Peter Q. Blair is the youngest of seven sons and “got his start understanding markets by selling fruit and vegetables in the Bahamas in the Nassau Straw Market with his brothers,” according to the website of Harvard’s Graduate School of Education, where he is an assistant professor. He studied math and physics at Duke and Harvard before circling back to markets, earning a doctorate in applied economics at the University of Pennsylvania’s Wharton School.
As a Black man, Blair brings a special perspective to the topic of professional licensing, which raises entry barriers to professions that in some cases disproportionately affect racial minorities. A classic example is licensing requirements for African-style hair braiding. Braiding does not involve harsh chemicals or sharp objects, so even if it’s done badly, nobody gets injured. Yet in the early 1990s, 36 states required hair braiders to be licensed as cosmetologists, even though they didn’t do cosmetology. All but four states have since repealed the requirement.
Blair explains in a recent article for The Reporter, a publication of the National Bureau of Economic Research, that he was drawn to studying occupational licenses because they cover close to a quarter of the U.S. work force. Another attraction was the availability of new sources of data from government surveys, administrative records and a large online marketplace, Angi, formerly known as Angie’s List.
Blair did some of his research with Bobby Chung, a labor economist at St. Bonaventure University in St. Bonaventure, N.Y. The two found that “when a profession is licensed, the relative share of workers in the profession declines by 27 percent, which is a large impact,” Blair wrote in The Reporter.
To find out whether those who remain in the profession pick up the slack by working more, Blair collaborated with Mischa Fisher, the chief economist of Angi, sifting through 21 million transactions on Angi. They focused on labor markets that were split by a state border, with licenses required in one of the states but not the other. They looked at something called the accept rate. In an acceptance, at least one service professional is willing to buy a lead based on a customer-initiated search on a site like Angi. When the accept rate is low, it means that work opportunities are being left on the table; too many service professionals are dropping out of the market. Blair and Fisher found, he wrote, that “licensing of a task reduces the accept rate by 16 percentage points from a baseline of about 60 percent.”
Other research has found that “licensing does not appreciably change service quality, as measured by customer ratings, or the price paid for the work,” Blair wrote. Which means that licensing produces a lot of pain for sellers in exchange for not much gain for buyers.
Dick M. Carpenter II, a senior director of strategic research at the Institute for Justice, which lobbies for loosening of licensing requirements, told me that in spite of victories such as the one in Idaho over braiding, the licensure tide is still slowly rising. He argues that in many professions, licenses could be replaced with less restrictive means of consumer protection.
“Some alternatives, like consumer ratings websites and private certification, harness the power of reputation to compel companies to keep service quality high,” the Institute for Justice wrote in a 2017 report. Other alternatives include requirements that sellers post a bond or carry insurance or submit to registration or certification. Case in point: Restaurant cooks don’t have to get licenses; instead, inspectors check that kitchens meet health and safety standards.
There are instances where licenses are the right answer, to be sure. You wouldn’t want to rely solely on Yelp reviews to weed out incompetent X-ray technicians, pilots or surgeons. Even in cosmetology there’s a case to be made that people working with chemicals on skin should be licensed. (Although — not bragging here — I didn’t get a license before I dyed my wife’s hair early in the Covid pandemic. “Chez Pierre.”) Erin Walter, the director of marketing at the Professional Beauty Association, a trade group in Scottsdale, Ariz., told me that blow-dryers need to be trained to look out for head lice so they don’t spread it from one customer to another.
Blair and Chung also studied how licenses affect different racial groups. While licensing works against the interests of Black professionals in the case of hair braiding, it could help at least some of them in other professions, Blair and Chung theorized. For example, some professions won’t give licenses to people with felonies on their records, and Black men are more likely to have been convicted of felonies than white men. So for a Black man, having a license can be a way of demonstrating that he has no felonies in his past, even in states that don’t allow employers to ask about criminal records, Blair and Chung theorized.
When they tested the theory against the data, they found that it stood up. Black men and women got a bigger income boost from having a license than white men and women did.
I asked Blair what he makes of the finding. “We’re not saying these licensing restrictions are good,” he said. “We’re saying they’re informative.” When hirers can’t tell if someone has a criminal past, they may “rely even more on race as a proxy” and consequently discriminate against all Black people, Blair said. “The labor market values information, and when you take information away, it functions less efficiently,” he said. “The more fundamental fix is to fix what’s contributing to the disparity in arrest records between white men and Black men.”
The readers write
In place of the usual email from a reader, here are snippets from several emails and Twitter comments about my Wednesday newsletter: “Ordinary People Don’t Think Like Economists. It’s a Problem.”
“The problem is that the public is correct and the economists are not.”
“The world’s 100 top economists meet in Jackson Hole, Wyo., every year and proceed, with great pomp and circumstance, to prove that they have no idea of what’s going on.”
“Some economists allow their politics to influence or override their knowledge of economics, and sometimes are even borderline dishonest.”
“Maybe the public needs to fire policymakers who hate it and hire some better ones.”
“Economists are the court astrologers of the modern era.”
Ouch. I wrote in my first newsletter last summer that I admire economists and hope to convey my enthusiasm for what they do. It appears that the profession has a lot of work to do on reputation-building.
Quote of the day
“The capacity to transform itself from the inside makes capitalism a somewhat peculiar beast — chameleon-like, it perpetually changes its color; snakelike, it periodically sheds its skin.”
— David Harvey, “The Limits to Capital” (1982)
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