Licensed to Braid

Hearing: Local licensing boards stifling competition and innovation in dozens of industries

BBC World Service Flickr
March 26, 2014

Republicans are teaming with conservative activists and a Mississippi hair stylist to end licensing regulations exploited by businesses to limit competition.

Melony Armstrong, an African hairbraider, told members of the House Subcommittee on Contracting and Workforce that state governments are engaging in crony capitalism to prop up large companies at the expense of small businesses.

"I have transformed the lives of literally hundreds of poor women in my state of Mississippi not because I sought out government assistance for them; rather, because I demanded that the government get out of my way so I could provide for myself and for my family, and so other women around me could do likewise in peace, dignity and prosperity," she said in her prepared remarks.

The hairdressing licensing regime in Mississippi required hundreds more training hours than some medical professionals, including EMTs. Armstrong sued for the right to practice and teach others and began lobbying politicians to overturn the standards. The suit prompted the state to reform the hairdressing laws ten years ago.

Licensing boards are generally made up of existing practitioners, rather than objective judges. The boards are established under the guise of protecting consumers, but witnesses at the hearing said they typically serve to safeguard the interests of existing businesses.

The boards have the power to deny licenses based on subjective measures like design tastes, thereby ensuring that there is less local competition, according to Vanderbilt Law School Prof. Rebecca Maw.

"If you asked competitors who they want to compete with, they’d say as few people as possible," she said.

Businesses will also report unlicensed competitors to shut down firms, said Timothy Sandefur, an attorney with the conservative Pacific Legal Foundation.

"Existing firms will also waste their money policing their rivals," Sandefur said.

Haw said that the boards should not even be classified as government agencies because they serve the interests of private companies looking to stifle rivals, rather than the general public.

She contrasted licensing technically skilled engineers with hairdressers, saying that a bad hair day does not represent "a disaster for society." The proliferation of review sites like Angie’s List and Yelp provide prospective customers with information about poor service.

State laws require business licenses for more than 1,000 jobs, according to Maw, ranging from white-collar professions to fortune tellers—"a profession that is literally impossible to be competent at," Sandefur said.

Those laws cost billions of dollars each year by increasing prices and creating artificial scarcity in the market, Haw said.

Poor people are hit hardest by the licensing laws by being priced out of the market. Not only are potential entrepreneurs prevented from starting small businesses but customers are forced to seek out higher priced goods and services. A person who wants a simple hairbraid in a state that requires licenses would have to seek out a professional barber who demands higher charges than someone like Armstrong.

"We’re actually hurting people we are pretending to help," subcommittee chairman Richard Hanna (R., N.Y.) said.

Sandefur said that Congress can take direct action to shut down licensing boards, even those at the state level. One path would be attaching these requirements to federal funding, as the federal government did with highway funding to enforce higher drinking ages and lower speed limits.

Armstrong said that such a measure would inspire growth amid a sagging job market.

"Imagine the creative forces that would be unleashed if government respected the rights of other would-be entrepreneurs who want to braid hair, or drive cabs, or sell flowers by the roadside, or pursue any of a hundred or more occupations that would otherwise be easy to pursue if only the government didn’t needlessly stop entrepreneurs from doing so for no better reason than to protect the politically powerful from competition," she said.