Breaking occupational licensing barriers for small business owners

July 26, 2018

Everyone wants to make sure their surgeon is properly licensed and qualified, or their architect has the proper credentials, but should the same scrutiny apply when it comes to dance instructors? Hair braiders? Manicurists?

Occupational licensing rules vary by state, and while some do protect consumers, far more of these regulations protect industry interests from competition. It has been a burden for Camillya Taylor’s beauty salon in Johnstown, Pennsylvania, where the per capita income is $25,000.

“It’s all about money. Money is involved,” said Taylor, who must undergo a background check every two years to continue her work.

To be a licensed hair braider in Pennsylvania requires 300 hours of training—all that for a skill that is often passed down through generations.

There are approximately 1,100 occupations requiring licensing or registration in states across the country, said Ed Timmons, who heads the Knee Center for the Study of Occupational Regulation at nearby Saint Francis College in Loretto, Pennsylvania.

Some states demand licenses for selling flowers or cemetery plots. In the equestrian-proud state of Kentucky, horse masseuses need a four-year veterinary school degree.

“It’s hard to justify why an individual would need to become a veterinarian just to massage a horse,” Timmons said.

The share of occupations requiring a license in the U.S. has grown from 5 percent in 1950 to more than one in five today, according to the most recent edition of the Institute for Justice’s study on the impact of occupational licensing. It has been estimated that this increase in occupational licenses costs American consumers an additional $200 billion per year as well as a loss of nearly 3 million jobs.

While consumer advocates say some of these regulations are necessary to protect the public, Timmons notes that sometimes the rules harm small businesses and make it too expensive for newcomers to enter the job market.

"Occupational licensing raises prices for consumers. It also potentially keeps individuals who are looking to enter a new profession from doing so,” Timmons said.

For its part, Koch Industries has long supported entrepreneurs by letting consumers decide who is qualified for the job. The problem lingers in states that do not even have an official licensing requirement for specific jobs. In the field of interior design, for example, Texas practitioners lacking the imprimatur of “registered” status still find themselves at a competitive disadvantage against those who might be registered but lack the same expertise and experience that no mandatory training can teach and no registration fee can buy.

“This is very expensive for us as a country,” said Clark Neily, vice president for criminal justice at the Cato Institute. “So, we are shooting ourselves in the foot with unnecessary licensing.”

This story originally appeared as a Freedom to Flourish segment, sponsored by Koch Industries, on Hill.TV’s Rising with Krystal & Buck.