My Short Case Against Occupational Licensing
By David Henderson
“Just because somebody packs up that moving van in Chicago, Illinois, they don’t lose their skills on the way to the state of Arizona. Why should somebody have to suffer the burden of thousands of dollars or weeks or months of recertification in a skill that they already have?”
So said Doug Ducey, the Republican governor of Arizona, in making his case recently for relaxing Arizona’s licensing laws. What Ducey and Republicans in the Arizona legislature propose is a small step in the right direction. Some economists who have studied the issue, including the late Milton Friedman and George Mason University’s Daniel Klein, argue for getting rid of all occupational licensing. This may sound radical. It is radical. But there’s a strong case for it that is rooted in basic economic reasoning and lots of evidence. What might seem to be powerful arguments for keeping occupational licensing are actually quite weak.
These are the opening two paragraphs of my latest Defining Ideas article, “Occupational Licensing Is a Bad Idea,” April 2, 2019. HT2 Alexis Garcia for making me aware of the proposed legislation in Arizona.
The third reason for doubting the consumer protection rationale is that if that were the driving force, one would expect, at least occasionally, that consumers were the ones who pushed for licensing. Yet, even though over 800 occupations are currently licensed in at least one state in the union, I know of no example where consumers were the driving force. Were consumers really that concerned about unlicensed fortune tellers in Annapolis, Maryland (Question: how would you judge their quality?), unlicensed manure applicators in Iowa, or interior designers in many states in the union? In every case I know of, the people who initiated the licensing were practitioners of the licensed occupation, not the consumers. Of course, the practitioners stood to gain from restricting competition.
A paragraph about medical licensure:
In his 1962 classic, Capitalism and Freedom, Milton Friedman even made a case for ending licensing of doctors. He pointed out that licensing made doctors’ fees higher than otherwise, causing some people to get less medical care than otherwise. An alternative he proposed, which many economists favor for many currently licensed occupations, is certification. In a discussion I had with the earlier mentioned Alan Krueger on NPR, Krueger said that some reduction of licensing would be good, but he “wouldn’t want an unlicensed doctor to touch” him. I would, if a trustworthy certifier had given thumbs up. Indeed, many of us wouldn’t want even licensed doctors to treat us on particularly serious ailments if they were not certified for that ailment. If we had certification rather than licensing, I predict that we would quickly have at least 10 percent more doctors, as foreign doctors resident in the United States came out of the woodwork and more of them moved here.
And finally my pitch for the Institute for Justice, a remarkable organization:
One reason I donate to the Institute for Justice is that it is on the forefront of protecting people’s right to make a living, which means going after burdensome licensing requirements. The case for no licensing requirements is strong.