Are licensing regulations killing small businesses?
Posted May 24, 2016
At first glance there doesn't seem to be much connection between ridesharing services Uber and Lyft being booted out of Austin, Texas markets earlier this month and a woman in Tennessee suing for the right to wash hair.
But both are cases where barriers to entry have been erected under the guise of education and public safety, protecting the jobs of those who currently have them at the expense of those scrambling for an opportunity.
"In the 1950s, only about 5 percent of workers needed permission from federal, state or local authorities to practice their occupation," The St. Louis Post Dispatch notes. "Now it's almost a third — not just doctors or airline pilots, but florists, exotic dancers, tour guides, auctioneers and bartenders."
"From the administration of President Barack Obama to conservative-leaning think-tanks, a rare consensus is emerging on the need to fix a system originally intended to protect consumers and ensure public safety," The Post Dispatch concludes. "Critics say it's turned into something less benign, draining the job market's dynamism and shielding well-off workers from competition while blocking the prospects of those lower down the wage scale."
Up in Tennessee, Tammy Pritchard just wants to shampoo hair. It's a simple part of a hair salon's daily routine, and hiring someone to do it frees up higher wage licensed hair dressers to focus on what they get paid for.
But in her home state of Tennesse, Pritchard would need to get a license, with hundreds of hours of classwork, just to wash hair.
"Unfortunately for Tammy, unlicensed shampooing is a crime, punishable by up to six months in jail," notes Nick Sibilla at Forbes. "The Tennessee Board of Cosmetology and Barber Examiners can also impose civil penalties as high as $1,000 for those who dare to lather, rinse and repeat without a license."
"Before she can legally wash hair at a salon, Tammy must finish 300 hours of training on 'the practice and theory of shampooing,'” Sibilla writes. She must also learn about the "chemistry and composition of shampoos and conditioners,” “shampooing and rinsing foreign material from hair,” and “shop management,” including “answering phone, scheduling appointments, ordering supplies.”
"After completing the class," Sibilla writes, "shampooers then have to pass two exams, one on “theory,” the other practical, to obtain their license."
In a lawsuit filed this week by the Beacon Center of Tennessee, Pritchard argues that the licensing requirement unfairly deprives her of the right to earn an honest wage.
A 2015 White House report urged states to rein in oppressive licensing regimes that put a drag on the economy and prevent people with limited experience or training from finding work. The White House report estimated that licensing restrictions "cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars."