Occupational licensing has no effect on quality

Dental assistants, make-up artists, manicurists, Emergency Medical Technicians (EMTs), barbers, cosmetologists, and packers are just a few of the numerous occupations that Minnesota licenses. For some of these occupations — like packers — licensing does not require education or experience, just merely some fees. But for others — like cosmetologists — applicants must undertake thousands of hours of education and write numerous exams.

Why is that the case?

Proponents claim that licensing is necessary to ensure safety as well as quality. But as American Experiment has shown, there exists a couple of irrationalities in licensing laws that weaken the safety argument. Consider, for example, the fact that barbers in Minnesota are held to a significantly higher standard than EMTs — who provide emergency medical services. Indeed if safety was an issue, the higher-risk occupation would have stricter standards, but that is not the case.

And what about quality? A new study by the Institute of Justice (IJ) also refutes the idea that licensing improves quality. Much like other previous studies, IJ concluded that licensing indeed has no effect on quality.

The study methodology

To conduct their study, the Institute of Justice compared border areas among states with different licensing structures to ascertain whether (stricter) licensing was associated with higher-quality services — as measured by reviews on yelp.

The study looks at 6 occupations: interior designers, locksmiths, manicurists, tree trimmers, barbers, and cosmetologists. For the first four occupations, the study compares quality between licensed and unlicensed states. But for barbers and cosmetologists — which are licensed in all 50 states — the study compares states with different levels of licensing burden. And across all occupations, they look at 9 sets of state pairings.

What the study finds

The results are, of course, what we would expect. According to the authors,

licensing, and progressively stricter forms of it, is not associated with greater service quality.

In fact, among eight of the nine state pairings, there is no statistically significant difference in quality. And in one pairing, the difference runs the other way. That is between,

tree trimmers in licensed Maryland and unlicensed Virginia—quality is higher in unlicensed Virginia and statistically significantly so.

A lesson for Minnesota policymakers

Burdensome licensing laws make it expensive for low-income individuals to enter licensed professions, which keeps them poor. Licensing also drives up prices for consumers by restricting supply. And despite these significant costs, these rules have no effect on quality as the research keeps showing time and time again.

Given the evidence, it’s only logical that Minnesota lawmakers should take steps to reform occupational licensing in our state which would remove barriers to jobs and improve consumer welfare without impacting quality.