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Government Licensing or Private Certification?


Everyone understands the need for children to obtain permission from their parents before undertaking certain activities: sleeping over at a friend’s house, viewing a particular movie, going on a field trip, participating in some sport, attending a particular party, staying up late, playing a particular video game, making a major purchase at a store, surfing the Internet, or having some medical procedure.

Whether the issue is safety, security, fiscal responsibility, liability, or morality, it is generally true that father and mother know best. Even when it is grandparents, older siblings, or other relatives that are the ones granting the permissions, it is still generally true that the families of the children know what is best for the children, not the children’s friends, schoolmates, teachers, and neighbors.

But since government is not a parent, or even a babysitter, a caretaker, or a nanny, why is it that adults must get permission from it to open a business, engage in commerce, work in certain occupations, have a particular vocation, or provide a service to willing customers? In other words, why do Americans need permission from the government to work?

Since the war on poverty was declared as part of Lyndon Johnson’s “Great Society,” governments at all levels in the United States have spent trillions of dollars helping the poor. The government spends hundreds of billions of dollars every year providing a myriad of forms of welfare to low-income Americans. The vast majority of the programs have a means test; if a family’s income were to increase above a certain amount, then the family would no longer be eligible to receive benefits from some or all of them. The government also spends many billions of dollars every year on job-training programs. Some Americans are even paid by the government for not working in the form of unemployment compensation. So why does government make it so difficult for some people to work?

Government licensing

Government makes it difficult for some people to work when it decrees that they obtain — sometimes at a great cost in time and money — an occupational license. An occupational license is simply a certificate of permission and approval from a government-sponsored board that a job-seeker is required to obtain before he can begin working in a certain occupation. Such licenses are most commonly issued and regulated by state governments, but government at the federal and local level also license certain forms of work. An occupational license always involves paying a fee and usually requires a certain level of education or completion of so many hours of required training. Taking everything into account, the total cost to obtain an occupational license, in dollars and time, can be considerable.

According to a study prepared by the Department of the Treasury Office of Economic Policy, the Council of Economic Advisers, and the Department of Labor, and published by the White House last year, occupational licensing has grown rapidly over the past few decades:

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 five-fold since the 1950s.

About two-thirds of this change stems from an increase in the number of professions that require a license, with the remaining growth coming from changing composition of the workforce.

And as the study goes on to say, this share of workers “is higher when local and Federal licenses are included.”

Although this White House report raises some concerns about the necessity and nature of some forms of occupational licensing, the common thread woven throughout the report is that occupational licensing benefits consumers by ensuring high-quality services and protecting them from the potentially harmful actions of unskilled and untrained practitioners. Occupational licensing also offers workers “clear guidelines around professional development and training” and “may also help practitioners to professionalize, encouraging individuals to invest in occupational skills and creating career paths for licensed workers.” At a recent Senate Judiciary subcommittee hearing spearheaded by Sen. Mike Lee, a Republican, and Sen. Amy Klobuchar, a Democrat, Jason Furman, the chairman of the Council of Economic Advisers, said that “licensing is usually justified on the grounds that it improves quality and protects safety.”

The White House report estimates that “over 1,100 occupations are regulated in at least one State, but fewer than 60 are regulated in all 50 States.” According to another study on occupational licensing by the Institute for Justice, the licensing burden in the states — in terms of education, experience, and examinations — ranges from an estimated average of 113 days in Pennsylvania to meet the requirements of the average licensed occupation to 724 days in Hawaii. The average fees range from $88 in Kansas to $505 in Nevada.

It is not just high-paid professionals such as doctors, lawyers, dentists, and accountants who are licensed. Lower-income occupations are licensed as well. Occupations such as barbers, auctioneers, child-care workers, animal breeders, manicurists, interior designers, skin-care specialists, upholsterers, shampooers, bill collectors, fire-alarm installers, midwives, make-up artists, crane operators, fishers, security guards, security-alarm installers, coaches, taxidermists, sign-language interpreters, locksmiths, bartenders, taxi drivers, funeral attendants, travel agents, and milk samplers.

Some occupations are licensed in all 50 states and the District of Columbia, such as cosmetologists, bus drivers, pest-control applicators, emergency-medical technicians, and vegetation-pesticide handlers. Other occupations are licensed only in one state, such as conveyor operators and forest workers (Connecticut), non-contractor pipe-layers and fire-sprinkler system testers (Wisconsin), and florists (Louisiana).

Along with occupational licensing come the government enforcement agencies and armies of government bureaucrats to make sure all the licensing rules and regulations are followed. Take Tennessee, for example. Tennessee is one of five states that licenses hair shampooers. To get a license requires a $140 fee, seventy days of training, and passing two exams. According to a recent report on occupational licensing by the Heritage Foundation (a conservative think tank), “The Tennessee Board of Cosmetology and Barber Examiners employs between 15 and 18 ‘field inspectors’ hired to inspect barber and cosmetology schools and shops for proper sanitation and unlicensed activity. Under authority established by the board, its legal division has the power to issue consent orders for unlicensed activity.”

According to a report an inspector filed with the state in April 2014, he entered a Memphis salon to conduct a “lawful inspection of the premises therein” and saw a manicurist running afoul of the law by shampooing a client’s hair. You see, although the manicurist was a licensed manicurist, she was not a licensed shampooer. The manicurist was ordered to pay a $250 fine or face formal disciplinary charges and attend a hearing before an administrative law judge. That could result in a $1,000 fine and the loss of the manicurist’s license.

The problems with licensing

The problems with occupational licensing can be classified as philosophical, empirical, logical, and rational.

First and foremost, occupational licensing needs to be recognized for what it is: government permission to work. But since when is it the proper role of government to forbid or permit people to exercise what should be their natural right to make a living? Since when is it the proper role of government to forbid or permit people to freely contract with other people to provide them services? Occupational licensing is an illegitimate purpose of government. It doesn’t matter what the occupation is, or whether the licensing requirements are “reasonable” or “in the public interest.” While the protection of the public’s health, safety, and welfare is important, it is not the proper role of government to do it.

Second, occupational licensing results in higher prices for services, reduces employment opportunities and depresses wages for excluded workers, stifles entrepreneurship, limits competition, makes it difficult for immigrants to find work in fields where they might have valuable experience and training, makes entry to a particular field more difficult for those who might otherwise challenge the pricing practices of those currently in the field, and excludes otherwise qualified persons who have a criminal record, since in many states applicants can be denied a license if they have any kind of criminal conviction, regardless of the nature of the offense or how long ago it occurred. Occupational licensing also prevents licensed job-seekers from moving across state lines to seek better employment opportunities, since there is little interstate reciprocity when it comes to occupational licenses. It likewise includes working remotely or from home if it involves doing so from another state.

Third, the occupations necessitating a license and the requirements to obtain a license vary so widely from state to state that the whole process seems illogical. According to the aforementioned report on occupational licensing by the Institute for Justice, “The share of licensed workers varies widely state-by-state, ranging from a low of 12 percent in South Carolina to a high of 33 percent in Iowa. Most of these State differences are due to State policies, not differences in occupation mix across States.” Five occupations are licensed only in one state. Five others are licensed only in two states. Two others are licensed only in three states. There are thirty-two occupations that only nine or fewer states license. Ten states require four months or more of training to be a manicurist, but Iowa requires only nine days and Alaska three days. It takes three years in Michigan to become a licensed security guard, but only eleven days in most other states.

And fourth, the difficulty of obtaining certain occupational licenses is irrational. It does not coincide with the public health, safety, and welfare risk that supposedly results from unlicensed practitioners. Take, for example, the occupation of emergency-medical technician (EMT). The actions of an EMT can affect people’s lives, not just their hair or nails. Although every state and the District of Columbia require an individual to obtain a license to work as an EMT, the Institute for Justice reports that “66 occupations have greater average licensure burdens” than EMTs’. Education and training requirements to be an EMT vary from 140 days in Alaska to zero in Washington, D.C., and each location requires two exams, but the average amount of time required to become an EMT is only 33 days. Contrast that with the average amount of time needed to become a licensed cosmetologist: 372 days; a barber: 415 days; a security-alarm installer: 535 days; and an interior designer: 2,190 days.

Three other points

There are three other points about government licensing that need to be raised.

First of all, the vast majority of the government licensing in existence is on the state level. State governments can be just as evil, authoritarian, tyrannical, and harmful as the federal government, and even more so when it comes to being a nanny state. Merely because something is enshrined in a state constitution it doesn’t follow that it is a legitimate purpose of government. And that includes local governments as well. Remember that it was the city of San Francisco that banned toy giveaways with children’s meals at fast-food restaurants unless the meals met the city’s strict nutritional standards and the city of New York that tried to ban large sugary drinks.

Secondly, although conservatives don’t hesitate to point out what they consider to be the most egregious examples of government licensing requirements, they are very inconsistent when it comes to government regulation of business and the imposition of occupational licensing. For example, someone recently writing for the Heritage Foundation, although recognizing that “over the last 50 years, occupational licensing has grown substantially,” nevertheless states, “Few disagree that those working in professions dealing with the public’s health, safety, and welfare — doctors, pilots, lawyers — should be required to obtain a license.” But at the aforementioned Senate Judiciary subcommittee hearing, Amy Klobuchar said basically the same thing, “Licensing is important when it protects the health and welfare of consumers or the safety of professionals.” Conservatives have no problem with the government’s licensing some occupations as long as it is “necessary” for public safety and the licensing requirements are “reasonable.” But that is just what the nanny statists in the state legislatures say in defense of their actions when they enact new licensing laws or defend existing ones. Conservatives have no firm philosophical basis for accepting some occupational-licensing requirements and rejecting others. They are therefore inconsistent and untrustworthy when it comes to criticisms of occupational licensing. In the end, it is still government regulators, bureaucrats, and nanny statists who decide which occupations require a license and what the cost and requirements are for someone to obtain one.

And third, since the so-called Republican revolution, we have had more Republicans elected to office on the federal, state, and local level, and more Republican control over legislative bodies, than at any time in U.S. history since Reconstruction. Yet, we now have more government, more government debt, more government spending, more government regulations, and more government licensing at all levels of government than ever before. Not only do Republicans control the Congress, but the Republican majority in the U.S. House is the largest in recent memory. In twenty-three states, Republicans control both houses of the legislature and the governorship (including Nebraska, which has a unicameral, nonpartisan legislature, but is made up of mostly Republicans). In six other states, Republicans control the governorship. In eight other states, Republicans control both houses of the legislature. In eight other states, Republicans control one house of the legislature. According to Ballotpedia, on the state level there are 4,120 Republican lawmakers and only 3,059 Democrats ones. What does all that have to do with government business regulations and licensing requirements? It is Republicans who claim to be proponents of free markets, free enterprise, and capitalism, and in favor of fewer government regulations, more individual freedom, and less government overall. But as Mises Institute chairman Lew Rockwell has well said about the Republicans,

Economic liberty is the utopia that they keep promising to bring us, pending the higher priority of blowing up foreign peoples, jailing political dissidents, crushing the left wing on campus, and routing the Democrats. Once all of this is done, they say, then they will get to the instituting of a free-market economic system. Of course, that day never arrives, and it is not supposed to. Capitalism serves the Republicans the way Communism served Stalin: a symbolic distraction to keep you hoping, voting, and coughing up money.

Clearly, Republicans merely want a government limited to one controlled by Republicans or else occupational-licensing requirements would be fewer and less onerous in the twenty-three states where Republicans control the legislature and the governorship.

Private certification

Proponents of occupational licensing would have us believe that without such government intervention in the economy, businesses would be full of untrained, incompetent, uneducated, unqualified, unscrupulous workers who would take advantage of consumers, rip them off, provide them with poor quality service, injure them, and possibly kill them.

Proponents of occupational licensing would have us believe that without licensing, barbers would give customers bad haircuts, cosmetologists would ruin their hair, fire-alarm installers would incorrectly wire fire alarms, bartenders would mix us the wrong drinks, coaches would never win a game, funeral attendants would not properly dress one’s dead grandmother, EMTs would allow patients to die, travel agents would book travelers on wrong flights, accountants would prepare incorrect financial statements, security guards would allow burglars to break in, child-care workers would molest children, skin-care specialists would damage customers’ skin, taxi drivers would drop passengers off on the wrong street, pest-control applicators would not be able to kill bugs, sign-language interpreters would tell deaf people the wrong thing, pharmacy technicians would give out the wrong drugs, taxidermists wouldn’t stuff a dead pet properly, auctioneers would not be able to sell anything, and milk samplers would allow sour milk to be distributed.

Proponents of occupational licensing would have us believe that government protects consumers better than the free market, that government bureaucrats know better than business owners, and that government licensing is better than private certification.

Private certification — or licensing, endorsement, or accreditation — does work. Just consider the case of auto mechanics. I don’t know of any state where auto mechanics and related occupations are subject to occupational licensing. But having worked as an auto mechanic in my younger days, I do know about ASE certification.

Founded in 1972, the National Institute for Automotive Service Excellence (ASE) is an independent nonprofit organization that works “to improve the quality of vehicle repair and service by testing and certifying automotive professionals.” According to the organization’s website, the ASE exists

to protect the automotive service consumer, shop owner, and the automotive technician. We test and certify automotive professionals so that shop owners and service customers can better gauge a technician’s level of expertise before contracting the technician’s services. We certify the automotive technician professional so they can offer tangible proof of their technical knowledge. ASE Certification testing means peace of mind for auto service managers, customers.

To become certified, a mechanic must pass an exam written “in workshops by a national panel of seasoned automotive industry professionals and executives, including working technicians, automobile manufacturers, aftermarket manufacturers, and educators.” The 40-plus exams are “segmented by sub-specialty such as automobile, medium/heavy truck, truck equipment, school bus, collision repair, and more.” Each exam is “designed to discern the automotive service technician’s knowledge of job-related skills.” The exams are not easy, “Only two out of every three test-takers pass on their first attempt.” Moreover, there is the requirement of “two years of on the job training or one year of on the job training and a two-year degree in automotive repair to qualify for certification.” To remain certified, a retest is required every five years. More than 200,000 automotive technicians in the United States are ASE certified, along with 100,000 service consultants, collision-repair/refinish technicians, collision-damage estimators, medium/heavy–truck technicians, engine machinists, parts specialists, and related occupations.

There is no legal requirement that auto mechanics be ASE-certified. Repair shops may or may not require that their technicians be ASE-certified. Customers may or may not insist that their vehicles are repaired by ASE-certified technicians. (Customers may or may not even know or care about ASE certification.) But it is the repair-shop owners and their customers who make the decisions, not the government.

There is absolutely no reason that all occupations could not be privately certified just as auto and truck technicians are. Government licensing, aside from its many other problems, crowds out private certification and should be eliminated.

This article was originally posted in the August 2016 edition of Future of Freedom.

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