Senator Mike Lee’s third foray into anti-trust policy has finally hit the mark. Teaming up with Democrat Amy Klobuchar of Minnesota, from their position as Chairman and Ranking Minority Member of the Antitrust Subcommittee of the Judiciary Committee, the two have in the past launched assaults on proposed or threatened mergers in the prescription drug and beer industries. In neither of those cases is there the slightest chance of “monopoly,” in any meaningful sense of the term (and savor the irony of Utah’s junior Senator concerned about possible increases in the price of beer).
Finally, in their latest effort, the blind squirrel has found an acorn: they will hold hearings on Groundhog Day on the effects of occupational licensure on competition.
The difference is a matter of law. Whereas anyone with the wherewithal can get into the business of brewing and selling beer (and thousands have), if you want to cut hair or arrange flowers, there are legal hurdles to jump. More often than not, those legal hurdles consist of requirements imposed by current practitioners of the trade you want to practice. So a board made up of manicurists will tell you whether or not you can wield an emery board in competition with them.
This phenomenon is a subset of regulatory capture, as practiced by every industry since the Interstate Commerce Commission in 1883. Who better to regulate railroads than railroad men? And if the result is (as it was) the use of the ICC to keep out truck and barge competitors, well, that’s “protection” for you.
Most of us are prepared to accept occupational licensure for doctors and electricians, tho a strong case can be made against it there as well. We used to have Good Housekeeping; today we have Yelp! Those that want to find well-trained and competent practitioners have ways to do it.
Again, most of us think that requiring hair-dressers to undergo hundreds of hours of rigorous (and expensive) training, just to protect us from Bad Hair Days, is a little excessive. Wisconsin will fine you $1,000 and maybe put you in jail for selling cookies baked in your kitchen; in Iowa (and many other states), if you want to braid hair, you need a cosmetology license, even tho there are few to no schools of cosmetology that have a clue as to how to corn-row hair, let alone teach others how to do it.
Utah is not the worst in licensure requirements: a little more than a fifth of the Utah workforce has to be licensed. On the other hand, our licensure requirements are more severe than most other states, amounting to 350 to 450 hours of education and training. And the trend is bad: in 1950, nationwide, only 5% of workers needed licenses; today, it’s over 25%.
The problem is not with certification. There is no theoretical or practical problem with industries regulating the training and qualification of its practitioners. The problem is with a legal regime that enforces training and qualifications on those who do not wish – or cannot afford – them. When government puts its muscle behind the guilds, that’s when barriers to entry are up, competition and innovation go down (should we let Yellow Cab regulate Uber?), and consumers suffer.
So there is definitely something for the Dynamic Duo of Lee and Klobuchar to examine here. One question is what business is it of the federal government? These requirements are exclusively state and local, and as such, not the business of Lee and Klobuchar. Even the Obama Administration, never shy about poking its nose into local affairs, has contented itself with a “best practices,” informational role, run out of the White Office Council of Economic Advisers.
The reality remains as it always was: oligopolies and monopolies can persist only when backed by the power of government. Absent that use of force, licensing requirements can provide useful information, but cannot stifle needed competition and innovation.