Opinion: Daily Journal

Key Factors in the Occupational Licensing Debate

There is a welcome debate about occupational licensing at the General Assembly. North Carolina ranks 36th in regulatory freedom among the 50 U.S. states in large part because of its strict occupational licensing regime.

So occupational freedom should be up for discussion, and I’m glad it is. I’ve produced blog posts, newsletters, reports, and official testimony on the importance of this reform.

I’ve covered the highlights of the economic literature on occupational licensing:

  • Research finds licensing restricts service providers, raises consumer costs, and lets the limited supply of licensed providers reap the premium of 15 percent or more higher earnings because of it.
  • Research is inconclusive and not very favorable to licensing producing overall improvement in service safety and quality received.
  • The many costs of getting a license are especially difficult hurdles for the poor, the less educated, minorities, immigrants, older workers seeking a new career, and mothers going back to work.

On net, therefore, occupational licensing costs jobs, hikes consumer prices, and harms the state’s economy, for little to no empirical benefits by way of safety and quality.

Why licensing boards lobby, but disaffected workers don’t

There are three other items I’d like to highlight here.

One-sided lobbying.

There will always be one-sided lobbying on this issue. Occupational licensing is a perfect setup for special-interest pleading. Licensees have a definite material interest in keeping the supply of competitors limited. They are organized under boards with access to legal counsel and lobbyists — whose jobs require insider knowledge and spending time in the halls of power.

In contrast, would-be service providers are working (or seeking) their alternate jobs and have little time to look up lawmakers, make the drive to Raleigh, figure out parking, etc.

Such an issue should not be decided upon a “squeaky wheel gets the grease” approach. As I wrote last year:

What do policymakers choose when they can bestow concentrated big benefits on a single “winner” industry while dispersing the costs across the many? They tend to hear nearly exclusively from the winner industry; why?

• How does the big-winner industry react? They pour money and effort into lobbying; the potential payoff is worth it.
• What about private individuals facing real — but smaller, spread out among so many — costs? The time and effort to fight on their behalf is usually too expensive.

I discussed this imbalance on pages 6-7 of my report on Carolina Cronyism. It takes principled leaders to resist public-choice cronyism.

Freedom to work is a constitutional right in this state.

North Carolina’s Constitution recognizes people’s self-evident right to “the enjoyment of the fruits of their own labor.”

That’s not an afterthought. It’s listed in Article One, Section One. As a self-evident right.

There are other policy choices, ones that respect freedom.

Legislators faced with safety and quality concerns are not stuck with either taking away North Carolinians’ self-evident right to enjoy the fruits of their own labor or letting a Wild West environment prevail in an industry.

The Institute for Justice uses an inverted pyramid to depict the many policy options available:

  • Start at the top [free markets and competition]. The free movement of labor and market competition should be policymakers’ default position. Before they leave that default position, they should identify an actual, serious market failure — one that is not addressed through litigation but that significantly threatens consumer health and safety.
  • If legislators are concerned about protecting consumers from fraud, the proper regulatory response is to enhance the powers of the attorney general and the deceptive trade practices act.
  • If the concern is over cleanliness, the proper regulatory response would be to require inspections.
  • If the concern is over externalities, causing damage to third parties, then the proper regulatory response would be bonding.
  • If the concern is over fly-by-night companies swooping in after, e.g., a natural disaster, the proper regulatory response would be registration with the attorney general.
  • If the concern is over asymmetrical information (sellers such as medical professionals or mechanics knowing more about their product than a consumer) or insurance reimbursement, the proper regulatory response would be certification.

With such a large menu of choices, it should be the least-used choice of policymakers to support occupational licensing in a field. It would be the worst-case option of last resort, not the selection of those who think, well, the state ought to do something.

Jon Sanders (@jonpsanders) is director of regulatory studies for the John Locke Foundation.