Is Occupational Licensing Meant to Block Competition from Ethnic Minorities?

Looking at this map of state licensing regimes (darker is more onerous, with AZ being the worst), it is hard to correlate with states being Republican or Democrat.  That doesn't surprise me, because I have always thought the urge to restrict competition and protect incumbents has always been a bipartisan enterprise.

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So I sat and thought for a minute about my home state of AZ.  Why is it the worst?  We have a pretty good libertarian history here, from Goldwater onwards.  We have at least one fairly libertarian Senator (Jeff Flake).  So what is the deal?

My hypothesis is that it is related to immigration.  The same majority Republican legislators who are generally open to free markets simultaneously have an incredible fear and loathing of immigration.  Perhaps our onerous business licensing regime is driven by nativists wanting to protect themselves from competition by new immigrants, immigrants who would struggle to compete onerous licensing requirements?

So what does this map look like vs. immigrant population density?  Via Wikipedia, here are the states on density of Hispanics

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Hmm, we might be getting somewhere, but its not a perfect fit.  So instead, let's hypothesize that business licensing is aimed at non-white, non-hispanic groups in general (similar to early justifications for the minimum wage as a way to keep black workers migrating from the south out of traditionally "white" jobs).  I cannot get it by state, but the map below by county looks pretty dang similar to the licensing map.  Areas in blue have above average percent of non-whites, red is below average.

Not a perfect fit certainly (one would expect Texas to be more onerous), but perhaps close enough to treat the hypothesis seriously.  I had always thought that I would be the last one to play the race card in a policy analysis, but business licensing tends to have an inherently base motive (protect one group from competition from another group) that is pretty easy to square with racial and ethnic fear.



  1. Snowbird:

    Immigration yes, but from within the United States. Warm weather states have historically protected the locals from the damn Yankees moving south.

  2. Mercury:

    Think of it as a backhanded compliment. Ethnic minorities are just about the only ones willing to get off the couch to try and make a buck performing unpleasant and hard work.

    I'd love to see Asian-Indians (for instance) set up cut-rate but rigorous and intensive private schools.

  3. Jess1:

    "My hypothesis is that it is related to immigration"
    So Connecticut & New Jersey are more, er, resistant to immigration? Or something?

  4. Rick C:

    No, it's just that on this issue, Warren's like Obama apologists: the only reason people could have for not welcoming unrestricted non-assimilating immigration is because racism.

  5. john mcginnis:

    You might find a higher correlation by looking at the number of planning permits requested vs those denied. I increasingly find that planing/zoning commissions are unanswerable to anyone, make capricious decisions and contribute greatly to the barrier to entry for everyone.

  6. Orion Henderson:

    Like everything, race is one of many variables. You can't really analyze one variable on big picture stuff. EG-your next post on the stimulus.

    It seems plausible that racists in Cali band together with greenies to create all sorts of requirements to restrict growth/keep Mexicans from working. The enemy of my enemy...

  7. marque2:

    Correlation without causation.

  8. mahtso:

    As I read this post, my perception was that the blogger sees every problem as a nail; imagine my surprise when I read that he believes he "would be the last one to play the race card in a policy analysis." See the posts related to Sheriff Arpaio for evidence that the blogger plays the race card often (these posts go beyond the Sheriff and routinely attributed racism to those who did not agree with the blogger's views).

  9. TMallory:

    As a construction engineering manager for many years, I dealt with many of the licensing requirements in the construction trades in many states. There are some extraneous items that have odd effects that cause large components of the graphics you have above. For instance Florida enacted their onerous requirements right after large numbers of citizens were scammed by fly by night contractors in the wake of hurricane Andrew in 1985. After hurricane Katrina most of the states along the gulf coast again tightened licensing. California has had similar troubles after large earthquakes, and tends to tighten after each large event. In these cases a barrier t entry is being constructed to stop the gold rush mentality that can occur when large markets are created literally overnight. we are seeing this same effect presently in the northeast after Sandy.

    In addition, many of the northern states seem to have less restrictive requirements; however, you will find that these are also the states with the strongest unionization. In this case the states are actually relying on the unions to do their filtering for them. As unionization has fallen, we see these states enacting licensing requirements to replace this function. Can this be construed as racial? I am sure it can in some ways, but there is also a quality control function. The problem is being able to sort out which one is the actual driving force.

    Most of the licensing in the construction trades that I have encountered in the last 20 years has been more tailored the following two items. Testing and financial requirements in the hopes of eliminating the underfunded or untrained. And time sink requirements that prevent a massive inrush at any time. By simply requiring everyone to wait two months many short term markets will have passed.

  10. marque2:

    Your comment is false and obnoxious. You go Iowa for instance and almost all the hard work from gardening to home building is done by white people. Even the minimum wage jobs. Except for racist stereotypes perpetuated on the coasts (gardeners and drycleaning are Chinese - farming is Mexican etc) there is no correlation.

  11. herdgadfly:

    I think that the history of licensing goes way back before the Great Mexican Influx began. A quick glance finds a pattern all up and down the east coast but with lighter than expected coloring in New York and Pennsylvania which makes no sense to me at all. The point about the East Coast, of course, is that New York greeted all of our European and Puerto Rican immigrants in the old days and taxi licenses are the most infamous unfair license - but anyone visiting NYC is unlikely to find a cabby who speaks much English. Come to think of it, licenses don't get in the way of Mafia-sponsored ripoffs that take place everyday in NYC when you receive freight or get your garbage picked up and union thugs have to have their palms greased just to move a file cabinet up from the 89th to the 90th floor.

    All that leads me to theory #2 which is that licensing is in juxtaposition with black market activity. So the higher the black activity, the higher the illegal immigrant population and/or higher state taxes exist. There of course are other reasons for black markets but these come to mind.

  12. MingoV:

    In Tennessee, occupation licensing is solely about money. License fees for fields such as cosmetology are around $100 a year. License holders get absolutely no benefits from the state. Organizations did not lobby for licensing to restrict the trade or to keep out minorities. The state adds more occupations to its list whenever it wants more money.

    Tennessee also has a Professional Privilege Tax that required a
    constitutional amendment that prevented unfair taxes. Every
    professional in a field that requires a Masters degree or more pays a tax of $400 annually.

    Tennessee also is one of the states that collects taxes on hockey and basketball professional athletes who play away games in Tennessee.

  13. randian:

    Florida licensing also acts to protect windfall profits contractors enjoy during emergency conditions. That consumers get screwed because their temporarily increased demand for services during those times cannot be satisfied because of licensing is apparently irrelevant. It's not just about money, the extreme wait times are a big problem too.

  14. randian:

    For one data point, AZ is one of the few states that licenses commercial (as opposed to residential or consumer) lending. Since you have to work a few years as a wage slave of an existing licensee to get your own license, it's difficult or impossible for new competition to appear.

  15. obloodyhell:

    As usual, when it comes to immigration, Warren finds gold where there's crap. No, not real gold, just Pyrites. This is easily one of your worst threads in a very, very long time.

  16. Mercury:

    Actually it's quite true and obvious.
    I didn't invent the national political issue of "Jobs Americans won't do". It's more or less a given at this point.

    But it's nice to see that at least Iowans still have a solid work ethic.

  17. randian:

    That's because there aren't "jobs Americans won't do". That slogan was invented by liberal elites to justify ethnic invasion and population replacement.

  18. CapnRusty:

    You seem to be saying that the business licensing laws are applied only to non-whites. Proof?

  19. Orion Henderson:

    If I read your post correctly you are saying Tennessee collects income tax on visiting athletes. Say, Andrew Luck and the Colts playing in Nashville against the Titans. While this is true, virtually every state collects income tax on visiting athletes. Not that that makes it right. You could make a case both ways. Do you collect income tax from based on residence or work location? It seems the state happy answer is both-as long as you earn enough to make it worthwhile for the state. NYC collects income tax on commuters living in NJ or CT. They won a supreme court case to get the money.

  20. Orion Henderson:

    Some people might be glad to pay exorbitantly high costs to get the roof back on their house faster. It may be better than having it rain in your kitchen.

  21. Orion Henderson:

    Have you ever hired for low wage dirty jobs? It is a rare American who even applies.

  22. treeher:

    Warren, I generally agree with your analyses, but on this one I think you've taken a dive off the deep end. As you have stated many times, you can make "facts" correlate to "data" whenever you want. Jumping to the "race card" without a deeper analysis of this issue is to me a wrong approach. The comments here bear that out. I suggest you retract the post lest it be picked up by your enemies and used against you!

  23. Mercury:

    Of course there are because it depends on what the (especially short term) incentives are.

  24. randian:

    If that's how it worked, I'd agree with you. Unfortunately, because of licensing and the lack of cross-state recognition thereof, you're going to pay exorbitantly high costs whether you're first or last in the queue. There will be nobody around to offer you a choice of slow/cheap.

  25. marque2:

    Jobs Americans won't do is a lie perpetuated by the chamber of commerce. I have seen Americans do these jobs that Americans allegedly don't want to do. And have seen it in mass numbers.

    What business folk in places like CA want is to have a subservient illegal population they can underpay and threaten if they demand more.

    Great example is the slaughterhouse in Postville Iowa where illegals were working under slave conditions. The 600 illegals were removed with much crying from the liberals and with a 50 cent increase in wages the jobs were all filled again with legal Americans.

  26. marque2:

    Exactly an invented slogan by liberals and chamber of commerce folks - trying to really exploit people.

  27. marque2:

    Almost every state has a residency tax as well. If you are a CA resident and work the year in Texas CA will charge you state taxes and give you an ungenerous credit for taxes paid in the other state. In the case of Texas one is fortunate since Texas doesn't levy an income tax.

  28. smilerz:

    I've long that that the best path forward for libertarian policies is to adapt a populist rhetoric.

  29. Eric Hammer:

    Licensing has a long history, at least back before Smith wrote Wealth of Nations. In those times it was used to restrict entry into businesses from own's countrymen, regardless of race. This would seem to be evidence that such laws (and I would include immigration in general) are more based on in-group vs out-group sentiments, with race being just one determinant of group. People who worry about losing status or power within their group due to changes in membership or behavior are going to push back against that. Branding people as racists because of that misses the root cause, and doesn't help the rhetorical point.

  30. obloodyhell:

    Exactly. I'm not sure where the heck these guys are talking from on this one, but it seems to be somewhere below the waist and on the opposite side of the body from their faces. A lot of young people consider work that was perfectly normal when I was young and had zero experience to be utterly unacceptable. And the number who can grasp the notion of working MORE than a 40 hour week is not in the double-digit percentages.

  31. obloodyhell:

    Sorry, Marque2 -- you and I are usually at least in the ballpark of one another, but, while I think there aren't any jobs Americans CAN'T do, there are plenty they WON'T do without starving. And, with today's nanny state government, that just ain't happening...

  32. obloodyhell:

    That's where I always put the sunday newspapers. Nothing is worse than having it rain on your Parade!! :-D

  33. obloodyhell:



  34. obloodyhell:

    Warren's take on immigration seems to be one area where he manages to be even MORE brain dead than a typical liberal. Can't figure it out, myself.

    Clearly, there's another census available which could be applied to the above, but I don't believe it would show anything better than that one does.

    I would not normally trust the NYT, but it's US Census data, so I'm not going to accuse them of completely lying outright without evidence to that effect.

    Take that map -- move the slider back to 1880. Now pick a nationality -- any one of them, excluding one of the hispanic groups. Slide the time-slider forward, and watch how the bubbles grow, and, in most cases, shrink.

    Now slide it back -- pick another non-hispanic group. And again, slide it forward. Note the behavior of the bubbles.

    Do this a couple more times, until you have a feel for how previous immigrations have happened in the USA.

    NOW slide it back to 1880, and pick Miexico, or Cuba... and slide it forward.

    Go ahead, and tell me there's not a serious QUALITATIVE difference between this wave and previous waves.

    Add to that the multi-culti PC crap that's bandied about, which tells all of them that they should NOT need to assimilate AT ALL, and you've got a recipe for a looming disaster. :-S

  35. marque2:

    What state do you live in? Seriously you go to a lower cost state and you see all the jobs done by Americans. Its if you live in California or Arizona that you hear business folk complaining - mostly because they want the cheaper labor. In states not on the border even most of the farming is done by non illegals. ( Washington pea harvest is done by college students - Iowa a lot of high school a d college kids earn extra worming the corn fields as well) and I don't know if you remember a few years back all the meat packing plant closures where hundreds of illegals were caught each time. They are all still open worked by legal workers.

    Even Welfare is not an issue in most states since it ends in 5 years. California is the only state with an exemption from that.

    I know you mean well but you have an upper class coastal elitist view of the world. - I had the same before i moved aroind the country a bit. Travel middle a.Erica and your eyes will be opened to what a fraud the Americans won't do that work comment is.

  36. mahtso:

    Of course there are some jobs that some Americans won't do, and some that some Americans cannot do. But there are no jobs that no American will do. And, as other comments indicate, the hiring of cheap illegal labor drives the wage rate down, making it more difficult for Americans to accept some jobs.

  37. mahtso:

    When Arizona passed an Employer Sanctions law to stop the hiring of illegal workers, one fine member of the local business community announced that he was canceling his plans to build a number of fast food places because now the labor (to operate) would cost to much.

  38. marque2:

    BS - there are no jobs available that Americans won't do. None. It is just an elitist notion from upper middle class folks who detest certain occupations, or have a vested interest in hiring illegals for the purposes of greed.

  39. marque2:

    So? The guy actually had in his business plan to hire illegal workers - imagine how else he was trying to shave. If he is that disreputable, then you are better off not having this fellow own stores in AZ.

    Would you be so sympathetic, if he said - because the EPA won't let me pollute the air and water, I won't open a business?


  40. mahtso:

    marque2, you are letting your bias (or worse) show: nothing in my comment even remotely suggests sympathy.