What does a hair salon “shampoo specialist” have in common with a private detective? In certain states, each needs a license to do business.
But what might licensing involve? For a Texas shampooer, it includes 150 hours of classes while a locksmith in Oklahoma has to pay a fee, take a test, and undergo a background check.
A type of occupational regulation, economists have studied licensing because of its impact on the jobs market. Licensed occupations can have greater prestige, protect consumers, pay higher wages, charge higher prices, preserve the status quo, raise money for the state, and constrain employment growth.
So, should we support it?
More specifically, for each of the following, who should need a license? Acupuncturists? Tattoo artists? Tree-trimmers? Glass installers? Florists? Massage therapists? If yes, requirements?
To make a decision, you might want to read this.
The Economic Lesson
We could say occupational licensing is a market vs. the government issue. Opponents of more licensing say the market would weed out incompetence. Proponents say the consumer needs protection. It could also take us to unemployment. Studies have shown more licensing, less employment growth. Yet another possibility is innovation because licensing tends to preserve the status quo.
During the past 50 years, licensed occupations have multiplied from 5% of U.S. workers to 23%.