Worried About Economic Inequality? Get Rid of Occupational Licensing - Hit & Run : Reason.com

"State policymakers who are serious about tackling the issue of income inequality need to consider the role that licensing plays in perpetuating that problem. It does not make sense to prevent someone from earning a living as, say, a barber merely because they did not finish high school and therefore do not meet an arbitrary requirement for a state license. And it makes even less sense for states to require expensive and time-consuming re-licensure processes when workers move from somewhere else.

A possible solution to the second problem is the establishment of interstate compacts that recognize out-of-state licenses and allow reciprocity across state lines. That's something the Federal Trade Commission has been encouraging state lawmakers to consider.

Fixing the first problem requires a complete reevaluation of why licensing laws exist in the first place. They are meant to protect the public, but too often become tools for incumbent license-holders to wield against would-be competitors. But it's now become clear that fencing out competition does significant damage to more than just the specific workers who are unable to obtain a license—such restrictions also drive an economic wedge between licensed workers and unlicensed ones. The former group benefits when opportunities are removed opportunity from the latter. Economic inequality increases as a result.

This makes perfect sense. If state policy is stopping some individuals from obtaining employment, those individuals are naturally going to fall behind their gainfully employed peers, particularly if the same state policy is boosting the earnings of those who are able to work in a protected profession. Loosening licensing laws, therefore, must be a fundamental part of tackling economic inequality...."