Posted on 12/11/2014 5:43:20 AM PST by MichCapCon
LANSING — Several decades ago, Dr. Morris Kleiner was assigned by his boss at the Department of Labor to look into occupational licensing.
“What had I done to him to deserve taking on this topic?” Kleiner asked at the Dec. 4 event hosted by the Mackinac Center for Public Policy in Lansing.
But the issue became much of his academic work and is an increasingly important one. Kleiner, now a professor at the University of Minnesota and a visiting scholar at the Federal Reserve Banks of Minneapolis, discussed why at an Issues & Ideas lecture entitled, “Our Guild-Ridden Labor Market: The Curious Case of Occupational Licensing.”
Licensure is a mandate by the state to meet a series of requirements – often fees, testing, and educational classes – in order to receive permission to work. The history of the practice goes back a long way.
Kleiner said the rise of licensing in recent decades – from about 5 percent of occupations in 1950 to about 30 percent today – is a recent phenomenon hearkening back to a very old system.
“In the Middle Ages, guilds arose to protect the members of the guild, using their power and the state to exclude others and get business for themselves,” Kleiner explained.
The late Nobel Prize-winning economist Milton Friedman showed that economic growth was stagnant in the Middle Ages because of this system and the overthrowing of the guilds led to expansive growth in England. The guild system never took hold in America, helping the country become an economic powerhouse.
“But in recent decades, there has been a regression,” Kleiner said.
As the economy in the United States has changed, licensing has become more prominent.
“There has been a movement away from manufacturing (where unions dominate) to the service economy (where licensing dominates),” he said.
When most people think of “licensing,” they think of lawyers, doctors, and areas where health and safety is potentially an issue. But recent laws deal with a wide variety of things – like auctioneers, interior designers, hair braiders, and even frog farmers.
The evolution of employment often follows a pattern: Occupational groups begin, then start growing, then voluntary associations are formed by several members. Often dues begin being collected and spent lobbying for registration, then certification, then licensing which allows the group to lock out competition.
Kleiner said there are four key questions to consider when thinking about licensure.
1. Why should people care about this issue?
He explained that this is one of the fastest growing and largest things involving labor markets. There are about 800 occupations across the states that are now required to be licensed. This affects almost every part of the economy.
2. What effect does licensing have?
In most areas, it has driven up wages. Kleiner explained that this “sounds great,” but is simply a shift in where money is going.
“Much like the medieval guilds, licensing is taking wages from consumers, not profits, and reallocating those prices to wages,” he said. This misallocation of funds harms consumers to the benefit of an interest group.
3. Who is licensed?
Many areas are licensed, whether dealing with health and safety or not.
In Des Moines, the state troopers shut down shampoo salons. There is a case currently pending before the Supreme Court about shutting down teeth whiteners because dentistry boards argue they need a dentist license. Hair braiders, florists and even professional wrestlers are required to take tests and pay fees.
“Aren’t you glad to know that Hulk Hogan has a license?” Kleiner asked, remarking sarcastically, “I’m sure the quality is much better because of this requirement.”
4. What should be done about this?
Kleiner said much of the discussion comes down to this question: “Who should decide who provides the services: The consumers or the legislature?”
The bulk of the evidence shows that licensing standards do not lead to better health and safety for citizens – which is arguably the only reason government should be involved.
Kleiner pointed out that there are no differences in health outcomes based on who can write prescriptions (there is a current fight over that in Michigan), no difference in the quality of loans whether mortgage brokers are licensed or not, and no difference in the number of building fires regardless of whether electricians are licensed. The Federal Trade Commission has not been able to see a difference in health and safety based on licensures across a broad spectrum of occupations. And insurance companies, whose business it is to access risk, do not charge a difference in premiums between the states despite licensing differences in occupations.
The professor also pointed out that licensing favors the wealthy at the expense of the poor. Those with higher incomes and better health care can afford to pay the arbitrary higher prices – the poor cannot afford it and often have no other (legal) options.
Kleiner does see some hope, and perhaps sees the country at a tipping point.
He pointed out that in recent years, governors have been vetoing bills that require more licensing – including from the majority of legislators in their own party. In Michigan, Gov. Rick Snyder established a committee that issued a report that was used to roll back several licensing regulations.
He warned citizens and legislators to beware of the people who want to use the police powers to restrict their competition and establish a monopoly of control.
Licensure of any kind is a boondoggle, a swindle, a scam, whatever phrase you want to use.
What ever happened to “Reputation”?
Exclusionary laws regarding hair-braiding & teeth-whitening are the cleanest examples of “Guild” style regulations.
Private Property and Liability law should cover all of the issues surrounding the need for licensing.
we don’t need no stinkin’ license!
No one should need a license to paint a house.
Or ferry people around in a car.
“In the Middle Ages, guilds arose to protect the members of the guild, using their power and the state to exclude others and get business for themselves”
This is the primary driving factor today, secondary is taxing the worker to support the licensing bureaucracy.
Fortunately the legislature just opened the market up to Uber despite taxi company complaints.
I don’t completely agree with you. Doctors should be required to prove they have the basic knowledge to treat people (such as being licensed and board certified) because of the risk of injury or death to individuals they treat. I’m up in the air about lawyers - although having proved the background knowledge and ability to read legal language may well be a necessary part of claiming the title “lawyer”, albeit the logic is somewhat circular and self-perpetuating.
However, anything less than a position wherein the health/life of a customer (including a pet of a human) or the customer’s potential freedom are at stake should use certifications as a voluntary mark of distinction, with property and liability laws covering the issue.
As you note, reputations will handle the rest.
Scouraged for not Taking a License!
The reply given him was that the man being scourged was a minister who refused to take a license. He was one of twelve who were locked in jail because they refused to take a license. A license often becomes an arbitrary control by government that makes a crime out of what ordinarily would not be a crime. IT TURNS A RIGHT INTO A PRIVILEGE! Three days later they scourged him to death.
This was the incident which sparked Christian attorney Patrick Henry to write the famous words which later became the rallying cry of the Revolution. “What is it that Gentlemen wish? What would they have? Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know no what course others may take, but as for me, GIVE ME LIBERTY OR GIVE ME DEATH!”(view complete speech here) Later he made this part of his famous speech at Saint John’s Episcopal Church in Williamsburg, Virginia.
/johnny
Doctors should be required to prove to who? If they graduate from Medical school, is not their diploma and record there proof enough? Licensing by a government agency is simply a means of control. Doctors and insurance agencies are the only judges necessary of the skill and integrity of a physician.
People will just as safe under a self regulating system. Take away the usage of lawyers to sue doctors, make them criminally liable for deaths and injuries if it can be proven they were criminally negligent or practicing medicine without any skill. It would save massive amounts in malpractice insurance, and deter crooks and quacks. That is where government needs and is charged with placing its resources, the court/justice system.
The reason hair stylists are licensed is that at one point in the past, maybe the sixties, stylists were using chemicals on hair which were poisonous or would burn the scalp if left on too long. I remember it as a big deal.
For me this whole licensing scam came up a few years ago when they were discussing licensing journalists. That inevitably led to the question of who is a “legitimate” journalist and who makes those decisions.
In the end it all came down to who would control what was published when the best option was to let it all be published and let the people decide for themselves.
In my state nursing home administrators must have a four year degree and go through a rigorous test to be certified. However there are no requirements for hospital administrators ...go figure.
I suggest you read Milton Friedman where he specifically addresses medical licensing. He discusses how licensing of Doctors artificially restricts the supply of Doctors and lowers the care for everyone.
Friedman brilliantly discusses how the free market can do a superior job of addressing the concerns you listed.
All government licensing should be eliminated.
Another evil racket is government permitting (code enforcement) process. It is filled with sadistic humans..
You do not need "licensing" to eliminate that problem. The market would easily solve that problem -- hair stylists would quickly learn that they would have mounting costs (legal) as a result of lawsuits if they use such products. The would quickly realize the benefits of switching to safer products.
We don't need to employ countless government parasites who handle licensing and such.
In the end it all came down to who would control what was published - when the best
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. - Adam Smith, Wealth of Nations
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