Cosmetologists in many states face substantially heavier training requirements t
ID: 446646 • Letter: C
Question
Cosmetologists in many states face substantially heavier training requirements than do Emergency Medical Technicians. In markets in which consumers cannot judge quality prior to consuming goods, the issue is whether licensing of the occupations producing the goods improves quality and economic welfare. Read WSJ article Do Barbers Really Need a License? by: Dick Carpenter and Lisa Knepper, May 11, 2012 (pdf). Also read Do barbers really need a license? By Bob Craft.
https://bbaddins.schoolcraft.edu/addins/econ202v2/docs/mod12Barbers.pdf
http://cbnclean.typepad.com/blog/2012/05/do-barbers-really-need-a-license.html
In your discussion post, respond to the following questions:
1. What is the "lemons problem"? In occupations with a lemons problem, does occupational licensing improve economic welfare?
2. What evidence do the authors provide in favor of eliminating occupational licensing requirements from some professions?
Explanation / Answer
Government regulation is often explained as consumer protection in cases involving asymmetric information: situations when sellers know more about their product than potential buyers do. Proponents of consumer protection regulations argue that if buyers know sellers can withhold key information about a product, meaning buyers are unable to distinguish between good and bad purchases ahead of time, lower-quality products will dominate the market because consumers will be less willing to make purchases. The fear is that without regulations buyers and sellers will not make beneficial exchanges.
A new study conducted for the Mercatus Center at George Mason University shows that reputational feedback mechanisms—buyers’ and sellers’ abilities to rate one another and share information about their interactions—can help correct these information deficiencies better than traditional regulatory approaches. The Internet and the expansion of the “sharing economy” have provided a solution to the information deficiency problem where regulations have been ineffective. The continued use of outdated regulatory approaches may in fact prove detrimental to consumers.
To read the study in its entirety and learn more about its authors, scholars Adam Thierer, Christopher Koopman, Anne Hobson, and Chris Kuiper, see “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem.’”
THE LEMONS PROBLEM
George A. Akerlof, winner of the Nobel Prize for his contributions to the economics of information, argued in a 1970 paper that information asymmetries between producers and consumers can lead to the “lemons problem,” in which lower-quality products crowd out higher-quality products because of uncertainty among consumers.
For example, in the used car market, used cars tend to command a low market price because potential buyers are unable to tell whether a used car is good or bad.
2 ,.
De-licensed occupations at the state level
As we discuss in the following subsections, our research of state legislative audit committee records, CLEAR reports, and various other sources has revealed only eight instances of the de-licensing of occupations over the past 40 years.
Barbers in Alabama
The National Association of Barber Schools (NABS) (which no longer exists) formerly published annual reports listing the various barber licensing requirements for all states.According to its reports, in the early 1970s, Alabama was the only state without a barber licensing law, although the NABS data also indicated that “some Alabama counties had barber laws.” Effective in 1973, the Alabama legislature passed a licensing law that required barbers hereafter to have completed 1,500 hours of barber school instruction and obtained a minimum of 12 years of formal education. Although a grandfathering exception existed, shortly after the 1973 law passed, the reported number of barbers practicing in Alabama fell sharply. The law was in effect for approximately 10 years until 1983, when Alabama state barber licensing requirements were dropped. After that time, Alabama was again the only state in the United States not licensing barbers, although seven counties—Baldwin, Lauderdale, Jefferson, Mobile, Madison, Morgan, and Shelby—continued to do so. Interestingly, cosmetologists—whose haircutting services are close substitutes for those of barbers—continued to be licensed over this period.
In 2000, a bill was introduced in the Alabama senate to again license barbers, but the bill did not pass. However, in 2012, another barber licensing bill was introduced, and in May 2013, it became law. As its sponsor stated, “In a business where personal services are being administered, there is a duty to make those services safe and sanitary with the highest level of care.”
The new Alabama law requires that all barbers be licensed, with fines of $500 and up to 30 days in prison for those who practice without a license. To become a licensed barber, one must complete at least 1,000 clock hours of instruction in a school of barbering and pass an examination. (A person already working as a barber on the effective date of the act is grandfathered, however.) Finally, the act replaces the Alabama Board of Cosmetology with the Alabama Board of Cosmetology and Barbering, which now regulates barbers as well as cosmetologists, aestheticians, manicurists, and natural hairstylists.
The licensing regime for barbers in Alabama has been unique in its transformation from a situation of no licensing to one of licensing, with the cycle repeated. Interestingly, to be a licensed cosmetologist in Alabama requires 50 percent more hours of schooling than the number of hours to be a licensed barber (1,500 hours vs. 1,000 hours), despite the similar services of each occupation.
Morticians (funeral directors) in Colorado
Currently, morticians are commonly referred to as “funeral directors,” although the term “undertaker” is also still used. Funeral directors arrange the details and handle the logistics of funerals. They help set up the locations, dates, and times of wakes (viewings), memorial services, and burials. Often, funeral directors also practice embalming, and sometimes, different titles are used for those who do or do not practice embalming and/or cremation.For example, Colorado refers to funeral directors who practice embalming as “mortuary science practitioners.”
Funeral directors are licensed in all states except Colorado. After state auditor and sunset committee reviews, the Colorado legislature repealed the mandatory licensing of funeral directors in 1981 and abolished its 70-year-old licensing board. However, a “title protection” requirement is still in place. The Colorado statute states the following:
A person shall not advertise, represent, or hold oneself out as or use the title of a funeral director unless the applicant has at least 2,000 hours practicing or interning as a funeral director and has at least fifty funerals or graveside services.
Similar title protection requirements apply to mortuary science practitioners and embalmers. The Colorado statute means that, although a person does not need a license to practice legally, he or she may not use the title ordinarily associated with the practice unless the requirements have been met.
Since the repeal of the licensing requirement for funeral directors in 1981, proponents of licensing have frequently attempted to reinstitute the licensing of funeral directors and other practitioners of mortuary science. In its role as a “sunrise review” committee, the Office of Policy, Research and Regulatory Reform of the Colorado Department of Regulatory Agencies (DORA) has repeatedly recommended against reimposing licensing, arguing that “there is no evidence that a licensing board could improve existing oversight.
A person shall not advertise, represent, or hold oneself out as or use the title of a funeral director unless the applicant has at least 2,000 hours practicing or interning as a funeral director and has at least fifty funerals or graveside services.
Similar title protection requirements apply to mortuary science practitioners and embalmers. The Colorado statute means that, although a person does not need a license to practice legally, he or she may not use the title ordinarily associated with the practice unless the requirements have been met.
Since the repeal of the licensing requirement for funeral directors in 1981, proponents of licensing have frequently attempted to reinstitute the licensing of funeral directors and other practitioners of mortuary science. In its role as a “sunrise review” committee, the Office of Policy, Research and Regulatory Reform of the Colorado Department of Regulatory Agencies (DORA) has repeatedly recommended against reimposing licensing, arguing that “there is no evidence that a licensing board could improve existing oversigh.