There are alternatives to occupational licensing

By Aaron Rice
October 14, 2020

Virtually every year, the regulations and licenses governing many occupations in Mississippi, and throughout the country, only seem to grow. 

In the 1950s, about five percent of workers needed a license to work. Today, it is 19 percent of workers in Mississippi.

And as new licenses have been added to the books in Mississippi, it is safe to assume that each proponent, usually an occupational licensing board, made the same central argument: we must do this in the name of consumer safety to protect individual citizens. 

The reality is often something less altruistic. 

Mainly, these occupational associations are more interested in building a moat around their industry with the help of government. The harder it is for someone to enter an industry, the less competition and consumer choice the industry incumbents face.

This is the story of Dipa Bhattarai, a graduate student at Ole Miss. She had her eyebrow threading business shut down by the state because she lacked the proper license and was forced to lay off four employees. 

To re-open her business, she would need to take 600 hours of classes and pass two exams. Yet, not a single hour of classes covers eyebrow threading. Bhattarai and other threaders are required to spend thousands of dollars to learn nothing they want to learn and everything they don't.

But what else can we do?

Source: Institute for Justice

Despite rhetoric from industries on how necessary such regulations are, there are options beyond licensing requirements that do not involve the government. As outlined in a report from the non-profit Institute for Justice, there are voluntary or non-regulatory options that help entrepreneurs start and run businesses while providing the maximum options for consumers.

This begins with market competition, the least restrictive option. Without government imposed restrictions, consumers have the widest assortment of choices, thereby giving businesses the strongest incentives to maintain a reputation for high-quality services. When service providers are free to compete, consumers can decide who provides the best services, thereby weeding out those that do not. 

Quality service self-disclosure is a fancy term for customer satisfaction. Think about all the common sites people can leave reviews such as Yelp, Google, Facebook, specific industry sites, etc. Finding out which location is providing a good customer experience is easier than ever, providing users with more complete options. 

Voluntary, third-party certification allows the provider to voluntarily receive and maintain certification from a non-government organization. One of the most common examples is the National Institute for Automotive Service Excellence (ASE) designation for auto mechanics. No mechanic is required to receive this certification, just like you may or may not care if a mechanic has it hanging on their wall. But it sends a signal to the consumer that the location with that designation is committed to quality service. 

Voluntary bonding and insurance is the final voluntary option. By being bonded and insured, providers are showing their concern for quality to customers at the risk to their own bottom line – whether that’s through the potential for increased premiums or loss of collateral. (If you’re a fan of government, but want a better option than licensure, you can make bonding and insurance mandatory.) 

But after reviews or certification, this is essentially another layer of protection for the consumer. 

You may or may not care about reviews, certification, bonding, or insurance. Or it may signal to you that this service provider has gone a step beyond to ensure high quality service, but those decisions are driven by market forces, outside of the government.

If you still insist on the government playing a role, there are a number of options that are less restrictive, and therefore better, than government licensure. 

Two legal options are private causes of action, which give consumers the right to bring lawsuits against service providers who are at fault, and deceptive trade practice acts, which allows consumers to sue businesses for practices that are deceptive or unfair. 

The government can also mandate inspections as they do in a number of fields, most notably the food-service industry.  It could be applied in occupations that also require licensing, such as the construction field and barbers and cosmetologists. This allows those who are trained in a field to spot potential hazards, while being less burdensome to licensure. After all, should a contractor be required to have a license if you are going to have an inspection from a trained individual who will tell you if the house the contractor built is about to fall down?

The state may choose to require registration, as they do with hair braiders. Hair braiders previously needed to take hundreds of hours of irrelevant cosmetology classes. Now they register with the state and pay a small fee. This discourages “fly-by-night” providers, while still only creating a small barrier for providers. 

All of these options have one theme in common: they are better than government mandated licensure. We do not need to force entrepreneurs to take state mandated classes, pay hundreds (or thousands) of dollars in classes, and take time out of their life to receive permission from the state to earn a living.

Instead, the state can protect consumers, while relying on a small government approach that promotes competition and consumer choice. This is what will encourage economic growth in a state that badly needs it. 

It is simply a matter of who you trust more, the government or the individual. 


magnifiercross linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram