Held Back by Red Tape: Occupational Licensing in North Carolina

This article is the first installment of a three-part series examining the practice of occupational licensing in North Carolina.

Imagine a practice that restricts freedom, stifles competition, crushes dreams of success, and takes money out of consumers’ pockets — often for little or no good reason. Would you call it bureaucratic red tape? Restraint of trade? Highway robbery?

In North Carolina and other states it’s called occupational licensing — the practice of requiring a permit, registration, certification or a license to pursue one’s chosen field. North Carolina agencies and boards impose occupational and regulatory licenses or other requirements on more than 700 professions, ranging from doctors and lawyers to barbers, kickboxing promoters, ginseng dealers and cemetery salespeople.

[To see a comprehensive list of these occupations, see this spreadsheet]

Getting such documents from state government is often a heavy burden for people trying to improve their lives. In North Carolina, manicurists must attain 300 hours of training and pass an exam. Would-be auctioneers must either serve a two-year apprenticeship or receive the equivalent of 80 hours of classroom instruction. If you want to braid hair legally, you’ll need to spend 1,500 hours at a beauty school and pass an exam.

Some other licenses seem superfluous. For instance, North Carolina requires licenses for school superintendents. It’s hard to imagine how that could add anything to the standards professional organizations, education agencies and school boards already set for such a high-profile position.

Yet licensing has been continually expanding. It is estimated that during the 1950s only 4.5 percent of the U.S. workforce needed a license to do their jobs; today nearly 30 percent of the workforce does. Is all this really needed?

In order to receive an occupational license, applicants generally have to pass a certification exam and pay a licensing fee, and in some cases may have to spend time as an apprentice. Working without such state authorization is illegal, and can bring criminal prosecution.

Licensing and similar mandates are typically justified as ensuring health and safety or preventing fraud.

However, the evidence that licensing improves public safety has been very limited. For example, a report by the Office of Fair Trading in the United Kingdom concluded that the evidence “does not support the contention that quality justifies restriction” by licenses.

The notion that licenses protect people is further undermined when the differences between states are examined. For example, though recreational therapists must be licensed in North Carolina, only three other states license or register people who use recreational activities to treat ailments or disabilities. Despite the lack of such licensing, those 46 states have avoided being ravaged by unscrupulous recreational therapists.

Moreover, the requirements imposed by the North Carolina Board of Recreational Therapy Licensure are substantially the same as the academic path requirements of the National Council for Therapeutic Recreation Certification. The most crucial difference between the two forms of certification might be that obtaining a North Carolina license requires sending a check to the state.

North Carolina’s 52 licensing boards brought in over $40 million in 2011. In addition to regulatory occupational licenses, North Carolina also issues privilege licenses, which serve no regulatory purpose, but brought in another $39 million to state coffers. Public safety and consumer protection fail to justify the privilege licenses that merely require a fee. Those sums are in effect a tax on ambition.

Licensing is often supported most vehemently by people in the profession itself because it stifles competition by raising barriers for new competitors, a fact noted by great economists beginning with Adam Smith and researchers ever since.  University of Minnesota professor Morris M. Kleiner wrote in an essay for the Cato Institute that licensing boosts the prestige of those in a profession, while curbing the supply of new practitioners who could compete with the established businesses.

As evidence, he noted that “[f]or occupations regulated in some U.S. states and not in others … employment growth was about 20 percent greater in unregulated states from 1990 to 2000.” That suggests that where occupational licensing reigns, for every five people who gain permission to enter a field, there’s one person who has been shut out.

While the cost of a license itself is usually within most people’s reach, boards often impose requirements that are highly onerous to fulfill.

For example, licensure as a landscape contractor in North Carolina requires three years of landscaping experience. But a 4-year degree in landscape architecture or horticulture counts only as 1.5 years of experience and many jobs in landscaping only receive 75 percent or 50 percent credit for time. This means a “three-year requirement” could take, for example, four years of college plus three years of work in a landscaping job.

Also, many trade schools profit from the licensing regimen. For instance, there are at least 130 schools in North Carolina that teach cosmetology. Such trade schools have a vested interest in maintaining a heavy load of classes for people to qualify for licenses.

Consumers ultimately pay the price for these often ridiculous regulations. For example, in the U.S. dental fees were found to be 14 to 16 percent higher in states with the strictest dental licensing laws compared to those with weaker ones. The bottom line: It is estimated by the Reason Foundation that licensing costs the U.S. economy more than $34 billion each year.

Finally, and most importantly, occupational licensing imposes costs in the form of infringements of freedom.

Coming soon: How licensing sometimes infringes on rights.

Click here to access the spreadsheet itemizing the professions requiring licenses or other documentation from the state.