You need a license to do what?

A new Kauffman Foundation study finds that nearly 1 in 3 jobs now requires a government-issued license.

Image credit: Getty
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Say you live in South Carolina and have a talent for braiding hair.

If you want to make a living at it, here’s what you need to do:

  1. Pay $25 to the South Carolina Board of Barber Examiners (yes, there is such a thing);
  2. Finish a six-hour “board approved braiding course”; and
  3. Pass a 25-question multiple choice test.

While this is perhaps one of the more outrageous examples of the kinds of occupational licensing requirements some states require, a new report from the Kauffman Foundation finds that state licensing requirements are increasingly a burden for entrepreneurs.

In fact, the study concludes, the number of jobs that require a state license has roughly tripled in the last several decades. According to an analysis by Kauffman Foundation policy director Jason Wiens, 29 percent of all jobs currently have a licensing requirement – up from 10 percent of jobs 40 years ago.

A few factors might account for this growth. For one thing, states likely derive a fair amount of revenue from fees, which are also politically far more attractive than raising income or property taxes. Current practitioners also have an incentive to use licensing requirements as a way to limit competition from new entrants into their fields – as Wiens and other analysts point out, licensing boards are typically larded with licensed practitioners.

The purpose of licensing requirements should be to protect public health and safety. You certainly want the doctors and nurses who provide your health care to be licensed with the state.

The problem is when these requirements cross the line into practices that are simply anti-competitive or that stifle innovation without also providing measurable benefits to the public.

Says Wiens:

Licensing often is justified by claiming that services provided by licensed individuals are of higher quality than those that are not. However, an analysis of licensed interior designers in one state and certified interior designers in another found no difference in the number of consumer complaints registered.

Compliance with licensing requirements is also expensive. One 2007 study estimated the total “dead weight” cost of licensing regulations on the economy to be between $34.8 billion and $41.7 billion a year.

And some requirements are in fact blatant efforts to preserve monopolies. For example, in 2011, a federal judge ruled in favor of a Louisiana monastery that was selling hand-made caskets in violation of a state law permitting only licensed funeral directors to make casket sales. The judge ruled the law unconstitutional because it impermissibly shielded a monopoly at the expense of consumers.

Governors and state policymakers committed to spurring entrepreneurship should take a hard look at the accretion of licensing requirements in their states and prune those requirements that either aren’t essential to public health and safety or that run the risk of suppressing competition at the expense of jobs.

It’s a common sense step that would benefit both entrepreneurs and consumers – and perhaps create some political dividends as well.

***

Here are a few other examples of amusing/puzzling state licensing requirements, gleaned from the 2007 study cited above and confirmed through visits to state websites:

  • The city of Annapolis, Maryland requires fortune tellers to apply for a license. Applicants must pay a $30 fee, provide a headshot and list of services and obtain certification from the chief of police that “the applicant is of good moral character.”
  • The state of Iowa requires certification for manure applicators, who must pay a $100 fee, take classes and score at least 35 out of 50 on a multiple choice test.
  • The state of Michigan requires the licensing of commercial “reptile/amphibian catchers.”
  • In Illinois, a “furbearing animal breeder” license costs $25.50, while a “resident mussel dealer” license costs $300.50 (non-resident mussel dealer license are $2,500.75).
  • The State of Utah charges licensing fees of between $65 and $105 for makers and sellers of bedding, upholstery and “quilted clothing.”
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