Increased regulation linked to slower job growth

BATON ROUGE, La. – Rep. Ledricka Thierry (D – St. Landry) wants to impose fines on any person who performs plumbing without a license, thus increasing the regulatory burden on Louisiana’s workers.

John Barker, executive director of the State Plumbing Board of Louisiana, states that the legislation is an attempt to “make sure the people we are dealing with are qualified to do what they’re doing, and to protect the health, safety, and welfare of the public.”

Risks associated with improper plumbing include, but are not limited to, explosions from the build up of hazardous gases, asphyxiation (oxygen deprivation) from faulty furnaces or water heaters, and general negligence, which in one case has caused a high school student to fall into a coma after he was given nitrous oxide instead of oxygen.

However, consequences of such heightened regulation include stymied employment growth, higher labor costs, and reduced competition.

HB 418 follows a 50-year legislative trend toward increased licensing requirements for U.S. workers. Today, nearly 30 percent of workers need licenses to practice in their field, up from less than 5 percent in the 1950s. And that compares to 13 percent in the United Kingdom today.

University of Minnesota professor Dr. Morris Kleiner affirms that increased licensing slows job growth. In his analysis, Kleiner compared states that regulated occupations with others that did not. Between 1990 and 2000, he found job growth was 20 percent higher in unregulated occupations than regulated ones.

Kleiner claims the real beneficiary of increased licensing are licensees who experience an average income increase of 15 percent, on the back of inflated prices. Increased licensing discourages new or out-of-state workers from joining the industry, predictably driving up the price of labor.

However, Barker claims the fiscal benefits of licensing are experienced elsewhere. “If you have licensed, qualified people doing the work, it will lower insurance costs. Also, banks want to loan money to companies who employ qualified people, not substandard plumbing or electrical workers.”

Louisiana’s licensing policies have gained notoriety, particularly from the funeral industry. The state’s Board of Embalmers and Funeral Directors continues to forbid Benedictan monks at St. Joseph’s Abbey from making simple caskets without a funeral director’s license.

The Institute for Justice became aware of the stand-off, and is engaged in a legal battle to defend the monks on the grounds that the licensing is pure economic protectionism.

Walter Block, professor of economics at Loyola University, agrees and claims “The licensing of plumbers is nothing but an attempt on the part of practitioners to limit the entry of competitors, and thus keep customers to themselves.”

Barker claims that portraying this type of legislation as a power play by licensees and licensing organizations could not be further from the truth, “the number one mission of this agency is to protect the health, safety, and welfare of the citizens of Louisiana.”

 

Robert Ross is a researcher and social media strategist with the Pelican Institute for Public Policy. He can be contacted at rross@pelicanpolicy.org, and you can follow him on twitter.

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