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Posts Tagged ‘occupational licensing’

The “license Raj” is an epithet often used for India’s byzantine code of rules and regulations on businesses under the central-planning system finally dismantled in part in the 1990s. The Economist applies the term to the United States, which buries entrepreneurs under layers of federal, state, and local red tape. According to the Competitive Enterprise Institute, the gross cost of federal regulations alone amounts to about $15,000 per household per year, and that doesn’t include the accumulated debt of lost growth due to regulation, which may be much higher. And none of that includes the costs of state and local regulations, such as occupational licensing, which has increased dramatically in the last 60 years, now covering up to 35% of the workforce.

The Economist cites thumbtack.com surveys showing that small business owners care more about the burden of regulation than taxation (about two-thirds of them say that they pay their “fair share” in taxes, as opposed to more or less than their fair share). This preference comes as no surprise to me. Apart from the soul-deadening effects of endlessly parsing legalese and filling out form after form, regulation also tends to substitute the grand (or petty) design of a bureaucrat or politician for the price signals the market provides. When regulation limits competition under the pretense of ensuring quality for the consumer, incumbent producers benefit, but potential upstarts lose, and so do consumers. There is a net cost to society. When local governments require construction companies to obtain permits for every little thing they do, rather than simply requiring them to post a bond and pay for any damage they may cause to local infrastructure or neighboring buildings, less desirable construction happens, and the costs of regulatory compliance are also pure loss.

The thumbtack.com ratings of state regulatory environment correlate highly with both Chief Executive magazine’s survey of CEOs on state regulation and with the regulatory index found in Freedom in the 50 States. CEOs of large companies and small-business owners really want the same thing: a streamlined government that works. We’re not as bad as Argentina or Belarus, but here in the U.S., we suffer from plenty of kludge, and everyone pays the price.

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This is a powerful story of injustice and one woman’s refusal to stand for it:

On August 17th, 2011 Katharine “Katie” McCall, a licensed midwife, was convicted of practicing medicine with out a license for a 2007 birth she assisted as a student. The charge arose from a home birth where Katie’s supervising midwife could not arrive because she was at another birth. Instead of leaving the family to birth unassisted, Katie stayed. She recommended that the family transfer to the hospital and the family refused.

She was imprisoned. After being released, she decided to move from California to New Hampshire as part of the Free State Project and is blogging the move.

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That’s the subtitle of a new working paper from Peterson, Pandya, and Leblang. Here’s the abstract:

Skills are often occupation-specific, a fact missing from existing research on the political economy of immigration. Although analyses of survey data suggest broad support for skilled migration occupational licensing regulations persist as formidable barriers to skilled migrants’ labor market entry. Regulations ostensibly serve the public interest by certifying competence but are simultaneously rent-preserving entry barriers. We analyze both the sources of US states’ licensure requirements for international medical graduates (IMGs), and the effect of these regulations on migrant physicians’ choice of US state in which to work over the period 1973-2010. Analysis of original data shows that states with self-financing state medical licensing boards, which can more easily be captured by incumbent physicians, have more stringent IMG licensure requirements. Additionally, we find that states that require IMGs to complete longer periods of supervised training receive fewer migrants. Our empirical results are robust to controls for states’ physician labor market. This research identifies an overlooked dimension of international economic integration: implicit barriers to the cross-national mobility of human capital, and the public policy implications of such barriers.

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The Institute for Justice has just released a new study of occupational licensing requirements in the 50 states and D.C. These requirements disproportionately harm low- and moderate-income people who are seeking to ply a trade.

License to Work finds that Louisiana licenses 71 of the 102 occupations, more than any other state, followed by Arizona (64), California (62) and Oregon (59). Wyoming, with a mere 24, licenses the fewest, followed by Vermont and Kentucky, each at 27. Hawaii has the most burdensome average requirements for the occupations it licenses, while Pennsylvania’s average requirements are the lightest.

Arizona leads the nation with the worst combination of number of licenses and burdensome requirements to secure those licenses, followed by California, Oregon, Nevada, Arkansas, Hawaii, Florida and Louisiana. In those eight states it takes on average a year-and-a-half of training, an exam and more than $300 to get a license, a tremendous burden for would-be entrepreneurs and workers.

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Police are using regulatory inspections as a pretext for warrantless, apparently racially biased searches. If you’re going to support occupational and business licensing, you’re going to have to accept a hobbled Fourth Amendment.

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This sounds like a story out of Nigeria or somewhere. A Michigan state senator is introducing a bill to license journalists! (Really, certification – you wouldn’t need the license to report, but it would be a state-sponsored credential.)

HT: Hit & Run

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