John Locke Update / Research Newsletter

Occupational licensing: Guild by association

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"The overthrow of the medieval guild system," wrote Milton Friedman in his seminal work Capitalism and Freedom,

was an indispensable early step in the rise of freedom in the Western world. It was a sign of the triumph of liberal ideas, and widely recognized as such, that by the mid-nineteenth century, in Britain, the United States, and to a lesser extent on the continent of Europe, men could pursue whatever trade or occupation they wished without the by-your-leave of any governmental or quasi-governmental authority.

There is, nevertheless, a resurgent movement that desperately wishes anyone pursuing a trade or occupation first to obtain leave from governmental authorities. Economists studying the practice of occupational licensure have often noted its similarities with the guild system. They include Friedman, whose book quotation above comes from his introductory lines to his chapter on "Occupational Licensure."

The very next line? "In more recent decades, there has been a retrogression, an increasing tendency for particular occupations to be restricted to individuals licensed to practice them by the state."

I reread that chapter recently while looking over research literature on the subject. I couldn’t help but wonder: if overthrowing the medieval guild system was so indispensable to freedom’s rise, what does it say for freedom’s future that we are restoring it under the name of occupational licensing?

Further into his chapter, Friedman offers an item of especial interest to a North Carolinian. He cites research by Walter Gellhorn, "the best brief survey I know" on the subject, which included this nugget: "As long ago as 1938 a single state, North Carolina, had extended its law to 60 occupations."

Why it is of special interest is because, three-quarters of a century after Gellhorn’s survey, if state licensing in North Carolina were pared down to 60 occupations, it would represent a sizeable increase in Tar Heels’ freedom to make a living. How times change. How many steps toward the decline of freedom in North Carolina have we taken?

No matter the methodology, North Carolina now licenses well over 60 occupations. CareerOneStop, which is sponsored by the U.S. Department of Labor, Employment and Training Administration, lists 172 licensed occupations for North Carolina. Using those data but attempting to eliminate duplication for comparison across the states (some states, for example, list subcategories of occupations as separate occupations; e.g., apprentice plumber, journeyman plumber, and master plumber — and of course apprentice, journeyman, and master are classifications lifted straight from the guilds), Goldwater Institute’s Byron Schlomach listed North Carolina with 154 licensed job categories, tied for 15th highest in the nation. Adam B. Summer’s Reason Foundation study of August 2007 had North Carolina tied for the 12th most licensed job categories at 107.

The ongoing saga of Steve Cooksey, the "Paleo-diet blogger" threatened by the North Carolina Board of Dietetics/Nutrition with a misdemeanor conviction, jail time, and thousands of dollars in fines for unlicensed practicing of nutrition, has put occupational licensing in North Carolina in the national spotlight, and not in a flattering way. Cooksey’s case seems to illustrate the reductio ad absurdum of licensing boards, which sees danger even in the personal testimony of a blogger.

Ostensibly, occupational licensing exists to protect a state’s citizens from fraudulent or negligent providers and ensure safety and quality of the services provided. Who occupational licensing really protects, however, aren’t consumers, but rather those who are already within the regulated industry. It puts up expensive and time-consuming hurdles to entry into a regulated field, keeping suppliers down, wages up, and consequently, prices high to consumers — who also frequently face fewer choices and offered levels of service (especially when even opinions on the subject are supposedly verboten).

One who has done much research on occupational licensure, University of Minnesota professor of Labor Policy Morris M. Kleiner, found that "The most generally held view on the economics of occupational licensing is that it restricts the supply of labor to the occupation and thereby drives up the price of labor as well as of services rendered."

Like so many other government interventions in markets, occupational licensing makes it that much harder for the poor to better their lot. North Carolina’s own state constitution recognizes a right of all persons to "the enjoyment of the fruits of their own labor." Some labors, apparently, require an expensively obtained blessing from governing authorities. The fullness of this injustice was anticipated by Adam Smith in The Wealth of Nations, when he wrote:

The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbor, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman, and of those who might be disposed to employ him.

A previous newsletter discussed that regrettable aspect of occupational licensing in more detail.

Click here for the Rights & Regulation Update archive.

 

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As Director of Regulatory Studies at the John Locke Foundation, Jon gets into the weeds in all kinds of policy areas, including electricity, occupational licensing, hydraulic… ...

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