Occupational Licensing Costs the Average American Household Over $1,000

A new report by the Heritage Foundation identified occupational licenses as a “government policy mistake” that “costs consumers $127 billion per year.” By restricting who can work in a given field, occupational licensing limits competitors, which in turn leads to higher prices for consumers. Heritage estimates that occupational licenses cost “the average American household $1,033 per year, making it one of the most promising areas for reducing prices.” Yet even that estimate may be low: Previous research suggested licensing’s annual cost to consumers at $203 billion.

Once limited to relatively few workers, licensing has exploded in recent years. Today, about one in four American workers need a license from the government before they can legally work—a fivefold increase from the 1950s.

Many of these licensing laws make little sense. For instance, the Institute for Justice’s latest challenge to occupational licenses involves Aicheria Bell and Achan Agit, two African-style hair braiders who live in Iowa. But under the state’s licensing laws, Aicheria and Achan must first complete 2,100 hours of cosmetology training, which can cost upwards of $22,000. Yet Iowa’s cosmetology schools are not actually required to teach African-style hair braiding, which doesn’t use potentially dangerous chemicals. Even worse, braiding hair without a license can be punished by up to one year in prison.

For more information on occupational licensure, read IJ’s thorough policy report, License to Work and check out our past cases: The Institute for Justice has litigated on behalf of eyebrow threaders, florists, tour guides, even casket-making monks, who all ran afoul of state licensing laws.

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