RALEIGH – Regular readers know that I’m often on the lookout for useful state-by-state comparisons of governmental policies and outcomes. Here’s another one to add to the list: the Reason Foundation has ranked states according to how aggressively they license personal occupations.
North Carolina ranks a depressing 13th in the number of licensed occupations – appropriately cramming us right between Massachusetts (12th) and Oregon (14th). Actually, that’s just because of alphabetical order, as those three states plus Vermont all license 107 different occupations. Most of our neighbors impose fewer such regulations, though Tennessee’s total is slightly higher at 110. South Carolina ranks 47th, licensing just (!) 60 occupations.
Occupational licensing is an underappreciated symptom of excessive government and cause of economic problems. While many people think “doctor” and “lawyer” when they hear about state licensing boards, the practice extends far beyond these cases – themselves debatable on the merits, I should say – to include such jobs as barbers, auctioneers, florists, interior designers, stockbrokers, and fortune-tellers (yes, I repeat myself). The regulations restrict entry into professions, thus raising the prices that licensed providers can charge and increasing business for the training and licensing programs they operate. Not surprisingly, most occupational licensing is strongly favored, not opposed, by those being regulated. Often, new licensing boards are created thanks to lobbying efforts by incumbent providers, seeking to make their field more “professional,” meaning more lucrative.
This phenomenon – a government regulatory agency doing the bidding of those it is supposed to keep in check – is so pervasive as to have an official terminology (regulatory capture) and an extensive economic literature. You can discern regulatory capture in much of what purports to be “utility regulation,” for example, and often in environmental cases where large businesses rationally expect a new air or water standard to increase their market share at the expense of smaller ones that are less capable of complying with the rule.
But occupational licensing is perhaps the most blatant category of regulatory capture, as many professional associations don’t bother to deny their pecuniary interest in “protecting the consumer” from greater selection and lower prices. What’s less obvious, but well worth remembering, is that occupational licensing was one of the key weapons in the arsenal of segregationists, both in America and South Africa. Whites used it to exclude blacks as economic competitors and to limit their upward mobility. Many of these laws remain on the books today, having the same effects as in the past (though now usually an unintended one).
One of the first magazine stories I ever wrote, for Reason magazine, involved a Jim Crow-era regulation banning shoeshine operations from the streets of Washington, D.C. A man named, I kid you not, Ego Brown (sounds like he should have been an Ayn Rand character, I know) was hiring homeless men to shine shoes. It was a way to do good while also creating a viable business. But the barber shops didn’t like the competition. They leaned on city government to enforce a 1905 ordinance that had clearly been intended to keep blacks from taking business away from established white barbers. It was 1985, the city was being governed by a majority-black council, but the effect was the same. Fortunately, the Landmark Legal Foundation took up Brown’s case and forced an end to the needless regulation.
Occupational licensing has become an expensive and destructive racket. It’s shameful that North Carolina is so quick to allow special interests to exploit it to the detriment of consumers and those seeking to better themselves and their families.
Hood is president of the John Locke Foundation.