ARLINGTON, Va.—A quarter of the American workforce must get a permission slip, or “occupational license,” from the government to legally work in their chosen occupations. These costly and time-consuming requirements ostensibly serve to provide better service. But an Institute for Justice study released today, “Raising Barriers, Not Quality: Occupational Licensing Fails to Improve Services,” finds no evidence that licensing raises quality and some evidence that it can reduce it.
“Licensing proponents argue occupational licenses make consumers better off by screening out workers likely to provide inferior service,” said IJ Senior Director of Research Dick Carpenter, an author of the study. “But our findings offer no reason to believe licensing, and progressively stricter forms of it, promotes safe, quality service.”
The new study compares consumer ratings for six types of service providers in neighboring states with differing licensing regimes. For four of the occupations examined, interior designer, locksmith, manicurist and tree trimmer, the study compares ratings in an unlicensed state with those in a bordering licensed one. For the other two occupations, barber and cosmetologist, both licensed in every state, it compares ratings in bordering states with more and less burdensome licensing requirements. In all, the study examines nine sets of state pairings across the six occupations. To ensure an apples-to-apples comparison, it focuses on service providers located near state borders.
Key findings include:
- In eight of the nine comparisons, the study finds no statistically significant difference in consumer ratings between licensing regimes. So, for example, reviews for cosmetologists in Connecticut were no better than those for cosmetologists in New York, even though Connecticut requires 1,500 hours of schooling compared to 1,000 hours in New York.
- In the one statistically significant comparison, tree trimmer quality was higher in unlicensed Virginia than in licensed Maryland.
“There are a few possible reasons licensing might not guarantee safer, higher quality services,” Carpenter argues. “First, ordinary market incentives may be doing the work on their own. Second, sometimes licensing requirements don’t actually match what it takes to do the job well. Finally, steep requirements can also deter people who would do a good job from entering the field.”
The study’s results give little reason to believe licensing improves service quality. And the findings are consistent with a long line of research examining occupations well beyond those IJ studied.
“Given this research, as well as ample evidence of licensing’s negative economic effects, policymakers should take steps to rein in licensing’s reach and burdens, not just among these six occupations, but beyond,” said IJ Senior Legislative Counsel Lee McGrath.”
In addition to defending workers subject to unnecessary licenses, IJ has developed model legislation—the Occupational Licensing Review Act—legislators can use to enact sunrise and sunset reviews that effectively balances public safety and economic opportunity. Previous IJ research on occupational licensing has revealed the crushing amount of beauty school debt taken on by people seeking cosmetology licenses, the economic costs of licensing, as well as the breadth and burdens of occupational licenses for 102 lower-income occupations nationwide.