California LOSES 196,000 Jobs due to occupational licensing

What a job?  Good at a job, have plans to build a business?  In many occupations you can’t, even if the customers like you and colleagues respect you, without first getting permission from government, paying large sums of money.  For instance, landscapers—as opposed to “gardeners” need a license to operate in California.  Even if businesses and homeowner associations want you to landscape for them—government says no unless you pay tribute (a big check) to feed the bureaucrats,

  • “Nationally, licensing costs the economy nearly 2 million jobs annually. In the states, licensing’s toll on jobs ranges from around 7,000 (Rhode Island) to nearly 196,000 (California).
  • By a conservative measure of lost economic value, licensing may cost the national economy $6 billion. However, a broader and likely more accurate measure suggests the true cost may reach $184 billion or more. At the state level, the broader measure finds losses ranging from $675 million (Rhode Island) to over $22 billion (California).

Yup, the California economy loses $22 billion a year due to government interference in the work place.  Think a government license guarantees a good haircut or a qualified attorney?  Just another way government has to control people.

Jobs

AT WHAT COST?

By Morris M. Kleiner, Ph.D., and Evgeny S. Vorotnikov, Ph.D., Institute of Justice,  11/15/18

Not only do state occupational licensing laws force people to spend a lot of time and money earning a license instead of earning a living, they also impose real economic costs. This study takes advantage of a uniquely large dataset to offer the first state-level estimates of licensing’s economic costs for 36 states, as well as new national estimates. It also confirms earlier research demonstrating considerable growth in licensing since the 1950s.

Key findings include:

  • States vary widely in the share of workers licensed, from 14 percent in Georgia to 27 percent in Nevada. At the national level, nearly 20 percent of workers are now licensed, up from just 5 percent in the early 1950s.
  • Nationally, licensing costs the economy nearly 2 million jobs annually. In the states, licensing’s toll on jobs ranges from around 7,000 (Rhode Island) to nearly 196,000 (California).
  • By a conservative measure of lost economic value, licensing may cost the national economy $6 billion. However, a broader and likely more accurate measure suggests the true cost may reach $184 billion or more. At the state level, the broader measure finds losses ranging from $675 million (Rhode Island) to over $22 billion (California).

Licensing likely leads to these losses because it restricts competition, effectively giving licensed workers a monopoly. With fewer competitors, licensees can charge more for their services. Consumers and the wider economy pay the price.

The costs of licensing are substantial, and it seems likely, given ample prior research showing licensing rarely improves consumer outcomes, that they outweigh any purported benefits. Eliminating needless licensing burdens—and, if necessary, replacing them with less restrictive alternatives—would likely result in a win–win for workers and consumers.

Click here to watch a video about the high cost of occupational licensing.

 

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. ScienceABC123 says

    Let’s see… Want to start a business, you have to pay an uninvolved third party. Want to hire people to work for you, you have to pay, you have to pay an uninvolved third party. Make a profit, you have to pay an uninvolved third party. Want to stay in business, you have to pay an uninvolved third party. My question is – Who is the uninvolved third party, the mob or the government? And what’s the difference?

    • No difference at all that I can see. In my business, a lot of cities require a “business license” in order to operate in their jurisdiction. I ran into this in Hillsborough, a town I don’t do work in often. Passed it directly along to the homeowner, of course. A fee that looks and acts like a tax, even though fees are supposed to be for a returned service. What service was returned? None that I could see.

  2. I have a friend who started a very successful business in Louisiana for $5,000. He offered to help me open the same business in California. However, because of all of the permits and bureaucracy, it would cost $100,000 here! And, rent would easily be five times higher. No way are we taking that risk. Everyone loses.

  3. Business and professional licensing began early in the 20th.Century. In 1906 the MDs were facing stiff competition from the osteopaths, homeopaths, naturopaths, and chiropractors. So, the pushed the California legislature to create a licensing law. The legislature was delighted to have more tribute money to spend so they could buy power. Licensure of any profession is openly a barrier to market entry, enriching the license holders and hurting everyone else.

    • Not so. I hold a California license as a marriage and family therapist. The cost to maintain my license takes 40% of my income. In order to practice my field and keep my license, I am required to take 36 Credit Education Units (CEU) every two years (2 or 3 units cost a minimum of $150.00). I am also required to go through a license renewal cost of $150.00. In addition, I need to keep a yearly liability insurance of $350.00, pay for MFT Association fees and for city business license fees. This without the cost of maintaining my office or paying city and state taxes. More over, as a licensed professional, I am competing with non – licensed individuals who are life coaches or part of the healing arts industry, who are allowed to practice without restrictions. So, you see, there isn’t a monopoly to make licensed people rich, rather the state takes tremendous amount of money from those licensed professionals. I will never get rich. Only a few business minded licensed professionals get rich, which include those who live from the boards’ licensing businesses.

  4. All the State needs to do is require business insurance with reputable companies. Case solved. If you the customer is stupid enough to do do business with a company or person who does not have liability and business insurance, that is on you.

Speak Your Mind

*