Saturday, August 8, 2015

Life among the 25 percenters

From the recent Obama administration Council of Economic Advisers' report we learn that, the percentage of the workforce covered by State licensing laws grew from less than 5 percent in the early 1950s to 25 percent by 2008, meaning that State licensing rate grew roughly five-fold during this period. [our bold]

If you add the increase in local and federal licensing it rises to 29%. Hardly a surprise that this coincides with something Paul Krugman and other leftish economists are always decrying; income inequality increasing since the 1970s. Because other data in this CEA report tell us that there is a big difference in wages between the lucky licensees and others.

The CEA use a study by Morris Kleiner and Alan Krueger (2010) that shows that licensed workers earn 28% more, on average, than unlicensed workers. Some of that undoubtedly due to superior skills prevalent among the licensed, but not all. Accounting for the different skill and training levels still leaves a gap in equality of 10-15%.

That's what happens when governments limit entry to some professions--raising wages for those who can qualify--and thus push others into lower skilled (unlicensed) professions where competition is more abundant.

It's very difficult to find any justification in concerns for consumers' health and safety in licensing interior decorators or florists. But that is happening in the USA, where the people are supposed to be equal before the law. That is, all free to pursue their happiness by furnishing homes and arranging flowers.

Ought to be a concern for inequality-phobes, no?

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