Backwards laws that stifle our economy deserve fresh scrutiny. In a recent paper called “Low-Hanging Fruit Guarded by Dragons,” Brink Lindsey analyzes the evils of regressive regulation, “policies whose primary effect is to inflate the incomes and wealth of the rich, the powerful, and the well-established by shielding them from market competition.” While many laws fit that bill, Lindsey focuses on four areas ripe for reform: “excessive monopoly privileges under copyright and patent law; restrictions on high-skilled immigration; protection of incumbent service providers under occupational licensing; and artificial scarcity created by land-use regulation.” Lindsey’s study of occupational licensing and land-use regulations have special relevance for our work at PLF.
Occupational licensing stymies liberty and prosperity. About a third of all U.S. jobs require a license. Many people hurting for work cannot get a job because of these widespread barriers. Licensing standards may demand college degrees, English proficiency, special training, and many other requirements that shut out job seekers, particularly lower income earners. Lindsey mourns the shocking statistic that “total unemployment is down by as many as 2.85 million jobs because of licensing.”
Consumer protection is the classic rationale for these laws, but Lindsey demonstrates that licensing requirements often hurt consumers. Even assuming licensing does improve quality of service, licensing requirements still favor rich consumers over the middle and lower class. When licensing laws trip up job seekers, the supply of services that require a license declines. Low supply creates high prices, meaning that many consumers can no longer afford the service.
Worse yet, licensing requirements are often arbitrary and unconnected to consumer protection. For what conceivable purpose would a florist need a license? And why must cosmetologists complete on average 372 days of education and training to get a license, while emergency medical technicians on whom lives depend need only 33 days? As Lindsey puts it, “Occupational licensing may not offer much in the way of consumer protection, but it succeeds admirably as protectionism–shielding incumbent firms from competition and thereby boosting their incomes at consumers’ expense.” Consumers pay $203 billion a year more than they would without licensing laws. Do you feel protected?
As for land-use regulation, Lindsey explains how zoning and similar laws have inflated housing prices at the expense of the poor. This price inflation tends to concentrate in urban areas, often as a result of lobbying by the well-established and well-off who fight development to protect their property values. Steep housing prices push modest income earners away from the higher wages and greater economic opportunities in urban areas. The net result? The poor get poorer, and the economy suffers because people move away from the country’s most productive places. Research indicates that “reducing land-use controls in the most restrictive U.S. cities to the level of the median city would boost overall U.S. output by 9.5 percent.” That number would translate to a better life for millions of Americans.
In addition to Lindsey’s suggested reforms, PLF and other groups that fight to uphold the Constitution in court can also slay the dragons responsible for these rotten policies. Our founders enshrined property rights and the right to earn a living in the Constitution because they feared that powerful interest groups would have too much political influence. PLF has championed these constitutional rights across the country. For example, PLF has amassed a string of recent victories against absurd licensing laws that allow your future competitors to veto your license application. PLF is also fighting misguided attempts to fix the affordable housing crisis through more regulation, a solution that just compounds the problem.
I hope Brink Lindsey’s entreaty that we unite on political reform bears fruit. Regardless, PLF will continue to fight for the constitutional rights that are built to keep the dragons at bay.