Saturday, August 15, 2020

Lepak: stop allowing special interests to pull up the ladder of opportunity

Let’s Stop Allowing Special Interests to Pull Up the Ladder of Opportunity
By Benjamin Lepak (1889 Institute)

A legislator I know once told me he heard a lobbyist for a trade group describe his job as helping those already on top pull up the ladder so no one else could follow. What he meant was that he helped this trade association get the legislature to pass laws that made it ever more difficult to become licensed in the field, thus limiting competition for his paying clients. For established license holders, this seems like an easy trade: the fee to hire the lobbyist is relatively small compared to the windfall produced by using the law to eliminate future competition.

To the lobbyist’s credit, at least he was forthright about what he was being paid to do. But pause for a moment and contemplate what this means for society at large. The practical effect of this mentality is that many people are legally prohibited—or at least substantially hampered—from pursuing their chosen career. What’s more, the entire goal of such action is to keep prices to the consumer high by artificially manipulating the supply of practitioners.

The share of occupations nationwide that required a license in 1950 was approximately 5 percent. It has exploded to more than 29 percent today. A recent study found Oklahoma is the eleventh most burdensome licensing state in the country.

There is little evidence that licensing enhances public health or service quality, but there is a good deal of evidence it limits work opportunities, redistributes income from lower to higher income individuals, increases the cost of living, limits innovation, and leads to more licensing.

So, despite its negative consequences, why does this pernicious form of regulation persist? Consider that rarely, if ever, is a licensing regime erected after public outcry for regulation of a rogue industry. Instead, it is usually the existing members of the occupation itself that organize a political effort to impose licensing on their own field. They are trying to pull up the ladder.

There are only two valid reasons to license an occupation: (1) an occupation’s practices present a real and probable risk of harm to the general public or patrons if practitioners fail to act properly; and (2) market failure or legal structures make it difficult for patrons to obtain information, educate themselves, and judge whether an occupation’s practitioners are competent. Unless both of these circumstances are present, people should be left free to practice the occupation unimpeded by a government licensing requirement.

Let’s stop imposing unnecessary costs on consumers. Let’s free individuals to pursue their calling in life. Let’s repeal unnecessary occupational licenses.