‘Mother-May-I?’ attitude in Nevada laws quashing low-income entrepreneurship
The State of Nevada regularly presents itself to the world as a place where government is less overbearing and regulation-obsessed than most.
But how true is that?
The Governor’s Office of Economic Development, for example, touts Nevada as “A very business-friendly state, with state and local governments committed to streamlining approval processes and remaining a very low-regulation environment.”
However, when lower-income Nevadans seek to work or start a business in several Silver State industries, they actually face some of the highest regulatory obstacles in the country.
Moreover, the primary purpose of those obstacles — evidence strongly suggests — is not to protect the public, but instead protect politically favored insiders from potential competitors.
An “occupational license,” simply stated, is government permission to work in a particular field. And of all American states, Nevada has the second-highest proportion of citizens licensed by the state to work in their fields. Only Iowa has a higher percentage, according to a 2016 study jointly produced by the Obama administration’s Council of Economic Advisers and Treasury and Labor departments.
Proportion of low-income citizens licensed is an important statistic: The more that states like Nevada require licenses in lower-income occupations, the more those states discourage low-income entrepreneurship.
This was clearly documented recently in an important 2015 study that matched different data sets from the Ewing Marion Kaufman Foundation and the Institute for Justice:
In particular, the higher the rate of licensure of low-income occupations, the lower the rate of low-income entrepreneurship. The states that license more than 50 percent of the low-income occupations had an average entrepreneurship rate that was 11 percent lower than the average for all states, and the states the licensed less than a third had an average entrepreneurship rate that was about 11 percent higher. Even after including control variables for demographic and economic factors that may explain the rates of low-income entrepreneurship, the association holds up and is statistically significant.
Thus, the states’ reflexive imposition of occupational licensing — supposedly to “protect” the public, but often actually in service to political cronyism — is stifling entrepreneurship in America.
In the 1950s, only one in 20 U.S. workers needed the government’s permission to pursue their chosen occupation. Today, that figure stands at almost one in three.
Near the top of the list of burdensome states is Nevada, ranked the third most burdensome in a study conducted by the Institute for Justice. A common pattern — which the Silver State adheres to — is for states to impose restrictive conditions before licenses are granted, such as completing a certain amount of education, paying fees or passing exams.
However, those conditions frequently have an implicitly discriminative tendency. As the Obama administration study found, “The costs of licensing fall disproportionately on certain populations.”
The groups listed as hardest hit were military spouses, immigrants, and those with a past criminal conviction who have served their time and seek to re-enter society.
Part of the problem is that licensing boards are frequently made up of industry insiders who have a direct interest in controlling the available supply of providers of goods and services in their industries. Perhaps because of this, Nevada’s licensing requirements appear frequently designed to require entrants to either take on staggering debt or give up altogether on entering the field.
Here in Nevada, that seems to be the case for the occupations of Interior Designer, Travel Guide, Cosmetologist and Athletic Trainer:
- To get a license to work as an Interior Designer, the equivalent of six years of education or training and a $250 licensing fee are required. This occupation is only licensed in 4 states.
- To be licensed as a Travel Guide, $1500 in fees and over two years of training or experience are required. This occupation is only licensed in 21 states.
- To be a licensed Cosmetologist, one must complete over a year of education, pay over $300 in fees, and pass a practical exam. All states license this occupation. This may not seem as egregious as the previous two, but this industry will get its own section to dig into the real negative effects further down.
- To be licensed as an Athletic Trainer, one must pay several hundred dollars in fees and go through several years of schooling or experience. This occupation is licensed in 46 states.
Alternatively, some occupations where human health and safety is a major consideration have surprisingly light requirements:
- To operate as a basic EMT, one must only complete 26 days of education or training and pay $176 in fees.
- To drive a city bus, there are no education/training requirements, however a fee of just $161.
Many state licensing boards are given discretion in the statutes based on vague “morality” clauses, by which they can exclude people on the basis of some irrelevant aspect of their life deemed “immoral” by the members of the board.
The Obama administration study included a set of “Best Practices” for policy makers. These recommendations include:
- Limiting licensing requirements to those that address legitimate public health and safety concerns to ease the burden of licensing on workers.
- Applying the results of comprehensive cost-benefit assessments of licensing laws to reduce the number of unnecessary or overly-restrictive licenses.
- Within groups of States, harmonizing regulatory requirements as much as possible, and where appropriate entering into inter-State compacts that recognize licenses from other States to increase the mobility of skilled workers.
- Allowing practitioners to offer services to the full extent of their current competency, to ensure that all qualified workers are able to offer services.
Some industries have harsher requirements than others. Future reports will take a deeper look into specific fields to show the harm being done by their respective licensing requirements.