Government’s Business-as-Usual Attitude Helps Bottleneckers, Hurts Entrepreneurs & Costs Consumers

Bottleneckers are found in literally every state, as documented by the Institute for Justice

Arlington, Virginia—Pop quiz:  What is the proper role of government?

Is your answer:  To protect politically powerful special interests from competition?

No?

Unfortunately, too many lawmakers and special interests see protectionism as a proper use of government force. Examples abound: There are the recent actions taken by lawmakers and the hotel industry against Airbnb. And those by lawmakers and the taxi industry to stifle Uber and Lyft and bail out taxi medallion owners. And those by lawmakers and the bakery and grocery industry to fight grandmas who just want to bake and sell cookies at home.

As documented in the Institute for Justice’s new book, Bottleneckers, lawmakers and the lobbyists of dozens of occupations team up to use government power to protect private interests from competition. These “bottleneckers” use government force to restrict entry into an occupation, thereby shutting out newcomers and generating monopoly profits for themselves.

This is not what American government is supposed to do, but it is nevertheless what American government has increasingly done unchecked for decades. As Bottleneckers coauthor Dick Carpenter points out: “In the 1950s only about one in 20 workers in the United States needed a government-issued license to work; today it’s about one in four. Most people know physicians and attorneys must be licensed, but licensing is also becoming increasingly common for lower-wage occupations, such as cosmetologists, auctioneers, hair shampooers and interior designers.”

Carpenter continued: “A growing mountain of research indicates that while licensing rarely results in increased protection for consumers and the public, it comes with significant costs in the form of higher prices to consumers, fewer job opportunities, reduced interstate migration, and obstructions to innovation. This is because licenses are created not out of a need to protect public health and safety or consumer welfare, but out of a desire to create bottlenecks to keep out competition.”

Trade groups have convinced the government to create anticompetitive bottlenecks on music “therapists” (requiring a bachelor’s degree and 1,200 internship hours), tour guides (who have been threatened with jail time if they gave tours without a government-issued license), interior designers (requiring six years of school and a government-issued license), and casket sellers (requiring, among other things, experience embalming bodies simply to sell an empty box).

In Iowa, one of the most widely licensed states in the nation, bottleneckers killed a bill (backed by the governor) that would have eliminated licensing for a dozen occupations, including barbers and massage therapists. After bottleneckers sent more than 3,600 emails to Rep. Bobby Kaufmann, who chairs the subcommittee that heard the bill, Kaufmann literally tore up the bill to wild applause.

And in Nebraska, bottleneckers helped defeat a more modest licensing reform that would have reduced the required hours for barber, cosmetologist, massage therapist and nail technician licenses. Nebraskan cosmetology schools lobbied hard against the bill and packed a legislative hearing, killing the bill last month. Had the bill passed, cosmetology schools—which charge as much as $20,000 for their programs—would have lost significant revenue due to fewer state-mandated training requirements.

The blame, however, does not fall solely on lawmakers, who pass these anticompetitive and often unconstitutional restrictions, or on the executive branch, which enforces them.

“The courts also share blame for the growth of bottleneckers,” said Institute for Justice President Scott Bullock. “Courts have too often abdicated their vital role as a check on the other branches of government. As a result, courts now regularly rubberstamp government power run amok, even going so far as to rule, ‘[W]hile baseball may be the national pastime of the citizenry, dishing out special economic benefits to certain in-state industries remains the favored pastime of state and local governments.’”

Each chapter of Bottleneckers covers the history of licensing in one occupation. It begins with alcohol distributors—which inspired the term bottleneckers—then discusses casket sellers, African hair braiders, interior designers, tour guides, taxi and limousine drivers, street vendors, and even occupations in which people merely speak for a living.

Journalists can receive a free hard-cover or electronic copy of Bottleneckers by contacting IJ Vice President for Communications John Kramer at jkramer@ij.org.

[NOTE:        To arrange interviews on this subject with the authors, journalists can call John Kramer, IJ’s vice president for communications, at (703) 682-9320 ext. 205.]

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