You’ll Need a License for That

In North Carolina, a licensing board composed mostly of dentists decided that spas, salons, and kiosks in malls could not legally whiten teeth. While the board says it is preserving quality, others say the reason is price. Charging far less, the mall kiosk is taking away business from dentists.

Here, the story gets complicated because antitrust law kicked in when the Federal Trade Commission took the North Carolina Board of Dental Examiners to Court. The question was whether a group composed of dentists is illegally barring others’ market entry. The Supreme Court just heard the case.

Rather than antitrust law, though, I wonder whether the real economic issue is occupational licenses.

Licensed Occupations

In Texas, becoming a “shampoo specialist” includes 150 hours of classes while to renew your license, Cosmetology to Go will charge a $25 fee and provide four hours of continuing education in sanitation, skin, hair and nails, and OSHA regulations. In Alabama, 140 occupations require licenses. The list includes aircraft pilots, eyebrow threaders, massage therapists, natural hair stylists, medical doctors, shampoo assistants and sign language interpreters and transliterators.

A type of occupational regulation, licensing impacts the jobs market. Licensed occupations can have greater prestige, protect consumers, pay higher wages (estimated at 18% more) and raise state revenue. On the other hand they charge higher prices, preserve the status quo and discriminate against low income consumers and entrepreneurs.

You can see below how the number of licensed workers has skyrocketed. During the past 50 years, licensed occupations have multiplied from 5% of U.S. workers to 33 percent in 2014.

From: Kleiner and Kreuger

Our Bottom Line: Market vs. Government

We could say occupational licensing is a market vs. the government issue. Some say less demand from the market will do the job while others depend on government.

For shampoo specialists, would you choose the market or government?  School bus drivers? Veterinarians? Florists (required in Louisiana)?