A very nice Wall Street Journal piece by Stephanie Simon takes a look at the insane proliferation of professional licensing cartels across American state government. She also examines some of the political economy behind this, which is that the licensing fees charged by licensing agencies can turn into profit centers reducing the need for more transparent forms of taxation. I’ve written about this issue before, but there are two points from Simon’s piece that I think are worth highlighting. One is the tendency to exempt existing practitioners from new licensing regulations:
When a trade group does succeed in getting a licensing law passed, it sometimes exempts existing workers from the testing requirements. In Michigan, for instance, it will soon be a felony to practice massage without a license. Newcomers to the field must take 500 hours of classes and pass an exam to get that license. But a grandfather clause exempts most current massage therapists, including those who may never have taken a class at an accredited school.
This is the bad faith that gives away the game. If licensing is primarily about ensuring quality in the face of market failure, then obviously you need to regulate existing practitioners. But if licensing is primarily about restricting competition to advance the interests of incumbents, then regulating existing practitioners is counterproductive.
The other point I would make here is that this impulse to create quasi-monopolies seems quite robust in conservative states. Alabama has the strictest manicurist licensing regime in the country, a stringent new locksmith licensing scheme in Oklahoma requires people to pass a 50-question exam, “Texas appropriated $151 million this fiscal year to regulate scores of occupations though independent boards and a state agency with about 400 employees,” and Kentucky has “eight full-time inspectors who spend much of their time responding to anonymous tips about unlicensed manicurists.” An interior designer who moved to Florida from New Jersey was shocked to learn that she’s now a criminal. Obviously these are all states whose legislatures would be extremely hostile to proposals to, say, regulate pollution externalities. But when it comes to rent-seeking and barriers to entrepreneurship and economic opportunity the state legislatures of red America have no objection.