Occupational licensing limits economic mobility

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Isabela Ney

While some of us prepare to walk across the stage in our green caps and gowns this spring, the rest of us dream of the day we’ll close our last textbook and take on the job market.

We’ll find that each profession has its own set of hoops to jump through, and although some are helpful, others are unnecessary. The most questionable requirement, however, is occupational licensing, or the government’s regulation on the labor market.

Many professions now require a license to begin working, and these licenses require excessive fees, mandated classes and exams for jobs that people have been doing unrestricted for ages.

In 2017, the Mackinac Center for Public Policy released a study called “This Isn’t Working,” which highlights the effects of licensing laws. The study found that cutting hair and braiding hair in exchange for payment require different licenses, and painters are required to pay $295 in fees, take 60 hours of classes and pass an exam in order to paint a house or a deck for money. Michigan even has a $100 fee to approve the selling of potatoes in any form, under the profession known as ‘potato dealer.’ These are some of the most ridiculous licenses in our state but the list goes on and on throughout the United States.

In 1950, about 5 percent of jobs required licensing and today the number averages around 30 percent. Even more prestigious job titles like “lawyer,” “doctor” and “engineer” require government approval in order to operate. While it’s understandable that earning a license, like earning a degree or any other form of merit you can put on a piece of paper, shows that a person is qualified for a position, is it necessary for the government to be involved in the hiring process?

Businesses have a strong incentive to hire the most capable employees since they will be directly liable for any mistakes their employees make. With the advent of the internet, there are numerous ways for employers and consumers to rate and check the quality of work that a person has done for others.

But, a license does not guarantee higher quality labor; it just means you jumped through the proper hoops, no matter how arbitrary the process might
have been.

Regulation across the board almost always has unintended consequences. Licensing of jobs has been traced to increased recidivism in ex-convicts. Many licenses immediately disqualify anyone with a criminal history, leaving them to seek low-skilled jobs or further criminal activity in order to earn a living. Isn’t it ironic that the state is responsible for rehabilitating its wards but decides not to trust them to rejoin the labor force once they’re released?

The opportunity for upward mobility in our economy is being stamped on by the restrictive and expensive barriers of the licensing process. Even if someone meets all the qualifications, they can be denied by the licensing board.

These boards are composed of the already-licensed professionals in their industry and anyone that they approve for a license will become a competitor to each of their businesses. The incentive for boards to deny someone a license is strong and the result is a barrier to fair competition in the market. This results in a loss for consumers who might have reaped the benefits of a better product by a new firm or by improving standards between competing firms.

Most people don’t find out they need a license until they have been slapped with fines for working without one. Successful, growing businesses are fined for doing exactly what customers paid for simply because they didn’t think to check with the government that they were allowed to perform a service to society.

We like to talk about the benefits of a free market in this country but it turns out that government gets in the way of our freedom to earn a living in more ways than we care to admit. While licensing laws operate under the guise of good intentions, the reality adds up to a quick buck for the government and an unnecessary and harmful obstacle to honest workers.