by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor | John Locke Foundation
First off, let’s go ahead and get it out of the way: your reaction to the notion of needing an official state license to ship potatoes:
Now. There was a bill in the Nebraska Legislature to eliminate the state’s potato-shipper license. Which, if passed, would lead to a sort of Wild West scenario whereby potatoes would be shipped pell-mell as if it were, well, every other state in the U.S. except Michigan according to Platte Institute.
The Federal Trade Commission’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics wrote to several Nebraska senators regarding that and some other licenses under consideration for elimination this year. Those letters are important signals for how the FTC views occupational licensing in general, and as such, merit attention from lawmakers elsewhere, including North Carolina.
Competition is a core organizing principle of America’s economy. It gives consumers the benefits of lower prices, higher quality goods and services, increased access to goods and services, and greater innovation. The FTC works to promote competition through enforcement of the antitrust laws, which prohibit certain transactions and business practices that harm competition and consumers. The FTC also engages in competition advocacy to urge decisions that benefit competition and consumers…
All occupational licensing restrains competition to at least some degree, because it limits the number of people who can provide certain services. …
Recent studies strongly suggest that the burdens of excessive occupational licensing fall disproportionately on the most economically disadvantaged citizens. Another group particularly impacted by excessive occupational licensing are the spouses of U.S. military personnel. Because members of the military move to new states frequently, their spouses must repeatedly meet new and often different licensing requirements as they move from state to state.
The harms of excessive state licensing are not limited to those looking for new jobs. Licensing requirements may limit not only who is allowed to work in a particular field, but also how they work. When the state mandates particular ways of doing things, these regulations may stifle entrepreneurship and innovation. …
Additionally, when licensing reduces the number of people working in a given field, that can blunt competition and may cause prices to increase. Several studies have found that prices increase, sometimes significantly, due to licensing an occupation at the state level. One estimate has shown that licensing restrictions can raise consumer expenses by over two hundred billion dollars nationwide.This means that even citizens who have never sought work in a particular area can be harmed by excessive state licensing because they may pay higher prices or receive lower quality services than would otherwise prevail absent the licensing.
Further, the purported consumer protection benefits of licensing may not justify the costs. Reductions in competition caused by licensing can also cause quality, choice, and access to decline. Although well-meaning licensing rules may be designed to provide consumers with minimum quality assurances, these rules do not always increase service quality, especially if training or educational requirements do not directly relate to the services a given professional provides.
For these reasons, FTC staff urges legislators and regulators to consider removing excessive, unnecessary licensing restrictions wherever possible. …
The FTC offers the senators its policy framework for evaluating changes to state occupational licensing law: