Worker's Permit

Brian Wingfield, 08.28.07, 6:00 AM ET
Most people want to make sure their doctors and lawyers have the proper credentials to work, but should the same be expected of fortune tellers and florists?
Regulators in some states think so. If you want to read palms in Maryland or sell flower arrangements in Louisiana, you'll need a license to do it.

Funny? It would be if it wasn't increasingly commonplace. A new study by the Reason Foundation, a free-market-oriented think-tank based in Los Angeles, finds the range of professions requiring government is exploding. In the 1950s, less than 5% of the workforce needed a license to work. Today, that figure is more than 20%.

"The real motivation behind most occupational licensing regulations is one of special interest, not the public interest," the report says. "By banding together and convincing governments to impose new or stricter licensing laws, existing practitioners (who typically are exempted from the new laws through grandfather clauses) can raise the cost of doing business for potential competitors."

If so, the apiary industry in Maine is doing quite well--beekeepers in that state are required to obtain government licensing, the report says. So do casket sellers in Oklahoma, jai alai players in Rhode Island, reptile catchers in Michigan and rainmakers--yes, tribal rainmakers--in Arizona.

The report, compiled using information from the Labor Department, state agencies, news articles and trade and professional associations, finds that California is the most regulated place to work, requiring licenses in at least 177 occupations. Missouri comes in at the bottom, regulating only 41 professions.

With the exception of California, employment in western states tends to be far less regulated than in the East and the Midwest. But even among adjacent states, licensing requirements tend to be very different. North Carolina regulates 107 professions; South Carolina just 60. In New Jersey, 114 jobs are licensed; in Pennsylvania, only 62.

According to Adam Summers, a policy analyst at the Reason Foundation and the report's author, the reason for the difference in employment regulation from state to state can be attributed to "the success or strength of the business interests in that state."

In fact, Summers' study says that the boom in employment regulation has had several negative effects on business in local communities.

"Less competition for licensees means less pressure to offer higher quality or lower prices to attract business," the report says. "Thus, licensed businesses will be more inclined to pocket more of their profits." Other effects of too much regulation could be the creation of black markets among those who decide not to get licensed, sub-par work created by a lack of competition and an increase in the number of people who don't follow their dreams simply because they can't afford to get licensed.

Summers believes that all licensing laws should be abolished, letting the market create its own certification system, such as the product-review information offered by Consumer Reports, Amazon.com or CNET.

But has the increased licensing of professions really damaged job growth in various states? This doesn't seem to be the case, if the government's employment statistics are to be believed.

The most heavily regulated states--California (where 177 jobs require licenses), Connecticut (155), Maine (134), New Hampshire (130) and Arkansas (128)--have an average unemployment rate of 4.8%, according to the most recent government data.
At the other end of the scale, Missouri, which regulates just 41 jobs, Washington (53), Kansas (56), South Carolina (60) and Idaho (61), have a combined unemployment rate of 5.1%--not much of a difference from those that are heavily regulated.
But within an employment field, these numbers are different, says Morris Kleiner, a professor of economics at the University of Minnesota, who is an expert on occupational licensing.

"Within an occupation, the employment growth rate is approximately 20% higher in states that do not require licensing," he says, quoting from his 2006 book Licensing Occupations: Ensuring Quality or Restricting Competition?

According to the Reason Foundation report, at least 17 states license more than 100 job categories, and many states regulate the same type of work. For example, in every state, you need a license to be a barber, a hearing-aid fitter or a pest-control worker. And in most states, you need government permission to be an athletic trainer, a plumber or a mortician. But in only 15 do you need government permission to be a tattoo artist, and in only 13 is a license required to be a cab driver.