Beyond Doctors and Lawyers: The Broad Reaching Impact of Occupational Licensure on Social Mobility by Jennifer Huddleston

Beyond Doctors and Lawyers: The Broad Reaching Impact of Occupational Licensure on Social Mobility by Jennifer Huddleston

America was founded on an individual’s rights to life, liberty, and the pursuit of happiness. However, if your pursuit of happiness includes employment in many fields or being an entrepreneur and opening your own business, then that pursuit is often burdened by occupational licensure laws. Such laws regulate not only highly skilled professions like accountants, doctors, and lawyers, but far more common professions that do not require advanced degrees like florists, hair braiders, and tour guides.[1] The number of occupations requiring licensure has grown exponentially in recent years. In 1950 only 5% of the workforce required a license, while in 2008 over 25% of workers were subject to state licensure laws.[2]  Additionally, the requirements for licensure are not always commiserate with the level of education necessary for the occupation nor are they related to the actual danger posed to the public.[3]

Due to the initial expense of the actual license and the requisite training and testing, such licensure laws disproportionately impact minorities and create additional barriers to entry for those at lower incomes.[4] As a result, such laws have begun to draw criticism from both the left and the right seeking to improve their status.[5] Even the White House recently examined the negative impact of occupational licensure laws and the burden they place on those attempting to succeed.[6] Despite this turn in academic and executive support, states continue to pass licensing laws that create additional burdens on those attempting to gain new opportunities.[7]

Licensing laws create barriers to entry for marginalized groups in a variety of ways. In some cases, licensing laws were initially enacted to prevent minorities from entering certain professions and continue to protect incumbents in the industry.[8] But even those not created for such reasons, often have disproportionate impacts. Typically someone seeking a license for an occupation must pay a fee of an average of $209, pass an exam, and complete at least nine months of training, and although specific requirements range between states and occupations, these requirements can place burdens on those seeking to transition to a profession.[9] Additionally, once obtained such licenses are typically not transferable between states placing greater burdens on those who cannot economically afford to maintain multiple licenses.[10] Many states also ban those with criminal convictions from obtaining licenses creating yet another barrier for former offenders seeking employment upon re-entry.[11] Additionally, the high price of civil penalties for those who violate licensure again penalizes lower income entrepreneurs more than others.[12] Many occupations such as hair-braiding and eyebrow threading are passed down in communities rather than learned through formal training.[13] Finally, licensure boards and licensing decisions are often made by those already licensed in the profession creating an incentive to make licenses more difficult to obtain and keep competition low.[14]

Not only does occupational licensure prevent social mobility, it fails to meet the state promoted goals of increased safety and often have negative impacts on both providers and consumers. One study found that licensure requirements have at best no impact on service quality and sometimes even have a negative impact on the quality.[15] Licensing requirements keep new and innovative entrants out of the market and may even decrease the overall labor force.[16] The White House found that licensure requirements increased the price of a service.[17] In at least one case, the licensing agency could not point to any injuries that had occurred as a result of the occupation.[18] Furthermore, the education and licensure requirements are often broadly constructed and therefore may not be relevant to all those in the profession. For example, until recently eyebrow threaders in Texas were required to obtain cosmetology licenses following a curriculum and testing that never discuss threading techniques.[19]

Licensure for some occupations dates back to the American founding and the courts have often upheld such regulations in the state’s police powers or promotion of the general welfare.[20] Until recently, because of Supreme Court precedent originally established in Williamson v. Lee Optical, individuals had little recourse against restrictive licensing laws given the holding such laws violated neither the Due Process or Equal Protection clauses.[21] States were further empowered to use occupational licensure laws by the Court’s statement, “It is for the legislature, not the courts, to balance the advantages and disadvantages of the new requirement.”[22] Yet, recently the courts have become the ally of individual rights against these increasingly restrictive requirements of occupational licensure. The Sixth, Tenth, and Federal Circuit have struck down occupational licensure requirements viewed as overly burdensome against the likes of tour guides and casket sellers.[23] The Texas Supreme Court vocally struck down regulation of eyebrow threaders.[24] And even the Supreme Court has signaled that licensing boards may not have the extremely broad discretion to create regulations that they once enjoyed.[25] Hopefully, this is the beginning of an emerging trend in favor of individual liberty and a shift away from over regulation of an individual’s right to earn a living and become an entrepreneur.

[1] See Morris M. Kleiner, Why License a Florist?, New York Times, May 28, 2014, at A35, available at http://www.nytimes.com/2014/05/29/opinion/why-license-a-florist.html?_r=0.

[2]Mike Lee, Rise of the Licensing Cartel, Forbes (Feb. 1, 2016) http://www.forbes.com/sites/realspin/2016/02/01/rise-of-the-licensing-cartel/#7b14f99276fe

[3] Dick M. Carpenter II et. al., License to Work: A National Study of the Burdens from Occupational Licensing, Institute for Justice, May 2012, available at http://ij.org/report/license-to-work/.

[4] See Dept. of Treas. Office of Econ. Pol’y et al., Occupational Licensing: A Framework for Policymakers, The White House, July 2015, https://www.whitehouse.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf.

[5] E.g., Carpenter, supra note 2; Edward Rodrigue and Richard V. Reeves, Four Ways Occupational Licensing Damages Social Mobility, Brookings (Feb. 24, 2016) http://www.brookings.edu/blogs/social-mobility-memos/posts/2016/02/24-occupational-licensing-opportunity-hoarding-reeves.

[6] Dept. of Treas. Office of Econ. Pol’y et al., supra not 4.

[7] See, e.g., Lee, supra note 2.

[8] See David E. Bernstein, Licensing Laws: A Historical Example of the Use of Government Regulatory Power Against African Americans, 31 San Diego L. Rev. 89, 90 (1994).

[9] Carpenter, supra note 3, at 16.

[10] See Rodrigue, supra note 5.

[11] See id.

[12] See Carpenter, supra note 3.

[13] E.g., Texas Eyebrow Threading, Institute for Justice, http://ij.org/case/patel-v-tx-department-of-licensing-and-regulation/.

[14] See Nicola Perisco, The Political Economy of Occupational Licensing Associations, 31 J.L. Econ. & Org. 213, 213 (2015).

[15] Lee, supra note 2.

[16] Morris M. Kleiner, Reforming Occupational Licensure Policy, The Hamilton Project, March 2015, available at http://www.brookings.edu/~/media/research/files/papers/2015/03/11-hamilton-project-expanding-jobs/thp_kleinerdiscpaper_final.pdf.

[17] Dept. of Treas. Office of Econ. Pol’y et al., supra note 4.

[18] See Texas Eyebrow Threading, supra note 13.

[19] See Complaint at ¶ 12-13, Patel v. Texas Dept. of Licensure & Regulation, No. D-1-GN-09-0004118 (Tex. Dist. 2009).

[20] See Mark T. Law & Mindy S. Marks, Effects of Occupational Licensure: Evidence from the Progressive Era, 52 J.L. & Econ 351, 357 (2009).

[21] 348 U.S. 483, 485-86 (1955).

[22] Id. at 487.

[23] See Edwards v. District of Columbia, 755 F.3d 996 (D.C. Cir. 2014); Powers v. Harris, 379 F.3d 1208 (10th Cir. 2004); Cragimiles v. Giles, 312 F.3d 220 (6th Cir. 2002).

[24] Mark Joseph Stern, Texas Could Become an Even More Dangerous Place, Slate.com (Jul. 7, 2015) http://www.slate.com/articles/news_and_politics/jurisprudence/2015/07/texas_supreme_court_strikes_down_eyebrow_threading_regulations_return_to.html.

[25] See N.C. Bd. Of Dental Exam’rs v. FTC, No. 13-554, 2014 U.S. LEXIS 1710 (2014).

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