Licensing Hurts Practitioners, Too

Licensing Hurts Practitioners, Too

One of the most tired justifications for occupational licensing is that consumers must be protected from unscrupulous practitioners. These arguments frequently ignore the fact that countless other professions and industries without licensing requirements are nonetheless regulated with consumer protection in mind, and that nebulous arguments against unlicensed workers often amount to downright scaremongering.

But let’s move from the world of hypothetical harm to consumers to very real harms to practitioners, even those who are licensed. Write Meredith Kolodner and Sarah Butrymowicz for The New York Times:

From what Ms. [Tracy] Lozano could tell, a cosmetology license was a realistic way to ensure a better life, and she was willing to make sacrifices. While also working nights at a Pizza Hut, she borrowed $21,000 to cover tuition and salon supplies and put in eight-hour days at the school for the better part of a year.

The amount of time Ms. Lozano spent learning to give haircuts, manicures and facials was enormous, but the requirement was set by the state, and she didn’t much question it. She was determined to earn enough money to move out of her mother’s house. Only a few weeks after getting her cosmetology license in 2005, she was hired at a local Great Clips.

The job, though, paid just $9 an hour, which meant that her days double-shifting at Pizza Hut weren’t over. Even with tips, Ms. Lozano didn’t earn more than $25,000 in any of her first few years as a cosmetologist. For years, she relied on food stamps and health insurance from the state. She couldn’t cover living expenses and keep chipping away at her loan payments. Thirteen years after graduating, she still owes more than $8,000.

It is certainly true that by restricting supply through rent-seeking, licensed practitioners are able to command higher wages relative to their unlicensed peers. But Lozano isn’t pursuing profits through politics: by The Times’ account, she’s a well-meaning, hard-working mother trying to make ends meet.

The rent-seekers in this story are the for-profit cosmetology schools that collect money hand over fist thanks to the training requirements:

Cosmetology schools have a unique business model in the for-profit school world. They have two main streams of revenue. The first comes from students, often in the form of taxpayer-funded grants and loans to pay for the tuition. Cosmetology schools took in nearly $1.2 billion in federal grants and loans during the 2015-16 school year.

The second stream is the salon work the students do while in school. [O]nce they’ve hit a certain number of [classroom] hours, they start working on real clients in salons run by the schools. In full-time programs, going to school becomes a full-time job, where students clock in and out for seven- or eight-hour shifts.

Prices for these salon services — which include haircuts, manicures, facials and, at some schools, massages — are typically set below market rates to attract customers. The salons also sell shampoo, conditioner and other beauty products. One Iowa student said he and others had gotten perks (such as trips and special training) if they sold enough products. Another student, who sued a school in Pennsylvania, reported that her grades were partly based on whether she offered salon products to clients.

The schools don’t have to pay students for the services they provide; in fact, the students pay tuition for the hours they work in the salons.

The cosmetology school industry raked in $200 million in revenue in 2015-2016. Between federal grants, tuition, subsidized labor for salons, and turning students into part-time salespeople, the rents add up.

This exposé shows that lower-skilled licensed professionals, in addition to those locked out of their chosen profession and consumers who have to pay more, are among the many casualties created by our current licensing regime.

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By |2019-01-08T09:57:13-07:00January 8th, 2019|Blog, Occupational Licensing|