Occupational Licenses Bad For The Economy But The People Who Get Them


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Occupational Licenses Bad For The Economy But The People Who Get Them

There was a time not much long ago when there were no borders in the world. The regulations were quite limited and people used to live a life of almost anonymity. How you traveled across the seas, who you married, and what you did for a living was not your state’s business. It is a debatable matter when the first modern nation-state came into being but the most popular consensus is that it was in Europe during the 18th or 19th Century. Today, we live in a world where privacy and personal freedom are becoming somewhat diluted. The governments have complete data about every one of us. We can hardly do anything without having to deal with tons of regulations and licensing documentation. If you are a student wondering if someone can take my online course for me, then various websites online can help you out.

What is an occupational license? It is a license from the government or state allowing you to professionally practice a profession that cannot be practiced otherwise.  In 1962, Milton Friedman discussed the pitfalls of occupational licensing in his legendary book “Capitalism and Freedom”. He wrote: “frequently establishes essentially the medieval guild kind of regulation in which the state assigns power to members of the profession.”

Friedman noted that because of occupational licensing the number of competitors in any industry would be of limited number and that would lead to hiked pricing and lower quality of service. Therefore, this system would only benefit the individual with the license and no one else.

During the time when Milton Friedman wrote this book, only 5 percent of the labor force in the USA required occupational licensing. Today, 30 percent of the labor force requires it. This seems outrageous since people have to get approval from the government to pursue their chosen professions to make a living.

Maybe the biggest problem with occupational licensing is that it applies to all types of occupations when that should not be the case. For example, a medical surgeon should need a license, since allowing an incompetent surgeon to practice the profession can lead to terrible consequences for the people who get treated by him or her. However, that is not the case with a profession like let us say a make-up specialist. In some states of the USA, like Louisiana, even a florist requires a license to practice his/her profession. It is surely not a matter of life and death, whether you got the right flower for the occasion. Yes, people interested in cutting and arranging flowers in patterns are required to have a written exam.

Occupational licensing has become extremely common in the US and it only continues to grow. This insane need for occupational licensing causes unnecessary constraints for anyone and everyone interested in making a living doing their own business. To such an extent has licensing become a part of American culture that it seems like a defense mechanism being applied to protect the big corporations and their monopoly in respective businesses.

If you are looking forward to creating your own start-up across the USA, then you will have to satisfy the unique and absurd licensing requirements across different states and that is a difficult task. Famously, Uber had to struggle a lot due to commercial driving regulations in different states of the US and worldwide.

The unemployment rate in the USA has reached an all-time high in 2020. Research from the University of Minnesota puts light on the negative impact of occupational licensing when it comes to the employment problem. The research shows that over 2.85 million jobs have disappeared due to the increase in occupational licensing requirements. In addition, it has led to an economic loss of around 205 billion dollars.

Some economists might argue in support of occupational licensing that this licensing can lead to a better quality of service. However, that is a totally unjustified argument since it is not like people living in Louisiana are getting the best flower service in all of the USA. Secondly, the licensing of florists has led to increased rates of flower in Louisiana when compared to the neighboring state of Texas.

It is appalling when we look at how underrated a subject of debate occupational licensing is in the USA. Politicians and lawmakers hardly give any attention to this problem that continues to rise at a rapid pace. More than a thousand professions require occupational licensing in the US. While the majority of these professions have an almost inconsequential impact and they are nothing like law, accountancy, or medical-related professions.

One sub-topic that needs to be shed light upon is which profession needs to be licensed and which does not. Licensing any and every profession without being able to decipher whether there is a need for licensing in the first place has led to foolish decisions by lawmakers. Lawmakers have blindly put occupational licenses on way too many professions that should not need any license to practice. The basic rule of thumb should be this, if a profession has a potential for serious public harm then its professionals should need a license for the practice. Licensing of any and every occupation is a dumb and lazy action by lawmakers.

It is quite an ironic state because occupational licensing should be helping the economy and people, however, ironically it is doing the opposite of the desired impact. If occupational licensing was done responsibly and practically, it would lead to nothing but prosperity since the consumers would be getting quality assistance, good options, and affordable rates. However dumb implementation of licensing laws has led to damage for the economy, consumers, and aspiring businessmen.

As we have mentioned above, occupational licensing only benefits the people who have got the license in hand and are practicing their occupation. For example, according to research conducted in 2013, it was shown that massage therapists working in a state with licensing regulations earned 16.2 percent earning premiums in comparison to states that had no licensing laws on licensing. Why is that? Because the number of massage therapists in the states that required licenses was way less than the state with no licensing regulations.

Occupational licensing restricts the competition for licensed professionals. This means that a very small minority of professionals in any occupation end up getting richer, while a big majority that fails to get the license has to find a new way of making a living. This is a classic, rich become richer, and poor becomes poorer strategy. Since, extending on the last argument, the probability of a big corporation getting a license is much higher than a small business. There was a controversy boiling up in the US for many years that big corporations run a deeply rooted monopoly in every sector. It is impossible for a local merchant with a small shop to compete with Walmart. Occupational licensing only further increases this problem of the big brand killing off the smaller ones. If you are a student wondering if someone can take my online course then you can find various services online offering help. Occupation licenses are surely bad for the economy and consumer, while it only benefits those who have got the license.

Author: Admin

January 1, 2022