A License (or Four) to Shine Shoes

What do shoe shiners in DC, pet groomers in New York and New Jersey, and Antler Dealers in Nevada all have in common? They all need occupational licenses to practice their trades. A couple years ago, a family friend told me a story of a man shining shoes in DC, who was forced to stop shining shoes and to obtain four different licenses costing a total of $337 before resuming work. At the time, this struck me as crazy. Now, thanks to Public Choice, I’m better able to explain both why these licenses are harmful and why they must have been instituted in the first place.

Jobs that require a great level of skill or entail substantial risk reasonably require licenses. It would be dangerous for the public if anyone could become a surgeon, a criminal defendant, or a policeman without a license. In these cases, licenses protect both the consumer and the supplier of the service. But, jobs such as shoe-shining or pet grooming pose little public threat. Licensing these jobs increases prices for consumers, discourages entrepreneurship, keeps people from working, and “disproportionately burdens low-wage and young workers, minorities, and immigrants.”

Occupational licenses are a type of entry barrier: the most important and durable form of regulation Stigler identifies. Licensing provides concentrated benefits to those already established in the industry, but imposes costs both to consumers and to new entrants. Licensing is often put in place because already established firms lobby the government for protection. For example, established shoe shiners in DC and pet groomers in New York might recognize the benefits that would accrue to them if they could block new entrants. Seeing this, they may lobby their state and local governments to require licenses. If successful, these firms help themselves, but hurt consumers and individuals seeking to start new businesses. 

In an attempt to mitigate the harmful effects of unnecessary barriers to entry, US senators Mike Lee and Ben Sasse proposed the ALLOW Act in 2015. The ALLOW (Alternatives to Licensing that Lower Obstacles to Work) Act aimed to limit occupational licensing, to promote less restrictive licensing requirements, and to substitute certification for certain types of licensing in DC. Though the bill didn’t pass, it provides an example of how a state might prevent unnecessary licensing, which harms more people than it helps.