90 Miles From Tyranny : Licensure and Labor Unions: Two Sides of the Same Coin

Tuesday, April 29, 2014

Licensure and Labor Unions: Two Sides of the Same Coin

As states increasingly move towards limiting labor union power through Right to Work laws, governments are finding other ways to restrict supply and inflate prices, by increasing occupational licensure requirements. Now, one might wonder why governments are motivated to do this, when it manifestly results in worse outcomes for consumers? It is not pure mean-spiritedness (although that undoubtedly plays some role), but the fact that they are barraged with misinformation from big-money trade groups who claim that without these requirements, the consumers will be endangered.

Of course, this is nonsense. Doctors don’t make money by killing all their patients. Chefs don’t make money by poisoning their patrons. It is in the businessman’s best interest to do a good job and to be honest about it. In our modern age of information, it is very difficult for a swindler to do well without being found out. A couple of bad reviews on a consumer information site and the would be crook is sunk. Meanwhile, millions of hard working, industrious individuals are prevented from practicing their trade by restrictions that are often insurmountable.

The effects of this are two-fold. One, those who are locked out of the labor market are regulated into poverty and dependence, forced to subsist on the public dole instead of becoming productive members of society. Two, incumbents are protected from competition, resulting in higher prices and lower quality for the consumer, not to mention less choice.

It should be noted that both the market power resulting from labor unions and that resulting from licensure requirements require government intervention to work. Labor unions operate under the fiction that they are a voluntary gathering of individuals to collectively bargain with employers. If this were true, I would have no problem with them, as their power would be limited to that achieved through voluntary exchange. In reality, however, they rely on a large number of coercive laws that prevent employers from exercising their rights to run their businesses as they choose. I have been critical of Right to Work laws for replacing one set of bad government regulations with another bad government regulation that restricts the rights of employers to contract. Nevertheless, it must be admitted that Right to Work represents an improvement on the status quo, although absolute freedom would be preferable to both systems.

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