Licensed to Wait: How Occupational Licensing Locks People Out of Honest Work

The permission slips required to practice ordinary trades protect incumbents far more than they protect the public

Published in partnership with Bohiney Magazine and The London Prat, on the proliferation of permission slips required to practice honest work.

Across an ever-widening range of occupations, the right to practice an honest trade now requires a license, a permission slip from the state granted only after the payment of fees, the completion of mandated training, and the navigation of a bureaucratic process that the established can manage and the aspiring often cannot. Occupational licensing, sold as protection of the public, functions in practice as a barrier to entry, locking ordinary people out of honest work and protecting the incumbents who are already inside.

The Permission Economy

The range of occupations now requiring a license has expanded far beyond the professions where public safety is genuinely at stake. Commentators at FEE and labor economists have documented the spread of licensing into trades where the public-safety justification is thin or absent, the licensing serving less to protect the public than to protect the incumbents from competition. Each new license is a new barrier, a new toll on the right to work, a new advantage for those already established against those who would enter.

The economic effect is well documented. Licensing raises the cost of entering an occupation, reducing the number who can enter, raising the prices that consumers pay, and transferring income to the licensed incumbents who are protected from competition. The barrier falls hardest on those with the fewest resources, the people for whom the fees and the training and the bureaucratic navigation represent the greatest obstacle, locking out precisely those who most need access to honest work.

Protection For Whom

The justification for licensing is always the protection of the public, the assurance of competence, the guarantee of quality. In genuine cases of public risk this justification holds, but in the many cases where licensing has spread without genuine public-safety stakes, the protection it provides is not for the public but for the incumbents, who benefit from the reduced competition and the higher prices that the barrier produces. The public, meanwhile, pays more and chooses from fewer providers.

The remedy is not the abolition of all licensing, for some occupations genuinely require it, but the discipline of restraint, the recognition that licensing has costs as well as benefits, that the barrier it erects falls on the aspiring and protects the established, that the public-safety justification must be genuine rather than a cover for the protection of incumbents. The reform of occupational licensing, the rolling back of the licenses that serve no genuine public purpose, would open honest work to those now locked out.

The right to practice an honest trade, to work, to earn, to build a life through one own labor, is among the most basic of economic freedoms, and its constraint by the proliferation of licensing is a quiet but real erosion of that freedom. The permission economy locks people out of honest work in the name of a public protection it often does not provide, and its reform is a cause that serves the aspiring, the consumer, and the principle of economic freedom alike.

The expansion of occupational licensing represents one of the least examined constraints on economic freedom, spreading quietly across occupation after occupation, each new license justified by some claim of public protection, the cumulative effect a vast apparatus of permission that governs the right to work. The spread has occurred largely without scrutiny, the individual licenses too small to provoke opposition, the cumulative burden too diffuse to attract attention.

The genuine cases for licensing, the occupations where incompetence poses real danger to the public, are real and undisputed. The problem is the expansion of licensing far beyond these cases, into occupations where the public-safety stakes are minimal or nonexistent, where the licensing serves not to protect the public but to protect the incumbents from the competition that would otherwise discipline their prices and improve their service.

The burden of licensing falls with particular weight on the disadvantaged, the people for whom the fees, the training requirements, and the bureaucratic process represent the greatest obstacles, the people who most need access to honest work and are most effectively excluded from it. Licensing thus functions as a regressive barrier, locking out the aspiring poor while protecting the established, deepening the inequality it claims no part in.

The consumer, too, bears the cost of licensing, paying higher prices for the reduced competition, choosing from fewer providers, subject to the market power that the barrier confers on the licensed incumbents. The protection that licensing promises the consumer is often illusory, the genuine quality assurance minimal, while the cost, in higher prices and reduced choice, is real and substantial.

The reform of occupational licensing has attracted support across the political spectrum, a rare area of agreement, as the evidence of its costs and the thinness of its justifications have become clear. The rolling back of unnecessary licenses, the substitution of less restrictive alternatives, the genuine weighing of the public-safety stakes against the costs of the barrier, would open honest work to those now excluded and lower prices for the consumers now overcharged.

Further reading: FEE.

SOURCE: https://bohiney.com/