

Suppose there was a collection of laws, that cost the average American household $1,600 every year with little to no demonstrable benefit.

You would hope voters would demand its repeal and policymakers would act swiftly to lift this needless burden.

It turns out there are such laws — thousands of them, in fact. The culprits are occupational licensing regulations that restrict entry into more than 1,000 different types of jobs in the U.S. and impact nearly 3 in 10 American workers — a 6-fold increase since the 1950s.

The long list of workers needing government permission to work includes plumbers, barbers, building contractors, interior designers, athletic trainers, and dental hygienists, to name just a few.

Licensing requirements — which can involve tens of thousands of dollars in educational and administrative costs and years of preparation — are sold as crucial safeguards that protect consumers from low-quality services provided by incompetent practitioners. But researchers who have scrutinized these claims have consistently found that strict licensing rules do little to boost service quality, and in many cases actually endanger consumers.

The inconsistency in how states regulate different occupations is one indication that public safety concerns aren’t the primary motivation behind these laws. For example, emergency medical technicians in Maine only need 120 hours of training before getting to work, while barbers need 1,500 hours of instruction. Do policymakers in Maine really think that learning to cut hair safely takes 12 times longer than acquiring the life-saving skills of a first responder?

In reality, the reason for these laws has to with protecting the lucrative benefits to incumbent workers in licensed professions. By erecting barriers to entering certain occupations, licensing requirements reduce the supply of workers, shield those in the occupation from competition, and allow them to raise prices on consumers.

The impact on the public is far from trivial. Economists found that allowing nurse practitioners to perform more tasks without the supervision of medical doctors reduced the price of a child’s medical checkup by 3 to 16 percent. Moreover, there was no evidence that service quality or patient safety declined as nurse practitioners’ occupational freedom was expanded.

Other studies have found that making it harder to work as a dental hygienist or dental assistant increased the price of basic dental services by 12 percent. In optometry, licensing drives up the price of eye care by as much as 13 percent. None of these studies found any reason to think that licensing increases service quality.

Reducing the burden of occupational licensing would translate into significantly lower prices for services ranging from child care to plumbing repairs to athletic training.

By failing to reform our broken licensing regime, lawmakers hurt their constituents and deprive willing workers of employment opportunities. Overall, estimates suggest that occupational licensure results in 2.8 million fewer jobs and annual costs to consumers of $203 billion.For too long, powerful professional associations whose members benefit from licensing laws have dissuaded politicians from taking action on this issue. With each passing year, licensing laws grow more onerous and their cost to consumers escalates. It’s time to take action.

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