Those on the left and the right share a growing awareness that politicians and corporations have “rigged” the system against ordinary Americans. Across the country, industries routinely exploit government power for their own private gain. In my new book, I describe how “bottleneckers” lobby legislators to create or defend regulations — specifically occupational licenses — that block potential competitors from entering an industry.
Thanks to bottleneckers, licensing is now one of the biggest labor problems facing Utah. Back in the 1950s, about 5 percent of Americans needed a government-issued license to work. Back then, government-mandated licensing was limited to a handful of trades, such as medicine and the law. Today, almost one-fourth of Utah’s workforce is licensed. By comparison, that figure is well above the number of workers who earn at or below minimum wage or who are represented by a union.
Over the years, bottleneckers — often through self-serving professional associations — successfully persuaded governments to adopt new licenses that are difficult or practically impossible to obtain. This restricts opportunities for would-be entrepreneurs trying to break into the marketplace and provide new or better services. With new licenses came licensing boards, which can extend their power and control occupations the original license wasn’t even intended to address.
One such example of this “license creep” is the Utah state cosmetology board’s crackdown on Jestina Clayton and her African hair braiding business. A refugee from war-torn Sierra Leone, Jestina and her husband came to the Beehive State to live near family. By braiding her clients’ hair at home, she could provide for her family and take care of her children. But one day, after years of braiding without any trouble, the cosmetology board informed her that it was illegal to braid without a cosmetologist license. That license requires a staggering 1,600 hours of training and can cost roughly $20,000.
But unlike cosmetologists, Jestina braids hair naturally and doesn’t use any dyes or potentially harsh chemicals. To exempt braiding from licensure, in 2011, Jestina worked with a state representative to craft a reform bill.
Unfortunately for them, cosmetologists and cosmetologist students lobbied hard against the bill and packed the state Capitol when the bill was heard. Cosmetologist students were even told they could log their hours spent lobbying in lieu of their regular coursework. Facing intense pressure, the bill was killed.
Jestina didn’t give up though, and instead partnered with the Institute for Justice to sue the board. Just over a year after she filed her lawsuit, a federal judge called Utah’s licensing scheme “wholly irrational,” since it was “so disconnected from the practice of African hair braiding.” Jestina could finally work without fear of punitive action by the board.
The negative implications of bottleneckers’ schemes are not limited to aspiring workers like Jestina. As a report by the Brookings Institution summarized, licensure can increase costs for consumers by anywhere from 4 to 33 percent. Another study estimates that pervasive licensing leads to “up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.”
Bottleneckers typically claim the costs of licensing are necessary to protect the public, but the reality is quite different. In Utah, a report by the Institute for Justice found that athletic trainers, barbers, cosmetologists and many construction contractors all must complete far more training for their licenses than is required for emergency medical technicians — who hold people’s lives in their hands.
This is not to say that EMTs should face greater licensure requirements. Rather, the tougher licensing requirements for the other occupations demonstrate greater skill in lobbying — not greater demonstrable need for public protection by the government.
Thankfully, commonsense licensing reform is one of the few issues where both parties agree. Late last month, Gov. Gary Herbert signed SB81, a first step toward reining in licensing laws. The bill, which passed almost unanimously, bans municipalities and counties from requiring licenses and permits or charging permit fees for home-based businesses that operate only occasionally. Businesses run by kids — think the ubiquitous lemonade stand — would also be exempt from local licenses. Statewide, a fiscal note estimates that these reforms could save Utahns $720,000 each year.
During the Obama administration, the White House Council of Economic Advisers urged lawmakers to eliminate “unnecessary” licenses. Last year, as part of its national party platform, the GOP endorsed reducing licensing laws since they “shut untold millions of potential workers out of entrepreneurial careers.” More recently, the Federal Trade Commission announced an Economic Liberty Task Force in order “to remove or narrow occupational licensing regulations and open doors to opportunity.”
All Utahns should have the right to earn an honest living free from unnecessary government regulation. Smashing open licensing bottlenecks would expand economic opportunity in the process.
Dick M. Carpenter II is a director of strategic research at the Institute for Justice and co-author of "Bottleneckers: Gaming the Government for Power and Private Profit."