When “business-friendly” regulations are bad for the rest of us

One theme of Gov. Fallin’s State of the State speech was that we should eliminate regulations to make the state more business-friendly. A common refrain from members of the business community is that environmental and safety regulations are too onerous. But even from free-market advocates, we hear much less about the regulations that protect existing businesses from competition.

A case in point – the Wall Street Journal reports on the growing number of jobs that require state licenses. For example, in Texas hair-salon “shampoo specialists” have to “take 150 hours of classes, 100 of them on the ‘theory and practice’ of shampooing, before they can sit for a licensing exam.”

Oklahoma also makes an appearance in the WSJ story:

Dusty Brummitt, a locksmith in Enid, Okla., says a new state law licensing his trade ensures the public gets quality work. Anyone who wants to be a locksmith must now prove he’s in the U.S. legally, submit to a criminal background check, pay fees of up to $350 a year and pass a 50-question exam. Just 32% of applicants pass the locksmith exam, state data show.

Mr. Brummitt says the law has “gotten rid of about 90% of the scammers in our state” since it took effect in 2007.

But it’s unclear how many scammers there were. The consumer-protection unit of the state attorney general’s office received just two complaints about locksmiths in more than a decade—one in 2006, the year before the law took effect, and one in 2008, the year after, according to Tom Bates, who runs the division. Three applicants for licenses were rejected because of criminal history.

Mr. Brummitt says licensure wasn’t intended to stifle competition. But he acknowledges that in some Oklahoma cities, the requirements have prompted immigrant entrepreneurs and retirees who did the work as a hobby—and who often undercut traditional locksmiths on price—to drop out of the trade. As a result, he said, some veteran locksmiths, who didn’t have to pass the exam because they were grandfathered in, have “definitely seen an increase in business.”

The trend continues in the current legislature. For example, HB 1462 by Rep. Lee Denney (R-Cushing) would require a state license for music therapists. The licensing would be overseen by a “Music Therapy Practice Board”, the majority of which is currently practicing music therapists. In other words, individuals already established in the field are tasked with developing rules that make it harder for newcomers to compete with them.

There’s certainly a case for licensing in fields where shoddy work can have dangerous repercussions, such as medicine. It’s also legitimate for professional associations to provide their own certifications based on whatever standard they see fit, but they shouldn’t be able to enlist the state to enforce it. That regulation may be friendly to existing businesses, but it harms consumers and new entrepreneurs.  If the legislature and governor are intent on reducing regulation, this would be a good place to start.