In Elizabeth City, Diana Maldonado and other beauty salon owners are frustrated. They recently received a letter informing them that, on top of state licensing fees they already pay, they’ll now have to pay $350 for a city license. And if they offer nail services, that will require an another $350. They’ll have to cough up $100 more to stay open after 8:30 p.m. for their customers’ convenience.
“It’s really unfair to us and small businesses,” Maldonado told News12, “We are trying to grow and be part of the community.”
She’s right. Licensing laws and fees benefit special interests at the expense of small businesses and low-income workers.
Take, for example, New Jersey’s occupational licensing requirements, which create a significant barrier to opportunity and success for people who need the most help: military families, immigrants, young adults, and those seeking a second chance after running afoul of our broken criminal justice system.
Once required mainly for doctors, lawyers, airplane pilots, and other high-earning or exceedingly technical professions, occupational licensing requirements have ballooned over the past several decades. Today, 21 percent of occupations in New Jersey require a license, up from just 5 percent in the 1950s.
From court clerks to floor sanders to makeup artists, more than 200 occupations need a government permission slip. According to the Institute for Justice, the Garden State “is the 16th most broadly and onerously licensed state.” To become a locksmith here you need three years of education as opposed to the 16 days or less in the 12 other states that license the profession. Becoming a cathodic protection tester — inspecting protection systems for buried metal pipes and tanks — requires two years of education. Only 15 other states even license this profession and in 14 of those, the educational prerequisite is fewer than eight days.
From a consumer standpoint, licenses raise costs by discouraging and preventing new competition in the market.
A 2015 Obama administration report confirmed that “licensing can … reduce employment opportunities and lower wages for excluded workers.” These “laws also lead to higher prices for goods and services,” increasing them by as much as 16 percent says the report.
So why do we have them?
Supporters of occupational licensing allege it keeps consumers safe. Not so says the 2015 White House report: “Most research does not find that licensing improves quality or public health and safety.” Which makes sense. After all, in the 37 states where locksmiths go unlicensed, we have not seen widespread lockouts or key malfunctions. New Jersey consumers would be just fine if we held our locksmiths to the same standards as most other states.
What’s more, in today’s world, platforms like Yelp and Angie’s List provide consumers with instant reviews and ratings for service providers. Young people in particular trust the judgment of their peers over that of government bureaucrats. A rogue locksmith wouldn’t stay in business long if a quick Google search showed only poor reviews.
The true purpose of occupational licensing is to help entrenched industry players “to obtain a degree of monopoly control, or the ability to ‘fence out’ competitors for a service,” says the University of Minnesota’s Morris M. Kleiner. Abolishing this abusive practice in New Jersey could create 34,000 jobs and save New Jersey families more than $1,100 annually, Kleiner said.
Nationwide, lawmakers in Arizona, Nebraska, and Mississippi are wising up and taking actions to curb the burdensome practice.
The New Jersey legislature must join their ranks and pass the three bills — (A4422, A4420, S3136) — currently before them that would roll back licensing requirements or exempt certain professions. Ideally, they should implement comprehensive occupational licensing reform, including sunrise and sunset provisions for all licenses and establishment of a panel within the executive branch to supervise licensing boards and ensure that industry players do not use them to stamp out competition.
New Jersey lawmakers should encourage low-income and disadvantaged workers to succeed, not create unnecessary barriers to their employment. Let’s get government out of the way of entrepreneurs in the Garden State and unleash New Jersey’s talent.
David Barnes is the policy director of Generation Opportunity. DBarnes@gennopp.org