In one of the videos I flag in my post “Milton Friedman: Celebrating His 100th Birthday with Videos of Milton,” Milton defines Aaron Director’s law:
Director’s Law is, that almost invariably, government programs benefit the middle income class, at the expense of the very poor and the very rich.
More than 100 low-income and moderate-income occupations require licenses somewhere in the 50 states and Washington, D.C. They range from the understandable (school bus driver, emergency medical technician) to the ridiculous: interior designer, makeup artist, florist.
These licenses don’t come cheap. On average, they force aspiring workers to spend nine months in education or training, pass one exam and pay more than $200 in fees (as documented in the Institute of Justice study “License to Work”). One-third of the licenses take more than a year to earn. Rather than working, these individuals spend time and money jumping through hoops for the government’s permission to work.
Once an occupational licensing regime is set up, one factor making the system hard to change is that those who “paid their dues” to get the license resent the idea that others could do what they do without a license. But even before an occupational licensing regime is set up, an important impetus is often those within a field who resent the idea that others who do lower quality work should be allowed to tarnish the reputation of a field. There is a problem here. It is often a low level of skills that puts someone in the position of being poor. Therefore, to say that no one should be allowed to put up a shingle to do cheap, low-quality work is often to say that a poor person should not be allowed to work. But somehow, the poor who look so sympathetic in other contexts start looking like “riffraff” when they are the competition.
How can we square free entry into occupations with high quality for those who want high quality? In my post “Magic Ingredient 1: More K-12 School,” I suggest that
… the stratification into different quality levels should be handled by the market as much as possible (and by government fiat as little as possible), with continually improved web-based ratings mechanisms.
Nevertheless, if political forces are insistent that something must be done by government, there is all the difference in the world between government regulation of labels and government regulation of substance. For example, under current Michigan law, you are not allowed to call yourself a “massage therapist” without a relatively high level of training. But you are allowed to do the same work as a massage therapist without special training as long as you call yourself a “body worker.” Although there is little doubt that this kind of regulation can be an aid to schemes to “keep the riffraff out,” where the forces of competition are otherwise strong it can be argued that this kind of regulation provides extra information to consumers without actually blocking any freely-agreed-upon economic activity.
To the extent that even the urge toward substantive occupational licensing cannot be resisted because of at least superficially plausible arguments about health and safety, it might be possible to get a better balance by imposing some kind of global budget constraint on licensing requirements that forces regulation to focus on those requirements that have the least specious justifications. Again from my post “Magic Ingredient 1: More K-12 School,” in the context of arguing for a longer school year, I write:
Others argue that health and safety and basic competence really do require training even for many jobs that sound easy, such as cutting hair or cutting nails.
What I want to do is to restrain the tendency to go overboard on occupational licensing while allowing genuinely necessary competencies to be transmitted by requiring states to ensure that their schools high school tracks that would make it reasonably possible to be meet the legal qualifications for any of at least 60% of all licensed occupations, with each student able to be qualified with his or her high school diploma for at least 10% of all licensed occupations. Then the graduates might actually be able to get a job. This requirement for getting the Federal education grant could be met by any combination of reducing licensing requirements and increasing effective training that each state chose. I am sure that states would game the rule, so that the overall effect would be less than what this sounds on the surface, but it would be better than the way things are now, where students graduating from high school are kept out of many of the more desirable occupations by occupational licensing restrictions.
Sometimes the hoops can’t be squeezed through, as Silvio Membreno of Miami has learned. Mr. Membreno seeks to do what countless immigrants have done before him: Come to America and provide for his young family as a street vendor, then grow that business into something bigger and better. Without much need for investment capital or formal education, street vendors can be their own bosses while climbing the economic ladder.
But the Nicaraguan immigrant’s dreams are being dashed by the city of Hialeah, the Miami suburb where he works. Hialeah city officials make it impossible to be an effective street vendor.
They bar vendors from selling within a football field of brick-and-mortar stores that sell the “same or similar merchandise.” They force vendors, unless in the middle of a transaction, to remain in constant motion when they would much rather stay put, sell and be safe. Vendors are even prohibited from displaying their merchandise anywhere on public or private property, even if they have the permission of the property owner. In a country with a long history of street vendors, local governments nationwide are increasingly quashing this traditional form of bootstraps entrepreneurship.
What I don’t want you to miss is the injustice of telling someone he or she may not work if the only job he or she can find is one that creates too much competition for groups who are politically more powerful.