One of the most controversial and heavily debated responses to the
pandemic, and one that was and continues to be used by various
governments, is Shelter in Place (SIP) orders, commonly referred to as
lockdowns. This week saw Australia
institute another SIP for the Greater Sydney region in New South Wales.
These SIP orders have become familiar in news coverage, and in the
logic they use to combat the pandemic. Countless articles and studies
lauded these policies as being some of the best ways to prevent deaths
from the pandemic.
While familiar in form and logic, evidence about SIP’s long-run
effectiveness remains scant. Many of the claims about their efficacy
have come from epidemiological models that have largely failed to accurately predict real-world outcomes
from the pandemic. In the face of this issue and in an attempt to
better understand the long-run effects, measures beyond simply counting
cases and deaths directly from Covid have moved to the front of many
policy discussions. Increasingly, references to excess deaths have
dominated discussions of the pandemic and how to respond to it.
This transition has generally been a positive one. While every death
is tragic, one of the core pieces of information that policymakers need
if they are to craft effective pandemic policy is the number of deaths
that wouldn’t have occurred absent the pandemic and what effect a policy
has on that number.
As public health practitioners moved to this view, a similar
transition occurred among those arguing strongly for SIPs. Arguments
about the effect of the pandemic on excess deaths now largely dominate
the discussion of the justification for implementing SIPs. This
justification has also been employed to suggest that without the
implementation of SIPs, excess deaths would have been far higher than
what were experienced, often based on the speculative models of disease
spread and death.
What is missing from too many of these claims is any discussion of
data-driven, long-run evaluations of the relationship between SIPs and
reduced excess deaths. Indeed, a plethora of articles purport that SIP
and other lockdown measures help to lower excess deaths created by the
pandemic, presenting raw counts of deaths compared to predicted deaths
without employing standard statistical approaches that could allow such a
hypothesis to be tested.
For example in April 2020 and updated in February 2021, The New York Times published a piece
that attempts to reconcile Covid-19 deaths with total deaths. The
journalists quote a demographer at the Max Planck Institute for
Demographic Research who says that while “today’s rise in all-cause
mortality takes place under conditions of extraordinary measures…It is
likely that without these measures, the current death toll would be even
higher.”
Similarly in May 2020, Business Insider released an article
about the correlation between lockdown duration and excess deaths. They
state outright: “Later lockdowns suggest higher excess death rates.”
They similarly suggest places that are quicker to lock down have lower
excess death rates.
The use of excess deaths can be illuminating because the data would
ameliorate many issues with misclassifying Covid deaths. Covid-19 death
counts are susceptible to under-or overcounting from misdiagnosis and
errors in reporting. Furthermore, excess death data surmounts the
reporting obstacle and simply accounts for the total number of deaths
from all causes at a given place and time. We can therefore gauge the
pandemic’s mortality impact by comparing 2020 excess deaths to a
historical average of excess deaths under ‘normal’ conditions.
As an increasing amount of data has become available, better
statistical examinations of the excess death data have become possible.
Examinations that utilize traditional statistical tools represent an
important opportunity to explicitly test claims like those made about
the efficacy of SIP orders.
One such study
was recently released by the National Bureau of Economic Research
(NBER) working paper series. The paper, “The Impact of the COVID-19
Pandemic and Policy Responses on Excess Mortality,” uses excess death
data from 43 countries and all US states to run an event study framework
and determine whether there was a significant change in excess deaths
after SIP implementation.
The research, while finding slight differences in SIP impact across
states and countries, concludes that “following the implementation of
SIP policies, excess mortality increases.” This finding runs counter to
the general claims from those supportive of SIP policies. Further, they
note that the research did not produce an observable difference in
excess death trends before and after the SIP was implemented. They
explain that “when comparing across countries, we observe a general
upward trend, indicating that countries with a longer duration of SIP
policies are the ones with higher excess deaths per 100,000 residents in
the 24 weeks following [the first] COVID-19 death.”
While these findings are preliminary and will undergo further peer
review, they provide interesting evidence that suggests SIP policies
might not lead to the claimed and desired results. The authors
acknowledge some limitations to their work, especially in its ability to
test for the counterfactual and in the issues surrounding the
measurement of total mortality numbers.
Despite these limitations, this study represents a welcome turn to
the “‘real world’ impact of SIP policies,” not modelers’ assumptions
about perfect implementation and adherence. Among the most interesting
parts of the study is their view that based on the evidence, individual behavior
and response to the Covid-19 risk might have changed even without an
implementation of SIP, implying that SIPs are potentially gratuitous.
Findings like these are based on actual data and use solid
methodological approaches that are hard to ignore.
Their overarching finding is that SIPs are largely ineffective at
reducing excess mortality (except perhaps where populations can be
completely isolated). These sorts of studies are of particular
importance when expansive and drastic public policies––no matter how
seemingly well-intentioned––are implemented. More studies like this one
that use real data are needed to better understand both the issues that
surround current policy and how to respond to similar problems in the
future.
Ultimately, these early findings reinforce the core difficulty that
policy planners face. Planners can never know enough to plan for every
eventuality, nor can they accurately predict what their plans will
actually do. As a result, plans often end up based on a “pretense of knowledge” rather than real-world evidence or understanding.
Ryan M. Yonk is a Senior Research
Fellow at the American Institute for Economic Research. He holds a PhD
from Georgia State University and a MS and BS from Utah State
University.
Prior to joining AIER he held academic positions at North Dakota
State University, Utah State University, and Southern Utah University,
and was one of the founders of the Strata Policy.
He is the (co) author or editor of numerous books including Green V. Green, Nature Unbound: Bureaucracy vs. the Environment, The Reality of American Energy, and Politics and Quality of Life: The Role of Well-Being in Political Outcomes. He has also (co) authored numerous articles in academic journals including Public Choice, The Independent Review, Applied Research in Quality of Life, and the Journal of Private Enterprise. His research explores how policy can be better crafted to achieve greater individual autonomy and prosperity.
Get notified of new articles from Ryan M. Yonk and AIER
Covid-19 and the lockdowns that followed should have been a rude
wake-up call that we are losing our appreciation for the power of
economic freedom. Our government deciding who can and cannot work was a
blatant attack on economic and personal freedom at the most intimate
level. This contempt for the right to earn a living, however, has been a
growing issue well before Covid-19. Our government has been deciding
who can and cannot work for decades through the advent of occupational licenses,
which legally bar individuals from offering a professional service
without first passing through artificially-imposed barriers to entry.
The public interest law firm Institute for Justice writes,
“All Americans deserve the
opportunity to earn an honest living. Yet occupational licenses, which
are essentially permission slips from the government, routinely stand in
the way of honest enterprise. Without these licenses, workers can face
stiff fines or even risk jail time.”
A person is not truly free if they are unable to provide a
professional service to another consenting individual, provided they are
not harming others. However, occupational licenses are a direct
prohibition on an individual’s right to perform a service for a living.
This is also a very recent innovation as the Reason Foundation reports,
“The percentage of the workforce
that must obtain a license to work has grown from about 4.5 percent
during the 1950s to over 20 percent today.”
The astronomical growth of the occupational licensing regime doesn’t
just cover high knowledge professions like medicine and law, but
virtually everything imaginable from hedge trimming to hair cutting.
Reason writes,
“More than 1,000 occupations are
currently regulated by the states. Children even need the government’s
permission to run makeshift lemonade stands during their summer
vacations.”
The growth of such a regime has come at the cost of people’s ability
to make a living with their unique talents. That is because often, such
laws are made to protect incumbent businesses from competition by
legally requiring new entrants to the market to pass a series of
requirements that are costly both in time and money. The Institute for
Justice writes,
“The requirements for licensure,
though, can be an enormous burden and often force entrepreneurs to waste
their valuable time and money to become licensed. Additionally, these
burdens too often have no connection at all to public health or safety.
Instead, they are imposed simply to protect established businesses from
economic competition.”
It is one thing to require doctors to attend medical school, it’s another thing to mandate that hairdressers
and florists pass hundreds of hours of formal training before they can
legally solicit a client. Reason highlights an example of how outrageous
and malicious licensure laws are when they tell the story of a talented
florist struggling to obtain a license in Louisiana:
“The licensing exam emphasizes
such subjective criteria as whether flowers have been “picked properly,”
arrangements have the “proper focal point,” or flowers are “spaced
correctly.” No wonder the passage rate is less than 50 percent. So
despite her proven talent, Shamille has been forced to forego floral
work and find a job elsewhere.”
Such licensure laws not only crush the ability of individuals to make
a living, but also hurt the community as a whole to the benefit of
well-connected interests and their friends in the government. A report
from the Brookings Institution explains that, although licenses are advertised to increase public safety and service quality,
“[b]y limiting access to many
occupations, licensing imposes substantial costs: consumers pay higher
prices, economic opportunity is reduced for unlicensed workers, and even
those who successfully obtain licenses must pay upfront costs and face
limited geographic mobility. In addition, licensing often prescribes and
constrains the ways in which work is structured, limiting innovation
and economic growth.”
The claim that these economic costs are justified by improved quality and safety is a dubious one at best. In fact, Reason documents
multiple studies finding that increased regulation of professions in
the 1970s and 1980s most often produced no change in quality and is
almost always coupled by an increase in the price of the service
provided.
A Closer Look
Aside from these disturbing anecdotes, there are ways to easily
quantify the cost that occupational licensing imposes on those seeking
them. For the purposes of our analysis, we will be investigating how
many hours, days, weeks, months, or years certain licenses
require – opportunity cost – as well as the upfront price of taking the
required examination or application fee – accounting cost.
To set the stage, occupational licensing is an aspect of law which is
handled on a state-by-state basis. As the Brookings Institute explains:
“Typically, licenses are required
by state governments…The U.S. licensure system takes a variety of forms
throughout the country, but typically a state regulatory board… will
process license applications, handle renewals, and oversee compliance
with licensing rules, among other activities.”
Below is a graph compiled on the number of occupational licenses on a state-by-state basis, ranked in ascending order, with data from CareerOneStop, sponsored by the U.S. Department of Labor.
As the most populous as well as the fourth most licensed state in the
country, we have chosen to inspect the opportunity and accounting costs
of licensing in California. Two sets of jobs are provided: one set of
low-skilled occupations; the other of high-skilled ones. In the
low-skilled set, we highlight the licensing costs faced by manicurists, electrologists, estheticians, barbers, and cosmetologists. In the high-skilled set, we include lawyers, registerednurses, optometrists, physicians, and psychologists.
All along the spectrum of licensed
professions, from high-skilled to low-skilled, the investment of time
and money in obtaining legal permission to work is dizzying to consider.
Even for manicurists, the low-skilled occupation with the lowest
barriers to entry, one must accumulate 400 hours – the equivalent to 10
weeks of standard 9-5PM workdays – of unpaid apprenticeship and invest
$110 before being able to legally bill for their services. While 10
weeks of unpaid labor might not seem like that big of a deal to a
college student, for those in the bottom two quintiles of wage earners,
i.e. most of those applying for a manicurist’s license, not working for
10 weeks and having to pay $110 can be financially impossible. According
to Deloitte and research compiled by the Bureau of Labor Statistics, the bottom two quintiles of consumers in 2017 had negative savings, making unpaid labor and paying over one hundred dollars well nigh impossible.
Considering that this is the grim reality faced by those aspiring
manicurists, the hurdles and hoops other beauticians must jump through
to get their licenses only gets more difficult. Given these data, it is
not surprising that a Reason Foundation study found that
“Licensing decreases the rate of
job growth by an average of 20 percent.” The same study also found that
the “cost of licensing regulations is estimated at between $34.8 billion
and $41.7 billion per year,” meaning that the deadweight loss of
complying with regulations is roughly equivalent to Armenia’s 2020 GDP
of $40,788, as estimated by the International Monetary Fund.
While many intuit the blatant, undisguised regulation capture in the
beauty fields, others believe that, while regulations may be
unjustifiable in fields that do not involve life or death
decision-making, they must be applied to high-risk fields. Whether
consciously or not, most of us buy into the idea that to exist in a
world where unlicensed physicians are commonplace would be uncertain,
chaotic, and even dangerous. Provided this pervasive attitude, the
subsequent graph detailing the time and financial investment required to
become a trained medical professional or lawyer will be less shocking,
prima facie, than the lower-skilled occupations.
The cost does not include an
undergraduate and graduate education which could reach into six-figure
levels when considered. For these high-skilled occupations, the
investment of time is measured in years rather than hundreds of
hours, and the cost of test-taking and licensing fees measures easily
above the $125 of the sample low-skilled jobs, climbing well into the
thousands. While extensive training, vetting, and ratings of
professionals in these high stakes fields are crucial to consumer
protection – certainly much more so than with the low-skilled jobs
listed – the imposition of attending an undergraduate program before
proceeding to graduate school to study the skills relevant to the
vocation is artificial, expensive, and unnecessary.
Mandatory Licenses Do Not Improve Safety
According to an article by the The Regulatory Review,
a publication associated with the University of Pennsylvania, an Obama
Administration report found that although there may be reason to believe
that licenses may improve safety in specific professions,
“[a]ccording to the federal report, however, studies on licensing requirements have found
that licensing does not actually improve public health and safety. In
its survey of twelve studies, the report identified only two that found
that stricter licensing requirements increased the quality of services.”
The report also found that state licensing regimes reduce labor
mobility and could become problematic as the prevalence of telework
increases. Furthermore, these licensing regimes disproportionately
exclude certain populations from the workforce such as those convicted
of felonies, who would be well-served by meaningful employment, and even
immigrants who possess certification from their country of origin but
not from their state of residence.
Medical professionals, for example, are generally only licensed to
practice in a given state, even after their years and years of rigorous
training, and must jump through more hoops to practice elsewhere. Such
restrictions on work only serve to preserve the market power of
well-connected businesses via the coercive arm of the state. The
illegitimacy of such licensing laws was revealed when former Vice
President Mike Pence issued a regulation
in the early days of the pandemic on March 18th, permitting all medical
professionals to practice anywhere in the United States in light of
limited medical workers and the threat of the coronavirus:
“With regard to medical personnel,
at the President’s direction, HHS is issuing a regulation today that
will allow all doctors and medical professionals to practice across
state lines to meet the needs of hospitals that may arise in adjoining
areas.”
Like many regulations that were lifted for emergency reasons during
the age of Covid-19, restrictions on the ability of doctors to practice
medicine across state lines without a license for each state was found
to be unnecessary. When push comes to shove, it turns out a doctor can
perform just as well in Connecticut as New York without extra
certification. Go figure.
Society Can Do Without Mandatory Licenses
It is clear that many professions have not seen any noticeable
increase in quality due to the advent of licenses and that such
restrictions function primarily to reduce competition for established
actors. Trimming hedges and styling hair for compensation without the
prescribed training and certifications should not be an illegal act. The
only people who benefit from this are the incumbent businesses that are
protected from competition and disruptive innovation. Even highly
sophisticated professions like law and medicine would be better off if
such legal barriers were removed.
American legal scholar and attorney, Tim Sandefur, explains in his book The Right to Earn a Living
that one of the biggest quality assurances is competition. The reason
why you won’t encounter an unqualified professional at hospitals and law
firms is due mostly to their motivation to provide excellent service
rather than legal barriers set by the government. Take a look at any
large law firm. They predominantly employ graduates exclusively from the
top law schools. Not only that, but they typically hire those with the
highest GPAs and strong extracurricular leadership positions. Passing
the bar is the least of the requirements to work at such firms.
Competition and innovation from both employees and employers is what
raises standards, not mandatory licenses and state intervention.
Quality certifications are good to have but they shouldn’t be
mandatory, especially if the cost of obtaining them is prohibitively
expensive. Continuing with the example of the bar exam,
passing is legally required to obtain a license to practice law.
Although it is surely a good quality assurance test, it shouldn’t be
illegal for someone to voluntarily solicit services from someone who
hasn’t passed the bar. Skills come in all forms and perhaps some people
can’t translate their legal talents into a test like the bar exam. Some
people simply can’t afford a fully certified lawyer and they should have
every right to solicit services from someone who isn’t.
Furthermore, what constitutes the practice of law or other
sophisticated professions is often nebulous on purpose to keep out
competition of all sorts. Supreme Court Justice Neil Gorsuch writes in
his book A Republic If You Can Keep It, that
“[i]n recent years, lawyers have
used these rules to combat competition from outsiders seeking to provide
routine but arguably “legal” services at low or no cost to consumers.”
He cites cases involving innovative firms like Quicken Family Lawyer
and Legal Zoom which were both sued in Texas and South Carolina,
respectively. Their crime was providing what can be interpreted as a
legal service. That service was selling software that helped draft
documents like wills and contracts. Such a service is clearly beneficial
to society, especially to those who can’t afford a lawyer to accomplish
these necessary but relatively simple tasks.
Furthemore, the cost of going to law school is skyrocketing, much of
which can be attributed to legal accreditation requirements. Justice
Gorsuch notes that since the 1980s the cost of a private law degree has
increased over 150% and a public degree over 420%, adjusted for
inflation. Harvard Law School’s
estimated cost of attendance is just shy of $100,000, $65,000 of that
being for annual tuition, with three years being the average time it
takes to receive a JD. That cost is relatively consistent among most
elite law schools. Justice Gorsuch notes that the average tuition for an
ABA accredited law school in the state of California is not much better
at around $44,170 a year.
Again, not only are legally mandated certifications to work inflating
the costs of important services, but they often keep it that way with
little improvements to public safety. The legal profession is a clear
example of a sector that certainly needs qualified workers. However, it
is clear that mandatory requirements to even practice law in any form,
whether it be complex corporate litigation or showing a family how to
write a will, are not necessary. In fact they are clearly barriers to
entry to the benefit of entrenched economic interests, at the expense of
society.
You can apply the same level of analysis to any other complex
profession such as medicine or accounting. All mandatory licenses do is
take the power to offer and seek a service from the people to place it
in the hands of the few. Even if someone is supposedly unqualified to
offer a service, it is the right of the consumer to take that risk as it
is likely they have no better option. If necessary, fraud and harm
caused by incompetent or competent professionals can be punished via the
criminal code.
Key Takeaways
Occupational licensing is one of those topics that may not seem like a
big deal to the average person at first glance. Of course professionals
should be qualified for their jobs and of course certifications provide
a great way to ensure quality. The problem comes when the power to
decide who can and who cannot work is given to a coercive authority. In
the marketplace, bad actors are naturally corrected by competition and
public scrutiny. This is especially true in our age of instant
communication and crowd-sourced reviewing platforms such as Yelp.
However, under our current occupational licensing regime, honest and
hard working people are kept from offering a service to society by an
arbitrary system that protects established businesses from competition.
Such laws are built more so on fearmongering than a true concern for
public safety. Furthermore, such a system artificially suppresses those
who have the skills but lack the resources to fulfill the expensive and
demanding licensure requirements set by the state.
While the number of occupational licenses increases, we have seen
little increase in public safety as a direct result and a massive
increase in prices. There is nothing more Un-American and
Anti-Capitalist than a system that ordains some with the right to earn a
living and bars others from that same essential right. Rather than
cultivating an environment where everyone can safely contribute,
occupational licenses have made the economy a pay-to-play scheme that
only serves well-connected interests.
Jack Nicastro is a Research Intern
at the American Institute for Economic Research. He is currently
pursuing his Bachelor’s degree in Economics and Mathematics at Dartmouth
College.
Jack is Director of Programming for the Dartmouth Libertarians, a
writer and content-creator for the Dartmouth Political Times, a Co-Chair
of the American Enterprise Institute Executive Council at Dartmouth,
Assistant to the Program Director of Dartmouth’s Political Economy
Project and a horseback rider on the dressage team.
Jack enjoys playing bass guitar in his free time.
Get notified of new articles from Jack Nicastro and AIER.
Ethan joined AIER in 2020 as an
Editorial Assistant and is a graduate of Trinity College. He received a
BA in Political Science alongside a minor in Legal Studies and Formal
Organizations.
He currently serves as Local Coordinator at Students for Liberty and
the Director of the Mark Twain Center for the Study of Human Freedom at
Trinity College.
Prior to joining AIER, he interned at organizations such as the
American Legislative Exchange Council, the Connecticut State Senate, and
the Cause of Action Institute.
Ethan is currently based in Washington D.C.
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Amelia Janaskie
Ryan M. Yonk – June 30, 2021
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