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Excessive Licensing: A Job Killer?

About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

Oct 14, 2016
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About one-quarter of jobs today require some kind of licensing by state governments, up from 5 percent in the ’50s. Some of the oversight is crucial for public safety and well-being. You want your doctor to be licensed, and probably your accountant. But a hairdresser? Florists?

Research shows licensing increases prices for consumers because it restricts entry into occupations. Worse, every state has its own licensing regime, so workers often have to take more courses and pay more when they relocate. The patchwork approach can be especially tough on people who move a lot, including military spouses.

There have always been debates about whether the market can do some of the work licensing is supposed to do. (Just how long will a talentless barber stay in business?)

The rise of crowdsourced websites like Yelp and Amazon Home Services has sharpened the question about whether licensing is the best way to protect consumers from incompetent service providers, says Siva Viswanathan, professor of information systems and co-director of the Center for Digital Innovation, Technology, and Strategy (DIGITS) at the University of Maryland’s Robert H. Smith School of Business, who is researching the relationship between online reviews and licensing.

“I wouldn’t go so far as to say you should get rid of all licensing,” Viswanathan says. “But regulators should look at these market-based review mechanisms for ideas about how to do a better job.” /CS/

007: Licensed to Braid Hair

Brain surgeons and blasters who handle dynamite need licenses. So do these workers (at least in some U.S. jurisdictions):

  • Casino dealers
  • Cosmetologists
  • Florists
  • Hair braiders
  • Insurance sales agents
  • Interior designers
  • Landscape architects
  • Massage therapists
  • Sports agents
  • Ushers and ticket takers

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