February 7, 2011

Licensing as a tool for restricting competition

Filed under: Bureaucracy, Economics, Government, Law — Tags: , , , — Nicholas @ 12:21

Stephanie Simon addresses the pro and con positions on licensing for various jobs:

[E]conomists — and workers shut out of fields by educational requirements or difficult exams — say licensing mostly serves as a form of protectionism, allowing veterans of the trade to box out competitors who might undercut them on price or offer new services.

“Occupations prefer to be licensed because they can restrict competition and obtain higher wages,” said Morris Kleiner, a labor professor at the University of Minnesota. “If you go to any statehouse, you’ll see a line of occupations out the door wanting to be licensed.”

[. . .]

At a time of widespread anxiety about the growth of government, the licensing push is meeting pockets of resistance, including a move by some legislators to require a more rigorous cost-benefit analysis before any new licensing laws are approved. Critics say such regulation spawns huge bureaucracies including rosters of inspectors. They also say licensing requirements — which often include pricey educations — can prohibit low-income workers from breaking in to entry-level trades.

Texas, for instance, requires hair-salon “shampoo specialists” to take 150 hours of classes, 100 of them on the “theory and practice” of shampooing, before they can sit for a licensing exam. That consists of a written test and a 45-minute demonstration of skills such as draping the client with a clean cape and evenly distributing conditioner. Glass installers, or glaziers, in Connecticut — the only state that requires such workers to be licensed — take two exams, at $52 apiece, pay $300 in initial fees and $150 annually thereafter.

California requires barbers to study full-time for nearly a year, a curriculum that costs $12,000 at Arthur Borner’s Barber College in Los Angeles. Mr. Borner says his graduates earn more than enough to recoup their tuition, though he questions the need for such a lengthy program. “Barbering is not rocket science,” he said. “I don’t think it takes 1,500 hours to learn. But that’s what the state says.”

In harder economic climates, expect to see a push towards trying to get some form of certification or licensing imposed in new fields. For example, I’ve seen several attempts to introduce mandatory certification for technical writers, usually with the intent of limiting access to the (reduced) pool of writing jobs in the field. Usually the biggest fans of certification are those who think they’re in a good position to dictate the requirements for certification (and often run courses/seminars which, I assume, would automatically appear in the final list of requirements).

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