How Regulations are Hurting New Businesses to the Benefit of Special Interest Groups

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    May 15, 2012 8:10 PM GMT

    From the libertarian Institute for Justice:

    License to Work details licensing requirements for 102 low- and moderate-income occupations in all 50 states and D.C. It is the first national study of licensing to focus on lower-income occupations and to measure the burdens licensing imposes on aspiring workers….

    All of the 102 occupations studied in License to Work are licensed in at least one state. On average, these government-mandated licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than one year to earn. At least one exam is required for 79 of the occupations….

    Noted licensure expert Morris Kleiner found that in the 1950s, only one in 20 U.S. workers needed government permission to pursue their chosen occupation. Today, it is closer to one in three. Yet research to date provides little evidence that licensing protects public health and safety or improves products and services. Instead, it increases consumer costs and reduces opportunities for workers….

    the difficulty of entering an occupation often has little to do with the health or safety risk it poses. Of the 102 occupations studied, the most difficult to enter is interior designer, a harmless occupation licensed in only three states and D.C. By contrast, EMTs hold lives in their hands, yet 66 other occupations face greater average licensure burdens, including barbers and cosmetologists, manicurists and a host of contractor designations. States consider an average of 33 days of training and two exams enough preparation for EMTs, but demand 10 times the training—372 days, on average—for cosmetologists. “The data cast serious doubt on the need for such high barriers, or any barriers, to many occupations,” said Lisa Knepper, IJ director of strategic research and report co-author. “Unnecessary and needlessly high licensing hurdles don’t protect public health and safety—they protect those who already have licenses from competition, keeping newcomers out and prices high.”

    And from and the Kauffman Foundation:

    Although taxes are a dominant topic in many discussions of a location’s attractiveness to business, our analysis indicates that small businesses tend to care more deeply about the friendliness of a region’s licensing regime by a factor of nearly two. Similarly, being subject to special regulatory requirements had a negative effect on overall small business friendliness, and among those small businesses subject to special regulations, the ease of complying with these requirements was by far the most important factor.

    And more:

    These results are not entirely surprising. Licensing regulations are often “captured” by interest groups seeking to keep out their competitors because most voters are unaware of them and often lack the knowledge needed to assess their quality even when they do happen to know about them. As a result, licensing regimes are often heavily influenced by lobbying from politically connected businesses seeking to keep out less influential competitors. Both consumers and potential new entrants into the market get the short end of the regulatory stick. It’s yet another example of the harm caused by political ignorance.

  • parametric

    Posts: 63

    May 15, 2012 10:51 PM GMT
    I"m normally a flaming commie in all my political positions, but I totally agree with everything that man said. huh.
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    May 15, 2012 11:14 PM GMT
    It's funny because I feel like there's a lot of validity to this argument (e.g. that some sectors are completely over-regulated) and, yet, in other spheres (those with the most political influence) there's too little regulation or what is there is toothless. But I believe the reason for both issues is the influence of money in politics. As long as politicians spend 80% of their time raising money, they will never be about the people's business.