California’s Occupational Licensing Laws Cost Consumers and Businesses Billions
California is one of the most regulated states when it comes to occupational licensing. It is estimated that more than 20 percent of Californian workers need to acquire a license before they can even step into the workplace. Rather than protecting the public, these laws drive up costs for both businesses and consumers—while punishing the poor. State legislators need to drown out the noise of lobbyists and let Californians work.
Occupational licensing ostensibly ensures that businesses and employees provide a base level of quality in their goods and services. Some of these state-based regulations mandate that entrepreneurs to buy a license, such as Alabama’s $11 license to sell fish to the public. However, other states set higher requirements, such as Florida’s interior designer license which necessitates 6 years of education and training and $1,120 in fees.
Far from protecting consumers, these laws are often little more than a money grab by state and local officials. Massachusetts, for example, requires that fortune tellers acquire a license before they work in the state.
Of course, bureaucrats in Boston don’t guarantee the quality of the paranormal predictions. Similarly, with little benefit to consumer welfare, eyebrow threading in Mississippi requires 600 hours of training, an equivalent of thousands of dollars in tuition.
These rules exist simply to charge entrepreneurs for the right to exercise their rights.
California is rife with these nonsensical regulations. Landscaping contractors, for example, need 4 years of training and the successful completion of 3 exams to oversee turf being laid or lawns being mowed.
Rather than helping consumers, these onerous demands impose significant costs with little tangible benefits. A 2015 report by the Obama White House highlighted that licensing can raise prices by up to 16%, often without a noticeable increase in the quality of goods or services provided.
What makes these regulations particularly pernicious is that countless studies have found them to disproportionately harm minorities, the poor, and those in lesser-skilled industries. A 2018 study from the Brookings Institution found that industries with occupational licensing have higher rates of wage inequality.
The rules also harm those who travel frequently for work or family. Because these licenses are broadly unrecognized in different states, military spouses are often unable to continue their careers when they get posted across the country.
Given the costs that these regulations impose on consumers, businesses, and workers, in 2018 researchers at the Institute for Justice estimated that occupational licensing costs the Californian economy over $22 billion.
California’s unemployment rate is currently above the national average, and state legislators should put more effort into slashing the red tape that is keeping entrepreneurs and workers out of business.
The problem is, however, that licensing boards in the state are loaded with industry professionals who have a vested interest in maintaining barriers to entry. Industry groups are already working openly to keep competition down and prices up; legislative efforts to scrap licensing requirements to wash and blow-dry hair, for example, were scuppered by industry lobbying last year.
For the benefit of consumers, entrepreneurs, and workers, state legislators need to pare back occupational licensing regulations. These cruel rules target the most vulnerable in society and burden consumers with artificially high costs.