Do I Need a Permit?

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. 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. 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.

More importantly, in each locality a small set of licensed practitioners can exercise monopoly power over customers. They pay local governments large fees for their licenses, and the local courts enforce the monopoly for them, ordering homeowners to use only licensed practitioners.

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

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.

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, 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. Other effects of too much regulation include 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.

At first glance, one might think that the government’s employment statistics show that the increased licensing of professions has not really damaged job growth: 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%; while 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.

However, this is deceptive. If you look within each employment field separately, occupation by occupation, these numbers are quite different. Within any given occupation, the employment growth rate is approximately 20% higher in states that do not require licensing.

At least seventeen states license more than one hundred 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 fifteen do you need government permission to be a tattoo artist, and in only thirteen is a license required to be a cab driver.