Before turning to the empirical analysis of this paper, it is important to note the history of recent reforms to occupational licensing. Historically, the removal of occupational licensing laws has rarely occurred. In an analysis that I co-wrote for the Bureau of Labor Statistics, we were able to find just eight instances of successful removal of occupational licensing laws in the last 40 years.[18] Interest in reform has grown in recent years, however. From 2011 to mid-2016, 12 states proposed comprehensive occupational licensing reform.[19] Interestingly, the state of Michigan was the most active of the 12 states in actually implementing reform — having delicensed a handful of occupations.[20]
Interest in reform has been growing at the federal level as well. In addition to the publication of the aforementioned white paper by the Obama administration in 2015, the Federal Trade Commission has become a more vocal advocate for reform. In early 2017, the FTC launched the Economic Liberty Task Force that serves as a resource for informing the public on the negative effects of occupational licensing.[*]
As states begin to implement occupational licensing reform, what benefits should accrue to consumers and prospective workers? Economic theory would suggest that prices of services provided by licensed workers should decrease. By examining the effects of Alabama establishing barber licensing requirements in 2013, it is possible to identify the benefits that Alabama consumers may have relinquished as a result of the new law.[†] This might provide insights into the potential benefits of licensing reforms being discussed in states around the country.
[*] “Economic Liberty: Opening Doors to Opportunity” (Federal Trade Commission, 2017), https://perma.cc/Q67D-GBEB. It should be noted that the FTC has consistently promoted occupational licensing reform through its research and advocacy since the late 1970s.
[†] For more background on Alabama regulation of barbers, see: Edward J. Timmons and Robert J. Thornton, “Here, There and Back Again: The Licensing, De-Licensing, and Re-Licensing of Barbers in Alabama,” Dec. 21, 2016, https://perma.cc/CXY7-X28K.