Description:

Excessive regulations and licensing laws restrict the liberty of average citizens to live out their dreams in meaningful ways. The more barriers that government creates, the more difficult it is for people to find work, especially for aspiring entrepreneurs. Overly burdensome regulations and licensing laws restrict value-creating entrepreneurial activity.

In this lesson, students will first watch a video, then read/discuss an article about occupational licensing. Then students will watch another video from the Institute for Justice. Finally, students will complete a Self-Study activity comparing the licensing requirements of two professions of their choice.

 

Time Required:

45 min

 

Required Materials:

Internet connection, writing instrument 

 

Prerequisites:

None

 

6.5.A – Watch and discuss the following video using the questions below to guide your discussion [10 min]:

Video: (Institute for Justice, 5:04 min) “This video shows how excessive government regulation by design stifles business and entrepreneurs. The Institute for Justice (IJ), a libertarian public-interest law firm, works to free entrepreneurs from such opportunity-killing regulations.”

Discussion Questions: Why Can’t Chuck Get His Business off the Ground?

1.  Is excessive government regulation of small business increasing or decreasing?

  1. Government is requiring more and more that entrepreneurs obtain a government-issued license before they can work.
  2. In the 1950’s, 1 in 20 people needed a government license to work. Today it’s 1 in 3.
  3. It can be especially difficult for entrepreneurs to start and/or grow a business due to government restrictions and regulations.

 

2.  What could government do to increase opportunities for entrepreneurs?

  1. The government could remove opportunity-killing regulation that stifles business and entrepreneurship.
  2. Government-enforced occupational licensing requirements is a way for established businesses to keep new competition from small business and entrepreneurs from emerging.

 

6.5.B – Read the following article and use the questions to guide classroom discussion [20 min]:

Article: Does Occupational Licensing Protect Consumers? by John Hood (FEE.org)

Discussion Questions: Does Occupational Licensing Protect Consumers?

 

1.  About how many occupations are required by law to have an occupational license?

  1. There are over 1000 different types of jobs that now require you have an occupational license before you can work.
  2. “While many Americans know that their doctors, lawyers, and other specialized professionals are closely regulated by state boards and commissions, most don’t know that barbers, plumbers, morticians, “cosmetic artists,” and a host of other occupations–1,000 at last count—are regulated, certified, or licensed by states.”

 

2.  Is quality and affordability ensured by this process of government licensing?

  1. “Advocates of government licensing and other occupational regulations contend that unless the state has a hand in guaranteeing quality, consumers will receive shoddy and overpriced services.”
  2. “But while the promise of occupational regulation is great, research shows that it is rarely fulfilled. In the United States, at least, these regulations typically raise the price of services without significantly raising service quality—and indeed, in many instances regulation appears to lower the quality of services consumers buy.”

 

3.  What is one of the major side effects of restrictive licensing laws?

  1. “One of the most well-known effects of occupational licensing and regulation is reduced competition. The theory is that by excluding some providers of a service from the market, regulations reduce competition and form a kind of “cartel” in which service providers can afford to charge high prices without fear of losing customers.”
  2. “Potential competitors are excluded by state requirements regarding years of education, college degrees, apprenticeships, or licensing examinations.”

 

6.5.C – Watch the following video and use the discussion questions to guide your discussion [10 min]:

(Institute for Justice, 4:59 min)

“License to Work: A National Study of Burdens from Occupational Licensing is the first national study to measure how burdensome occupational licensing laws are for lower-income workers and aspiring entrepreneurs. The report documents the license requirements for 102 low- and moderate-income occupations—such as barber, massage therapist and preschool teacher—across all 50 states and the District of Columbia. It finds that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.”

Discussion Questions: Should You Need the Government’s Permission to Work?

1.  What are the effects of occupational licensing that requires people to “get permission” to work?

  1. Excessive barriers, such as licensing, fees, education, and training make it costly and time-consuming for people to “get permission” to work.
  2. These barriers make it extremely difficult for people to find jobs or to start businesses which would create new jobs, especially for minorities, lower-income occupations, and those will lower levels of education.
  3. According to research in 2012, “On average, these licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than a year to earn. At least one exam is required for 79 of the occupations.”

 

2.  According to the study, which states are the worst for licensing?

  1. Louisiana requires licensure for 71 of the lower-income occupations.
  2. Hawaii has the highest hurdles.
  3. Arizona requires the most licenses and hurdles.
  4. Other states with the highest requirements include: California, Oregon, Nevada, Arkansas, and Florida.
  5. On average, these eight states require over 1.5 years of training, an exam, and fees exceeding $300.

 

 

3.  Does licensure regulations provide consumers with safer and better products?

  1. No. Research has shown that by creating barriers for people to work, products and services are not any safer or better when compared to states that do not have barriers.
  2. The hardest occupation to enter (according to the “hurdles” a worker would have to jump through in this study) is Interior Designer. It takes 6 years of education and training, an exam and fees.
  3. It’s irrational that occupations such as EMTs have lesser requirements than Interior Designers with one month of training and two exams, on average.
  4. Cosmetologists spend more than ten times that of EMTs when it comes to time required for training and experience, even though EMTs hold people’s lives in their hands-literally.

 

4.  Are occupational licensing “hurdles” necessary to keep consumers safe?

  1. No. When cities, counties, states, or other government agencies create barriers for workers, it causes consumer costs to go up and opportunities for job-seekers and entrepreneurs to go down.
  2. Some licenses don’t make sense at all, such as shampooers, interior designers, or funeral attendants.
  3. Inconsistencies between states show that many licenses and requirements should be done away with completely. Other occupations, when comparing state requirements, show that training, experience, and fees are wildly different for the same occupation.

 

5.  What is the real reason for such high regulations and barriers to obtain licenses to work?

  1. Established industry participants often lobby for licensing requirements making it difficult for people to get permission to work, thus decreasing competition.
  2. Those who already have a license don’t have to worry as much that others will compete with their products and services, thus allowing for prices to remain high.
  3. c.     

Teacher Tip: Teachers should assign Self-Study research assignment 6.5.D at the end of class. Teachers may want to collect student essays and/or allow students to share their findings in the first few minutes of the following class.


“If state law makers want to help people find jobs they should start by clearing away licensing barriers that do little more than protecting some people from competition, by keeping others out of work.”

6.5.D – Self-Study: Research and be prepared to present what your findings in class [30 min]: 

Activity: Burdens of Licensure

Using the Occupations Ranked by Average Burden study from the Institute for Justice, select and compare two or more occupations and their associated requirements for licensing, training, fees, exams, etc.  In your opinion, are these occupational requirements rational? Can these requirements all be justified? Why or why not?

The National Study of Burdens from Occupational Licensing is the first national study to measure how burdensome occupational licensing laws are for lower-income workers and aspiring entrepreneurs.

The report documents the license requirements for 102 low- and moderate-income occupations—such as barber, massage therapist and preschool teacher—across all 50 states and the District of Columbia. It finds that occupational licensing is not only widespread, but also overly burdensome and frequently irrational.

On average, these licenses force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees. One third of the licenses take more than a year to earn. At least one exam is required for 79 of the occupations.

Barriers like these make it harder for people to find jobs and build new businesses that create jobs, particularly minorities, those of lesser means and those with less education.

License to Work recommends reducing or removing needless licensing barriers. The report's rankings of states and occupations by severity of licensure burdens make it easy to compare laws and identify those most in need of reform.

The need to license any number of the occupations in this sample defies common sense.  A short list would include interior designers, shampooers, florists, upholsterers, home entertainment installers, funeral attendants, auctioneers and interpreters for the deaf. 

 

Lesson Recap

 
  • Many government-imposed regulations and licensing laws restrict the liberty of average citizens to live out their dreams in meaningful ways.

 

  • Americans are having their freedom to work restricted more and more as government regulation is stifling people’s ability to work and start businesses.

 

  • A National Study of Burdens from Occupational Licensing is the first national study to measure how burdensome occupational licensing laws are for lower-income workers and aspiring entrepreneurs.

 

  • When cities, counties, states, or other government agencies create barriers for workers, it causes consumer costs to go up and opportunities for job-seekers and entrepreneurs to go down.

 

  • Occupational licensing is often overly burdensome and frequently irrational. It benefits established benefits at the expense of new entrants to the market.

 

  • Licensing barriers make it extremely difficult for people to find jobs or to start businesses which would create new jobs, especially for minorities, lower-income occupations, and those will lower levels of education.

 

  • “If state law makers want to help people find jobs they should start by clearing away licensing barriers that do little more than protecting some people from competition, by keeping others out of work.”

 

 

Additional Resources

Video:(Learn Liberty, 3:12 min)

“According to Prof. Don Boudreaux, free trade is nothing more than a system of trade that treats foreign goods and services no differently than domestic goods and services. Protectionism, on the other hand, is a system of trade that discriminates against foreign goods and services in an attempt to favor domestic goods and services. In theory, free trade outperforms protectionism by bringing lower cost goods and services to consumers. In practice, the benefits of free trade can be seen in countries like America and Hong Kong. Both countries have a relatively high degree of free trade, and, as a consequence, have experienced an explosion of wealth.”

 

Video:(Fraser Institute, 2:25 min)

“Today America’s entrepreneurs are stifled by cascading regulations and other mandates from government. Rather than focusing on satisfying their customers, entrepreneurs increasingly have to satisfy government bureaucrats.”

 

Article: Entrepreneurs Under Attack by John Stossel (FEE.org)

“Every day, federal, state, and local governments stifle small businesses to privilege well-connected incumbent companies. It’s a system of protectionism for influential insiders who don’t want competition. Every locality has its share of business moguls who are cozy with politicians. Together, they use the power of government to keep competition down and prices high. The Institute for Justice (IJ), a libertarian public-interest law firm, works to free entrepreneurs from such opportunity-killing regulations.”

 

Video:  (Institute for Justice, 3:27 min)

“Florida is ground zero in the nationwide battle to cartelize the interior design industry. A small group of well-funded industry insiders led by the American Society of Interior Designers has been relentless in its pursuit of ever more restrictive laws. Studies have shown that interior design regulations result in higher prices, less variety, and fewer employment opportunities, especially for minorities and older mid-career switchers.”

 

Video: The Most Dangerous Monopoly: When Caution Kills (Learn Liberty, 4:40 min)

“…when the government holds the monopoly on safety standards, products are likely to be over-tested, delaying their entry into the market and making them more expensive. Sometimes the costs of such delays cannot be quantified; lives can be lost while life-saving medicines are held up in safety-testing processes.”

Last modified: Monday, August 13, 2018, 12:55 PM