Licensing — What’s the Big Deal?

There are certain issues that, when put in the national spotlight, tend to really tug at the heartstrings. For example, our immigration dilemma conjures up images of children left to fend for themselves at the border. America’s wars in the Middle East bring to mind the toll taken not only on the region, but also on our soldiers. Our economic crisis hits particularly close to home for young people who face the highest unemployment rate for their age group in decades.

So when libertarians get all up in arms about licensing restrictions, you might wonder – what’s the big deal?

Licensing laws set requirements that a person must fulfill before he or she can enter a given profession. For example, to work as an attorney one must graduate from an accredited law school (in most states) and pass the bar exam of the state in which one wishes to practice. To be a doctor, one must complete college, medical school, residency, and fellowship, and then take the relevant state exams.

In economic terms, licensure is a barrier to entry, plain and simple — it increases the cost of entering an occupation. That’s not an argument, that’s economic fact. The theory on the part of licensure advocates is that these increased costs are worthwhile because they increase accountability and quality of service within the given profession.

You might think that businesses are generally opposed to licensure laws, right? Wrong. In fact, incumbent businesses are often the biggest supporters of increased licensure requirements, as this boxes out their potential competition. The harder it is to enter a profession, the less competition a firm will have.

So doctors, lawyers, and other technical professions have to jump through hoops to eventually make a whole bunch of money. Break out the kleenex, right? If only it were that simple. Every day, more Americans are required to obtain a license to work, and these state-issued permission slips are becoming more expensive and time-consuming to obtain.

Want to be an interior designer? Not so fast, you’ll need to purchase a “title” first. Interested in braiding hair for a living? Sorry, you’ll first need to obtain more hours of training than EMTs and firefighters combined. Opening a moving company? You’ll need the express permission of your direct competitors first — and you’ll have to pay for the privilege of obtaining that permission. Massage horses for a living? Not so fast, you’ll first have to obtain four years expensive out-of-state training.

This is not a quirky, isolated issue that only affects a select few. All in all, nearly 40 percent of Americans are required to hold some kind of license to work.

This is a big deal. Licensure makes it more difficult for people to obtain work and thus support themselves and their families. It also is more often than not a clear example of crony capitalism, where the wealthy and connected rig the system to protect themselves against the laws of competition. Finally, licensure is not only an important issue in and of itself, but it also permeates many other important national issues from healthcare to unemployment to the tuition bubble.

Want to learn more about licensure and its importance? Here are a few resources:

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