Congressman Sam Graves, of Missouri, who chairs the Committee on Small Business in the U.S. House of Representatives, recently sent a letter to the Small Business Administration’s Office of Advocacy asking the agency to study the “rise of occupational licensing across states and the economic effects of licensing on entrepreneurs and would-be entrepreneurs.”
Graves noted that today nearly 30 percent of occupations are licensed at the state level, In 1950, fewer than 5 percent of all occupations were licensed. One study pegs the total cost of licensing regulations to the economy is between $34.8 billion and $41.7 billion per year.
Small business advocates claim the increase in occupational licensing is strangling small business owners and discouraging would-be small business owners. In fact, the Federal Trade Commission testified last month before Graves’ committee that while some licensing requirements protect consumers, often they simply serve to “discourage new entrants, deter potential competition from professionals in related occupations, and suppress innovative forms of service delivery that could challenge the status quo.”
The FTC said the monetary and training requirements to obtain many occupational licenses is simply a way for those professions to protect those already working in the industry. The higher the fees and more extensive the training, the more difficult it becomes for new entrants to break into those professions. Those barriers to entry mean less competition and higher prices.
Small business owners around the nation seem to share the FTC’s views that protectionist occupational licensing requirements are an obstacle to a business’s growth and job creation. In a recent “Small Business Friendliness” survey of 12,000 small business owners, the friendliness of professional licensing requirements was the most important regulatory issue in determining a state’s overall friendliness to small businesses.
In that survey, Washington state’s small business owners gave the state a lackluster “C” grade for licensing friendliness and a woeful D+ for business regulations in general.
Not coincidentally, a study released in 2012 by the Institute for Justice ranked Washington as the 19th most broadly licensed state. Washington earns the dismal ranking because of the number of occupations licensed, combined with the fees and training requirements associated with those licenses. The state licenses 54 of the 102 low- to moderate-income occupations studied, and averages $152 in fees and 199 days in required training.
The study said that Washington “licenses some occupations more onerously than appears warranted by concern for public safety.” The study points to the fact that only 26 days of training are required to become an emergency medical technician, while massage therapists must undergo 117 days of training, and manicurists and skin care specialists must complete 140 days of training. Meanwhile, it takes 233 days of training to become a barber and 373 days to become a cosmetologist.
Unfortunately, it doesn’t appear that Washington state will ease the occupational licensing burden any time soon. In 2005, the state Department of Licensing said natural hair braiders don’t need to obtain an occupational license to practice their craft. The state has reversed course and now says hair braiders must obtain a cosmetology license. To obtain that license, one must spend an average of $13,748 (not including books and supplies) to complete 1,600 hours of cosmetology school—even though the course curriculum doesn’t include even one minute of hair braiding.
The Institute for Justice, which has filed a lawsuit challenging the new requirement, says the 1,600 hours of training is “more than ten times the number of hours required to become an animal control officer, emergency medical technician and a security guard—combined.”
Erin Shannon is director of the Washington Policy Center’s Center for Small Business.
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