The Rip-Off that Is Occupational Licensing

Occupational licensing rules allow trade schools in some states to force students to attend them, enabling the schools to charge students lots of tuition for training that is not worth remotely what it costs. At Slate, columnist Matthew Yglesias writes that “beauty schools are ripping off their students. Terrible licensing rules deserve some of the blame.” He points to an article

in the New York Times about beauty schools that leave their students drowning in debt rather than opening up the doors of opportunity to them. . .what doesn’t get mentioned in the article is what I see as the underlying evil here: occupational licensing.

To cut hair in New York state, you need to graduate from barber school. The number of hours of barber schooling you need is “determined by the approved NYS barber schools.” . .  if you’ve been cutting hair in New Jersey and want to move your practice to the other side of the Hudson, that license is no good. Do New Yorkers whose kids go off to college in other states warn them about the dangers of Connecticut or California or Massachusetts barbers? Not in my experience, but the state of the New York takes the official view that the regulatory requirements in 46 states (and the District of Columbia) are not up to snuff.

As Yglesias notes, mandatory-school-attendance requirements for barbers and hair-stylists make no sense. Indeed, such attendance requirements make no sense even for occupations where public safety is at issue and some form of licensing may thus be justified (comically, defenders of beauty-school attendance mandates depict hair-styling as being a dangerous occupation where licensing is needed due to the presence of chemicals in hair treatments). As he notes, it makes more sense to require competency to be shown

purely through certification. In other words: You need to be able to pass the test. In that world, a beauty school can stay in business if and only if it offers a cost-effective training regime. Beauty schools would need to compete with efforts at self-instruction or with apprenticeship arrangements of various kinds. Instead, by requiring the 1,000 hours of training, the state licensing board creates a cozy business for the beauty schools. They become for-profit gatekeepers to economic opportunity. And their incentive structure isn’t to focus on effective education—the quality of the teaching is irrelevant to the business model. It’s to focus on maximizing the amount of money extracted from the students.

I previously explained why Yglesias’s proposal — abolishing attendance mandates and just requiring passage of a certification exam — makes sense even for lawyers, for whom licensing requirements are more plausible. (The case for requiring lawyer/litigators to pass the bar exam — and undergo a background check — is stronger because they can put you in jail, or sue you and force you to comply with subpoenas, document demands, and other involuntary activities, meaning that lawyer-licensing might make sense to weed out unbalanced lawyers or those who ignorantly don’t understand when they have no case before they file a harassing and burdensome lawsuit. But that doesn’t mean they logically should attend law school, since you could easily pass the bar exam without ever going to law school.)

Egged on by colleges and trade guilds, state legislatures force many people to attend college just to get a business license for a job that logically shouldn’t require any college. For example, Florida requires interior designers to spend two years at a state-approved college before they can get a license to work. More than 20 percent of the American workforce needs a license to work, compared to just 4 percent in 1950. College-attendance mandates enable colleges to charge high tuitions even as their students learn little.

Licensing requirements increasingly demand college attendance. But a nation’s success has little to do with how many of its citizens graduate from college. As Washington Post economics columnist Robert Samuelson noted last June, “Some robust economies have workforces with a much smaller share of college degree-holders than the United States: Germany’s rate is 26 percent. Some other countries with higher rates (Japan: 56 percent) are floundering. And some with higher rates (Russia: 55 percent) lag well behind the United States economically.” Moreover, there are already too many college graduates: “The Bureau of Labor Statistics estimates that only 20 percent of U.S. jobs require a bachelor’s degree or more. About another 10 percent require some post-high school instruction, including an associate’s degree. Against this need, the United States is already producing a workforce with about 30 percent holding a bachelor’s degree and another 10 percent with an associate’s degree.” Many students are being harmed by the “college for all” mantra, he notes, resulting in “Much human and financial waste — the dropout rate at four-year schools is roughly 40 percent, and many of these students leave with large debts.”