Licensing Occupations: Ensuring Quality or Restricting Competition?

By Leef, George C. | Freeman, July/August 2007 | Go to article overview

Licensing Occupations: Ensuring Quality or Restricting Competition?


Leef, George C., Freeman


Licensing Occupations: Ensuring Quality or Restricting Competition? by Morris M. Kleiner W. E. Upjohn Institute for Employment Research * 2006 * 181 pages * $40.00 hardcover; $18.00 paperback

Reviewed by George C. Leef

Cases of ridiculous occupation al licensing regulations are a dime a dozen. One that I came across recently is illustrative. Due to the fact that the diet of horses today contains much less abrasive material than in the past, their teeth need to be filed down periodically. Without that service, called "floating," it becomes painful for a horse to chew or hold a bit.

A veteran horse teeth "floater" in Minnesota has run into trouble with the State Board of Veterinarians, which informed him that he was doing work that fell within the legal purview of veterinarians and because he was not a licensed vet, he would have to stop. No customer of his had complained about his work, so what was the problem? The problem was that he charged only half as much as vets did for the same work. That was intolerable. The licensed vets of Minnesota saw an easy way to eliminate competition from this outsider by enforcing the law.

Is there any justification for occupational licensing statutes? The many professional organizations that promote such laws invariably claim that there are laudable public purposes behind them-primarily that they are needed to protect the public against incompetent practitioners. "All we care about is guaranteeing that those in the field have at least achieved the basic level of competence so consumers won't be cheated," they claim.

Should we accept that claim? Morris Kleiner, an economist who teaches at the University of Minnesota and is a visiting scholar in the economics department of the Minneapolis Federal Reserve Bank, takes a careful look at the issue in Licensing Occupations and comes to the conclusion that occupational licensing statutes do little or nothing to protect consumers, but do tend to raise the price of services. Kleiner writes, "[F] rom the evidence I was able to gather, there is no overall quality benefit (measured in a number of different ways) of licensing to consumers. Consequently, the cost of regulation to society is higher prices or longer waits for a service. An additional societal cost is the reallocation of income from consumers to practitioners of the licensed occupation as well as lost output."

So once again we find that coercive interference with market processes creates benefits for a few that are outweighed by costs to the many.

Kleiner's analysis involves comparing states that license certain occupations with others that don't. For example, while most states require that practical and vocational nurses be licensed, several do not. …

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