Creating jobs by eliminating entry barriers to them

I have occasionally written blogs on the degree to which the jobs crisis has been made worse by government laws and regulations. However, even I was shocked by what guest columnists Chip Mellor and Dick Carpenter wrote in an op-ed piece in the July 28, 2011, issue of The Wall Street Journal entitled “Want Jobs? Cut Local Regulations.”

I had previously understood the excessive licensing requirements states impose on professions that can be available to people without 4-year college degrees. For example, I learned this past year that, in Connecticut, a person aspiring to cut hair at a beauty salon must take a course costing $20,000 for one year and pass a licensing exam. While requiring barbers and beauticians to be licensed is a reasonable exercise of state regulation, because of the degree to which a beautician is handling and applying dangerous chemicals to their customers’ hair, scalp and face, I believe that there has to be a lower-cost way of preparing and qualifying individuals for this profession.

I thought the Connecticut example was extreme. I was wrong. According to Mellor and Carpenter, whereas only 5% of all workers required government licenses to pursue their chosen occupation in the 1950’s, that figure is 33% today, according to University of Minnesota Professor Morris Kleiner. Governments can justify licensing requirements for any job, based on the theory that consumers can get defrauded by someone pretending to have the ability to do a job, when he or she is not qualified.

However, there has to be a line drawn between jobs and professions that, if not regulated, create a serious risk to health and safety, and those that simply create a risk of claims of inadequate performance. For example, why would Florida, Nevada, Louisiana, and Washington, DC regulate interior designers? There is no obvious health or safety risk to someone doing a bad interior design job. In fact, given my wife’s and my experience with several interior designers, some of our worst experiences were with highly credentialed designers. Interior design is a profession that depends on skills that are highly unlikely to be tested and measured through a credentialing process or improved through a mandated education or training system. The best members of that profession have the ability to listen actively to clients and make recommendations that match client needs and preferences, soft skills that almost never emphasized in a training or education program.

In fact, as a general rule, education, training, and licensing requirements are generally inappropriate for professions that depend heavily on so-called “soft” skills, that is, interpersonal skills that heavily depend on the personal chemistry between the person practicing the profession and the people they serve. For example, North Carolina regulates community association managers, a job that depends heavily on the ability of a manager to balance the needs of a diverse set of community stakeholders and to manage conflict. Such a skill can be improved to some degree by courses in conflict management and negotiation, but the most effective community association managers are those with the predisposition to manage conflict in a constructive way.

For those professions or jobs that benefit from licensing, the question then becomes: how much regulation is needed and for what purposes? If we go back to the 19^th century, the legal profession was one in which lawyers were trained through apprenticeships. The advantage of an apprentice process is that it allowed an individual to get a foothold in the profession, to make a living, and to improve his or her skills over time to be ready to take on higher-value tasks when ready. In virtually every profession, the licensed professional performs a mix of high and low skill tasks.

For example, when I started in legal practice in 1974, attorneys performed many tasks which, today, are performed by paralegals or even clerks or administrative assistants. I was fortunate to be spared the drudgery of proofreading lengthy documents, a task that required someone of single-minded focus on document accuracy, as opposed to someone of exceptional skill and training. Firms deployed attorneys for these tasks because they could get clients to pay for them, not because attorneys were needed.

Today, given the high and growing unemployment rate, we do not have the luxury of leaving these protectionist regulations untouched. States need to be pressed to revisit every licensing requirement for every job and to modify, or even eliminate, these licensing requirements.

Why have these licensing requirements persisted in the face of common sense analyses that suggest that they should be eliminated or modified? Licensing requirements create special interest groups of those who get the licenses and are overpaid for their work because of the artificial entry barriers those licensing requirements create. Each of the special interest groups is organized, powerful, and single-minded, whereas those excluded from the profession are unorganized, lacking in power, and often not as committed to overcoming the entry barriers the government has created.

Our elected officials need the moral courage to take on every one of these special interests to create middle class jobs that are readily available for many people currently unemployed. Moreover, we would probably find that, as more people enter these professions, the public would pay less for goods and services which carry artificially high prices because of the excessive labor costs built into them.