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Hidden costs of licensing cost more than Christmas

By   /   December 25, 2015  /   News  /   No Comments

Americans have a well-earned reputation for generosity and consumerism – two things that combine to make this weekend the culmination of the biggest shopping holiday of the year.

The average American family will spend more than $880 on Christmas gifts this year, according to a survey from the American Research Group, which polls consumers annually to track holiday spending habits. If you’ve been to a mall within the last week, you might wonder if that number is low-balling things.

But even the tremendous outpouring of consumer cash during the holiday season cannot match how much Americans spend each year – often without noticing it – as a result of occupational licensing schemes.

New research from the Heritage Foundation, a Washington, D.C., think tank, suggests the average household pays more than $1,000 every year in costs associated with licensing. Unlike holiday shopping, which is “seen” and easily budgeted for, these costs are hidden inside tax deductions, utility bills and almost every purchase made.

Licensing is nominally intended to protect public health and safety – something we should all be willing to pay for, at least on some level – but often goes far beyond those goals, says Salim Furth, a researcher for the Heritage Foundation.

“In a few cases — mostly in medical professions — there is clear argument for preventing newcomers from practicing without going through a rigorous pre-examination,” he said. “However, for most other professions — from barbers to sign language interpreters to school teachers — that argument does not apply.”

In Iowa, for example, hairbraiders are required to complete 2,100 hours of training in all forms of cosmetology before they can be licensed by the state. Not only does that drive up the cost of services, it keeps some people from being able to earn a living.

READ MORE: Iowa hairbraiders sue state over licensing requirements

In Texas, a similar licensing scheme that applied to eyebrow threading was recently struck down by the state Supreme Court.

One in four jobs in the United States is subject to occupational licensing, which means businesses must get permission from the local or state government before setting up shop.

Source: White House Report on Occupational Licensing, July 2015

Even the federal government says this is too much government.

In a report released in July, the White House advised state and local officials to take a hard look at red tape that restricts employment or increases barriers for entrepreneurs and job-seekers.

Licensing rules create “substantial costs” and are often not in sync with the skills needed for the job, the report found. They also make it harder for workers to transport skills across state lines – moving to a new state often requires going through a brand new licensing process – and raise the price of goods and services.

“Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing,” the White House concluded.