The Case For Occupational Licensing

There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”

G.K. Chesterton

There is an emerging left-right consensus that the licensure of professions has gotten out of hand.  Recently, a Heritage Foundation report appeared entitled “Reconsidering Occupational Licensing in Virginia”, taking aim at the supposedly galloping enthusiasm for occupational licensure that is supposed to be holding back the job prospects of some and increasing the costs for other Americans.  Here, I don’t dispute the possibility that some occupations and professions are over-licensed, but I believe the consensus emerges out of snickering about the supposed purpose of licensure, rather than a familiarity with the reasons that such licensure arises.  I want to look at a few of the targets and show that it is not unreasonable that such occupations be licensed.

But first, a question: why do these people have it in so deeply for the barbers?  Here, I’m not talking about hairdressers or other allied occupations, and I’m not talking about people who want to do African-American-style braiding or weaves.  I’m talking about old-fashioned barbers.  Are the barbers in your town extracting monopoly rents?  Do the big houses in your town belong to the barbers? I live in lower Manhattan and pay $20, before tip, for a haircut and people won’t cross the street here for $20.  So, the barber is in to me for a couple of hundred bucks a year – would someone explain to me how much of that I get back when we arrive in the libertarian Promised Land?

Barbering appears to be an occupation that forms a step on the road for new ethnic groups.  At one time, a familiar figure was the Italian barber.  Now, at least here in New York City, men’s hair is tended to by immigrants from the former Soviet Union, Russians, and, particularly, Bukharians.  What we have here is people getting one or two rungs up the ladder of economic success, and some people can’t wait to knock them back down by inundating them with competition.  Commentators complain about the licensing of barbers, the too-long and too-burdensome educational requirements, and so on.  Maybe that burdensome training all functions as signaling, the way a four-year degree does.  If someone is willing to sit through superfluous training, maybe they really are willing to become a barber.  Perhaps having the onerous requirements slow the competition a bit results in the extra bit of peace of mind and confidence that are needed, to, for example, sign a lease.  If they’ve built a little moat around themselves, let them have it.

Apart from the underwhelming evidence that the price of haircuts is dangerously inflated, there is a less equivocal reason that barbers are fairly highly regulated.  It’s because barbershops are a traditional locus of crime.  People in different circumstances may not have the same relationship to the barbershop as someone might have with their local strip mall Supercuts franchise.  Ice Cube starred in the movie Barbershop and its sequel, premised on the important social role barbershops play.  They’re hangouts, often all-male hangouts, and those can go bad.  Men come in and stay a while, then leave.  This provides an excellent cover for many types of criminal enterprise.  Among the crimes that can be committed under the cover of a barbershop are bookmaking, selling stolen merchandise, and drug dealing.  Furthermore, all over Asia, brothels operate under the cover of a barbershop.  Perhaps one would not know, ex ante, of the association between barbershops and crime, but hard-won experience tells us there is one.

Let’s take a couple of more risible examples in turn. What could be more risible than the licensing of ballroom dance instructors?  Yet, there are excellent reasons why ballroom dance instructors are regulated by the state.  Is there some risk of merengue malpractice?   Are would-be Ginger Rogerses piling up in the emergency room trying to keep up “backward and in heels”?  No, the reason that ballroom dance instructors are licensed by the state is because the industry was a hotbed of fraud, shoddy business practices, and predatory behavior.  The law books are lousy with cases naming Arthur Murray Dance Studios, or affiliated persons, as a defendant.  They often involved vulnerable people, spinsters, bachelors, and widows, who were taken advantage of by unscrupulous instructors, often selling people thousands-and-thousands of dollars of dance courses that the customer could never use.  Here’s a representative case from the Supreme Court of Iowa in 1965 discussing a 68-year-old widow who worked as a “coffee girl” who was nevertheless sold $29,000 worth of dance instruction (at least $240k in today’s money) with the promise that she would become “a professional dancer.”  The court quoted the printed sales instructions used by the studio, including “[h]ow to prevent a prospect from consulting his banker, lawyer, wife or friend” and “[a]void permitting your prospect to think the matter over.”

As these abuses began to rack up, the regulatory apparatus kicked in.  In 1961, California enacted the “Dance Act”, barring dance studios (and gyms) from certain abusive practices, and requiring contracts to be in writing.  Soon thereafter, the California Attorney General obtained an injunction against Arthur Murray studios barring such violations.  In 1969, the Federal Trade Commission brought its own case against an Arthur Murray affiliate to enjoin certain deceptive practices and obtained its own injunction.

I suspect the potential for this kind of exploitation is why you see fortune tellers making these lists of licensed professions as well.  Surely, we laugh to think the state is ensuring the quality of the sooth being said.  But prudence might dictate that we allow people to avail themselves of these services, so long as it stays within certain bounds.  Maybe the state doesn’t want to ban them altogether and allows people to go for a bit of comfort, maybe for a bit of entertainment, like reading the horoscopes.  Yet, if a more serious form of exploitation surfaces, the state may desire the ability to block that person from performing further exploitation, and removing a license is a fairly straightforward way to do that..

The licensure and regulation of ballroom dance instruction points to a reason for licensure; that is, the inadequacies of the legal system to provide redress. In fact, there is a bit of a cottage industry of legal scholarship built around studying the Arthur Murray cases.  The blandishments that instructors offered, perhaps interjecting romantic elements, did not square up precisely with the settled law of fraud or other contract principles that might have provided relief.  Nevertheless, the dance studios were clearly behaving in a predatory manner and the plaintiffs were sympathetic.  In large part, the courts bent the rules to give the plaintiffs a break.

Sometimes, the critiques of licensing are just plain wrong.  If you want to get a laugh out of your libertarian friends, mention the licensing of interior designers.  As told by the folks over at Reason magazine, “advising someone about drapes could land you in the hoosegow.”   I agree that’s worth a chuckle – I’m imagining a licensing exam presided over by RuPaul, who offers an arch and cutting critique of your color palette and textures.  The only thing is the person who matches your duvet to your drapes and feng shuis your furniture is pursuing the ancient and admirable calling of the interior decorator, not an interior designer.  The profession regulated by this licensing requirement does architectural work, not decoration.  As the Eleventh Circuit Court of Appeals ruled in upholding Florida’s statute requiring such licenses, “Florida’s statute on its face requires only interior designers, a subset of architects, but not interior decorators, to obtain a state license before practicing in a commercial setting.”  As noted by that court, Florida’s laws define interior design as “designs, consultations, studies, drawings, specifications, and administration of design construction contracts relating to nonstructural interior elements of a building or structure.”  An interior decorator may offer services including “the selection or assistance in selection of surface materials, window treatments, wallcoverings, paint, floor coverings, surface-mounted lighting, surface-mounted fixtures, and loose furnishings not subject to regulation under applicable building codes.”  They can continue in unregulated bliss.  As I believe no one is challenging the licensing of architects, I’m having a hard time thinking this one is out of bounds.

Feature Image by haddensavix