Archive for the 'unemployment' Category

Occupational licensing and ex-cons

By JSC5

Matt Yglesias has had a great series of posts up about how little sense it makes for state governments to require certification before someone can provide simple services like haircuts. The silliness of occupational licensing is one of my pet issues, and I’m stunned by how many intelligent people spend time justifying the status quo instead of applying the free market principles they otherwise claim to support.

For an indication of just how ridiculous some of this licensing gets, check out this list of occupations in North Carolina requiring government licensing. Along with Yglesias’s hobbyhorse, barbers, North Carolina also requires government charters for athletic agents, chick and egg dealers [presumably referring to chickens], geologists and soil scientists [but no other scientists], interpreters, landscape contractors, manicurists, refrigeration contractors, seed dealers, and scores of other workers.

Those of us who question the extent of occupational licensing in America usually argue that it is just a tool that helps currently-licensed providers limit competition and thus artificially raise prices and profits — all while hiding under the guise of consumer protection. To be sure, licensing is a good idea for certain classes of services in which market forces and lawsuits don’t provide sufficient deterrent to and remedies for harm. But how does “landscape contractor” fall into that category? Anyone who believes that landscape contractors clearly need a government license to operate, while gardeners are good to go without public imprimatur, is probably letting their preexisting beliefs and status quo bias guide their ‘principles’.

But back to Matt Yglesias. His final post in the series praises Barack Obama for making some positive moves towards liberalizing Illinois’ licensure regime.

And Yglesias is partly right. Barack Obama, as a state senator in Illinois, was the primary sponsor behind a bill that eased occupational licensing restrictions for convicted felons. The felon, after living crime-free for a period of time and documenting certain pro-social behaviors, could apply for a ‘Certificate of Relief from Disabilities’ (CRD) that would remove certain legal disabilities all felons face when released into the world. No longer would a single felony conviction bar someone from getting a license to cut hair; the licensing board would have to come up with some other excuse, instead.

Yglesias is skeptical about the broader impact of the CRDs:

“The problem here is that when you set up these boards, they have incentives to think up any kind of halfway plausible reason to bar people from entering the field.”

Remove the felony bar, the logic goes, and the boards will just come up with other flimsy excuses.

He’s almost certainly right about most licensing boards and most occupations. But in the particular case of Illinois, the problem isn’t that the licensing boards don’t approve ex-cons despite their Certificates. It’s that few ex-cons end up applying for licensing in the first place. As this report (PDF) indicates, only 47 applications for CRDs were made within the first 2 years of the program’s implementation. Of that extremely low number, 81% of applications for CRDs were approved. But none of those recipients ended up applying for occupational licenses within the observation period. That said, a very few ex-cons without CRDs did apply for occuptional licenses, and 67% of those applicants were eventually approved during the same period.

The bottle-neck in Illinois, then, isn’t necessarily the board rejecting felons, but qualified felons not knowing about or not applying for CRDs or occupational licenses in the first place.

I guess the take-home lesson here is that occupational licensing boards really can be nothing more than thinly disguised guilds covering their own economic interests. But occupational licensing reform isn’t exactly the key to rehabilitating felons. Connecting felons with existing benefits and procedures is the easy low-hanging fruit there. That doesn’t mean that making it easier for ex-cons to become barbers isn’t worth doing … it’s just not the kind of major reform that should get our blood pumping. It turns out that the actual benefit of CRDs may just be the perception among private employers that the state says these guys (and they are mostly guys) are safe(r).*

* No, I didn’t closely follow Barack Obama’s occupational licensing and recidivism reform policies in the Illinois state legislature. I came by this knowledge honestly, as part of a much larger research project this summer.

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State-owned enterprises

[by JSC5]

A good illustration of the incoherence of our discourse about government-owned enterprises, from today’s NYT:

Neil M. Barofsky, the special inspector general for the Troubled Asset Relief Program of the Treasury Department, said both carmakers [GM and Chrysler] needed to shut down some underperforming dealerships. But it questioned whether the cuts should have been made so quickly, particularly during a recession. The report, released on Sunday, estimated that tens of thousands of jobs were lost as a result.

After having read and watched most of Mr. Barofsky’s congressional testimony for a one of my jobs, I can honestly say that I think he’s done a great job as Special Inspector General for TARP. This latest SIGTARP report, however, seems to suffer from a problem shared by just about all analysts, commentators, politicians, and academics who work on bailout issues and the problems of state ownership. What exactly are our goals with these bailed-out institutions? Should we run them for the public benefit, or run them as businesses to return them to profitability as soon as possible? Or do we have hybrid, competing goals?

I think conservatives (and the rest of us!) were worried that state-owned enterprises would get treated like adjunts of the state and be forced to operate suboptimally in order to support public goals like employment. It now turns out that the Administration, perhaps afraid this perception, has been very aggressive in pursuing profit-maximizing personnel cuts and dealership reorganizations. Does anyone think this will win the Administration any love from conservatives (or from the rest of us)? If anything, the Adminstration is now catching flack for not doing enough to support employment.

All I’m saying is, we need to decide what the proper goals for SOEs are. And then we need to tell SIGTARP, congressional representatives, and everyone else in the system, so that we don’t get whiplash going from shouts of “socialism!” to “free market ideolog!” in 2.6 seconds.


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This is a group blog. JSC5 currently writes from the US. JSC7 writes from behind the Great Firewall of China.

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