Licensing: From Barber Shops to Interior Designers, Restricting the Flow of Labor

Thinking about opening a barber shop, what do you do? If your answer was something other than, “Find out how to obtain the state’s permission,” you’re in for a surprise.

Imagine: You’re one of the 6.1 million unemployed Americans. Try as you might, you can’t find a job. But you’ve always been great at something—cutting hair, giving manicures, or maybe hanging drywall—so great, in fact, that you reckon you could actually make some real money doing it. What’s the first thing you do?

If your answer was something other than, “Find out how to obtain the state’s permission,” you’re in for a surprise.

A shocking amount of occupations require workers to seek permission from the government before they can legally practice. This includes not just the obvious, like doctors and lawyers, whose services, if rendered inadequately, might do consumers life-threatening harm, but also barbers, auctioneers, locksmiths, and interior designers.

This phenomenon is known as occupational licensing. State governments set up barriers to entry for certain occupations, ostensibly to the benefit and protection of consumers. They range from the onerous—years of education and thousands of dollars in fees—to trivialities like registering in a government database. At their most extreme, such regulations make work without a permit illegal.

As the United States transitioned from a manufacturing to a service-based economy, occupational licensing filled the “rules void” left by the ebb of labor unions. In the past six decades, the share of jobs requiring some form of license has soared, going from five percent in the 1950s to around 30 percent today. Put another way: over a quarter of today’s workforce requires government permission to earn a living.