Issues & Ideas Forum Dec. 4 in Lansing

Our growing occupational licensing regime

On Dec. 4, the Mackinac Center will host Dr. Morris Kleiner of the University of Minnesota to speak about occupational licensing. On this issue, Dr. Kleiner is one of the leading experts in the nation. (For information about the event, go here. Free lunch!)

In a just-published piece in the Cato Online Forum, Dr. Kleiner makes the case for why occupational licensing laws are harmful. Specifically, licensure laws raise costs, limit consumer choices and impede social mobility. These harms fall disproportionately on people with below-average incomes, because licensing laws limit the opportunities for people to earn income.

But that’s not all. Occupational licensing also creates a “reverse Robin Hood effect.” When these laws are introduced, newly licensed providers disproportionately flock to serve the high-quality end of the market. This creates competition and reduces prices in that segment of the market, but this comes at the direct expense of consumers on the other end of the market — those consuming lower quality services. In other words, those who can afford the higher quality services reap the benefits, while those who cannot are stuck with higher prices or nothing at all.

Considering these harms, one might wonder why licensing has grown in recent decades. In the early 1950s, only 5 percent of jobs required licensing. It’s about 30 percent now. Dr. Kleiner provides an answer:

From the time of medieval guilds, service providers have had strong incentives to create barriers to entry for their professions in order to raise wages. In contrast, consumers who will be affected by the higher costs due to licensure are unorganized and arguably underrepresented in the political process. The willingness of a legislature to pass licensure laws without rigorous analysis of its benefits relative to costs creates the opportunity for well-organized producer groups to lobby for laws that bring them personal gain.

Michigan policymakers have made some progress rolling back our anticompetitive licensure laws. But they should go further. The state should reduce the costs of obtaining a job, give residents a better chance to improve their lives and generally just get out of the way of people who want to offer all the rest of us their skills and talents.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.