007 A License To Cut

Most US states require a license to cut hair.  This is basically a way for the barbershop lobby to restrict competition and raise wages.  This might be good for reducing American inequality because barbers are probably below the median wage and it helps raise their incomes up to the median.  But it also raises costs for the median American without any productivity gains, so I tend to think that licensure for barbers should be eliminated until there is some evidence that it creates clear benefit for anyone besides the licensure lobby.  It restricts basic freedoms and increases the opportunity for the kind of police overreach that we have seen in Ferguson this past week.  For example, in 2010 the Orange County police engaged in SWAT-style raids of barbershops that were suspected of harboring barbers who were allegedly serving their contented customers without licenses from the state barber syndicate

“Deputies rushed into the businesses with their guns drawn, while wearing masks and vests and yelling obscenities and threats of violence,” the new complaint alleges.

“During these raids, Plaintiffs were arbitrarily detained, their persons searched, the premises were ransacked and left in total disarray and property such as doors, windows, cabinets, mirrors, and furniture was damaged or destroyed.”

…In a series of sweeps — conducted without warrants under the authority of the DBPR between August and October 2010 — 35 people were arrested on a charge of “barbering without an active license,” which is almost never used for custodial arrests in the state.

…Employees of the shops searched in the sweeps described them as SWAT-style raids, during which some barbers were handcuffed and their workstations searched.

A DBPR review, conducted after an Orlando Sentinel report brought the barbers’ complaints to light, found evidence of property damage, the use of police dogs during inspections and, in some cases, the failure of inspectors to plan or document entire operations.

…The suit alleges deputies performed “‘pat downs’ and criminal background checks, all of which were done without probable cause and without warrants.”

The suit describes the barbershops in the latest lawsuit as “owned, operated and frequented by African-Americans and located in African-American communities” in Orlando.

“The selection of these businesses for ‘inspection’ based solely on the race and ethnicity of the owners, employees and customers, and the absence of appropriate search warrants, constitutes racial discrimination and unreasonable searches and seizures,” the complaint alleges.

Who exactly is this supposed to protect?  There is no evidence that anyone got a bad haircut before the police arrived. There have to be better ways to raise barber wages than requiring licensure for cutting hair.  Licensure is sometimes compared with unionization because both work in similar ways, but traditionally unions reduced inequality by transferring money from wealthy owners of capital to their workers.  That is why unionization is more politically controversial than licensure.  Business owners hate unions for taking some of their profits and the business lobby fights unionization.  Barber licensure is a way of extracting money from the general public rather than from the owners of capital and so licensure does less to reduce inequality than unionization.  In some cases licensure increases inequality by raising costs for the public and boosting incomes for elites. 

Take taxicab licensure as an example.  Taxicab regulations in major cities have generally raised costs and created a floor on minimum service quality.  New competition from Uber and Lyft has been successful because these companies can offer lower fares because of loopholes that help them evade taxi regulations and offer lower fares. Or at least I have heard that they have good fares.  In my limited experience, they were more expensive than a regular cab.  They can maintain quality of customer service through online customer ratings and electronic GPS monitoring.  Before long I am sure our conventional taxicab companies will copy Uber and Lyft’s mobile phone apps to increase their service quality too.  Taxi regulations will need to change with the new technologies. 

Taxicab regulations were historically designed by urban elites to try to guarantee a minimum level of service for a relatively elite section of the population who rely upon taxis.  This meant that taxi fares rose higher than the median person would like and taxis became something that poorer families avoided whenever possible.  The taxi regulations are fine for higher-income customers who worry more about reliable service than about the cost of a fare. 

So taxi regulation arguably has not worked well for the median customer.  Also it has not worked well for the median worker in the taxi industry.  Most of the profits of taxi regulations haven’t gone to the workers who drive taxis, but to the owners of taxi medallions who are already rich. The drivers haven’t gained much from the rise in fares caused by regulations.  The most expensive regulation is the license to operate a taxi (often called the “medallion”) which are rarely owned by the drivers because they have been selling for over a million dollars each in places like New York City.  The owners of the licenses then rent cabs to drivers for a high price which squeezes the drivers’ incomes. 

From the point of view of the median customer and the median worker, it is insanity, but it works well for elites on both sides of the market.  The relatively elite customers get more higher minimum quality than greater competition would bring and the elite owners get higher incomes than greater competition would bring.  Hopefully Uber and Lyft’s technology will provide a new way for elite customers to get the quality they desire and create a more democratic industry lobby to reduce the extractive rents that elite taxi owners have been sucking out of society. Then fares might decrease without reducing quality.  Time will tell. 

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Posted in Health, Labor

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