Licensing hurts North Carolina consumers more than it helps them
By John Hood
Raleigh, North Carolina – Although North Carolina has become a demonstrably freer place to live and work in the past 10 years, our state remains grossly out of step with the rest of America in one key respect: we unnecessarily restrict the freedom of workers to enter new professions and the freedom of consumers to buy goods and services from whomever they want.
According to the latest assessments from the Cato Institute, North Carolina ranks 40e in the nation in professional freedom. In most of the country, states require fewer professions to be licensed, the requirements they impose are less stringent, and the cost of entering these licensed professions – in cash and time – is much lower.
Why are we erecting such high regulatory barriers to access so many careers? Professional licensing advocates argue that consumer welfare is at stake. Without the quality control that licensing boards represent, unqualified or unscrupulous vendors would take advantage of consumers. They would do a bad job. They would cheat. They would endanger consumers.
Proponents of licensing reform do not deny the presence of incompetence and corruption in the marketplace. Instead, they offer three interrelated reasons for rejecting strict licensing laws as the appropriate response.
First of all, the stakes vary greatly depending on the business. No state allows doctors to perform brain surgery without a rigorous license. But professional regulations extend far, far beyond these obvious cases. In North Carolina, you must be licensed to hold auctions, cut hair, install irrigation systems, or give massages.
Of some 1,100 distinct professions regulated by at least one state, only 60 are regulated by all states. In other words, what is regulated and what is not is largely a matter of economic interest and local politics, rather than anything approaching a serious assessment of material risks and likely benefits.
Second, while it’s certainly true that you could be cheated by a dishonest auctioneer or rubbed the wrong way, so to speak, by a masseuse, getting a license isn’t the only deterrent. such behavior. Locke Foundation analyst Jon Sanders observes that there are many less restrictive remedies, such as disclosure rules, bonding requirements, and voluntary certification (which provides useful information consumers can consider but are not legally required to do so). Licensing is the most extreme option, Sanders says, and should be reserved “for use only in extreme cases.”
In my opinion, the third argument against excessive professional licensing is the strongest: it doesn’t work. It does not achieve its stated purpose of protecting the safety and well-being of consumers. Although there are some exceptions, most studies I’ve seen show that places with stricter licensing not have lower rates of accidents, injuries, fraud or customer dissatisfaction than places where professional freedom is better protected.
Here are some recent examples. In 2011, the state of Illinois tightened its licensing rules for real estate agents. Prospective and current agents had to obtain more training hours to obtain a license, although the latter were given a one-year grace period before their license expired. Illinois also has a robust system for collecting misconduct complaints from home buyers and sellers. A study on policy change, just published in the journal Labor savingfound that it reduced the number of agents and the number of homes sold in Illinois, but did “find no strong evidence that the reform reduced new incidents of misconduct”.
Similarly, a new study in the Accounting Research Journal considered an increase in the number of educational hours required to become a public accountant. The new rule clearly reduced the number of people who became CPAs, but found no effect on the quality of services provided.
I think North Carolina should completely eliminate licensing for most of the 319 professions we need them for. Even if the state maintains such regulations, it should at least streamline the process. Too often, licensing is a politicized device to restrict access and raise prices, thereby harming rather than helping consumers. Let’s change that.
John Hood is a board member of the John Locke Foundation. His latest books Mountain folklore and people of the forest, combine epic fantasy and ancient American history.