More states embrace licensing reform

Eric Boehm
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Jul 06, 2016 5:39 AM
More states embrace licensing reform

Achan Agit fled the civil war in Sudan and ended up in the middle of Iowa, where she found herself in a different kind of conflict. Despite having a lifetime of experience and knowledge in the craft of traditional African hair braiding, she was unable to get a license to work because the Hawkeye State required a high school diploma as part of the licensing process.

Agit, a refugee, did not have a diploma.

Undeterred, she opened a hair-braiding business anyway. Meanwhile, she and Aichera Bell, a native Iowan of West African descent and a fellow hair braiding entrepreneur, took the state to federal court over its cosmetologist licensing law. The two plaintiffs said the rules were unfairly preventing them from making a living and forcing them to live in fear of having their businesses shut down by state inspectors.

Photo provided by Institute for Justice

UNTANGLED: Achan Agit, left, fled civil war in Sudan to come to the United States. She wanted to start a small business braiding hair, but in Iowa she had to have a high school diploma before she could be licensed.  As of July 1, that’s no longer the case.

Before the courts could act, though, the state legislature and Gov. Terry Branstad did.

When the new state budget took effect  July 1, it included a provision exempting hair braiding from the state’s cosmetology licensing rules. Braiding hair should not be subject to government mandates or regulations, said Branstad when he signed the bill in late May, adding that licensing “should only be mandated when necessary to serve public health or safety.”

Too often, that’s not the case.

Onerous and often unnecessary, occupational licensing laws are a boon to incumbent businesses protected from additional competition, and to trade schools that charge thousands of dollars in tuition to teach mandatory classes.

Everyone else loses.  Occupational licensing rules prevent would-be entrepreneurs like Agit and Bell from finding work in their chosen profession, while driving up costs for consumers.

But a growing bipartisan consensus supports repealing, or at least trimming down, the tangle of licensing regulations written over the last few decades. Think tanks and policy experts who rarely agree on anything have found common ground here. Even the Obama administration and the Koch brothers are on the same side in this fight.

Progress has been slow, but some states are making headway.

Branstad’s signature knocked Iowa’s hair-braiding licensing laws off the books, just two months after the state legislature in Nebraska voted to kill a similar law. Kentucky, Texas and Virginia have also recently repealed licensing rules for hair braiding.

READ MORE: Hair braiders tangle with Iowa bureaucrats in lawsuit challenging excessive regulations

In Arizona, the state legislature in May passed a bill to eliminate licensing requirements for non-commercial motor vehicle driving instructors, citrus packers, metallurgists and yoga teachers. The fact that those licenses existed in the first place is a good argument for why states should be taking a close look at their licensing laws – is public safety endangered by yoga instructors who lack a government-issued permission slip?

Arizona’s licensing laws are making it too difficult for people to enter the workforce, says Gov. Doug Ducey. In his annual State of the State address, Ducey said the Grand Canyon State had created a “maze of bureaucracy for small-business people,” and promised reforms.

Photo via Wiki Commons

DUCEY: Arizona’s licensing laws are making it too difficult for people to enter the workforce, says Gov. Doug Ducey. In his annual State of the State address, Ducey said the Grand Canyon State had created a “maze of bureaucracy for small-business people,” and promised reforms.

Though he originally wanted to abolish a wider range of licenses – including those for landscapers and geologists – Ducey settled for a smaller set of reforms after his proposals were attacked by “an endless stream of industry insiders and lobbyists,” said Paul Avelar, a senior attorney with the Institute for Justice, a national nonprofit law firm that challenges onerous licensing requirements in court, as they did in Iowa’s hair braiding case, and supports legislative efforts to reduce burdensome licensing requirements.

According to IJ, Arizona was the second most heavily licensed state in the nation before the modest reforms passed this year (only Louisiana had more licensing laws on the books), and Avelar says there is still plenty of room for improvement.

Michigan has been the national leader in occupational licensing reform in recent years. Since 2012, Gov. Rick Snyder has signed eight bills repealing licensing requirements for professions ranging from dietitians and interior designers to auctioneers and carnival ride operators. State lawmakers have reduced the requirements for obtaining a barber’s license and legislation has been introduced to remove licensing requirements for forestry workers, landscape architects and several other professions.

These reforms are turning the tide against rising levels of government red tape. According to the Bureau of Labor Statistics, only eight occupations have been completely de-licensed since 1970. That same year, only about 10 percent of jobs in the United State required a license; now, about one in three do, according to research by Morris Kleiner, an economist at the University of Minnesota.

Trade schools benefit from these laws. In Iowa, for example, attending a cosmetology school is the only way to get licensed by the state, giving the schools a guaranteed supply of students willing to pay $10,000 in tuition just so they can go to work.

Incumbent businesses are another big winner from licensing rules that keep newcomers out of the marketplace, allowing them to charge more and avoid competition.

Consumers certainly lose out. By one estimate, the hidden costs of licensing laws cost American families an average of $1,000 last year – about $120 more than the average family spends on Christmas.

Those were some of the reasons why the White House, in a report released last year, urged state and local officials to take a hard look at red tape that restricts employment or increases barriers for entrepreneurs and job-seekers.

“By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars,” the White House concluded. Licensing laws also make it harder for workers to transport skills across state lines – moving to a new state often requires going through a brand new licensing process – and licensing schemes disproportionately affect the poor, who are less likely to be able to spend time and money getting licensed, the report said.

In some cases, these state-level licensing rules border on the absurd. More than 20 states require workers who collect coins from slot machines to be licensed. But Nevada, the state with the most slot machines by far, somehow manages to get by without requiring such a license.

Meanwhile, five states require licenses for shampooers – mandating a government permission slip for something that most humans do on an almost daily basis. In Tennessee, potential shampooers must pay $140, take 70 days of classes (at a cosmetology school, of course, which costs another $3,000 to attend) and pass two exams. Failure to get a license can mean penalties of up to $1,000 and the threat of jail time.

Those requirements in Tennessee will soon be getting scrutinized. On April 28, Gov. Bill Haslam signed the Right to Earn a Living Act, which requires the state legislature to review all existing and pending regulations by Jan. 1, 2018, to determine if they are necessary to protect the public or if public safety can be ensured by less restrictive means.

Observers see that law as a first step toward broad reform of occupational licensing rules in the Volunteer State – and as an example for other states to follow.