The Institute of Justice, a public interest law firm in Washington, D.C., focuses part of its litigation on issues of the ability of citizens to enter and compete in markets unburdened by unnecessary regulations. In a study titled License to Work: A National Study of Burdens from Occupational Licensing (Carpenter et al. 2012), the Institute reports that "in the early 1950s, only one in 20 U.S. workers needed the government's permission to pursue their chosen occupation." In 2008, that number was estimated to be one in three (Kleiner and Krueger 2013).
Given its pervasiveness, occupational licensing has long been a subject of debate as to whether it serves to protect the public interest or the interests of special interest groups by acting as a barrier to entry. Proponents of occupational licensing argue occupational licensing enables better quality services to consumers that would otherwise not have been provided (Arrow 1971). It has also been argued that occupational licensure encourages prospective entrepreneurs to accumulate human capital in their occupation of choice (Akerlof 1970, Shapiro 1986). Opponents, however, argue that occupational licensing gives rise to regulatory capture (Stigler 1971) and results in barriers to entry that disproportionately affect the poor and disadvantaged (Dorsey 1983, Bernstein 1994). Supporting the claim of regulatory capture is Kleiner (2000), who reports that more often than not members of licensing boards are chosen from the occupations being licensed.
The literature on occupational licensure has typically focused on the effects of licensure on wages and safety. A few articles focus on licensure as a barrier to entry, but those studies largely deal with high-skilled labor markets. Carpenter and Stephenson (2006), for instance, find that 150 hours of college course work necessary to sit for the CPA exam reduces the number of candidates sitting for the CPA exam by 60 percent.
In this article, we focus on occupational licensure as a barrier to entry for one relatively low-skilled occupation--barbering. The barbering profession was one among many professions to be licensed early in the United States, with Minnesota passing the first barber licensing law in 1897 (Thornton and Weintraub 1979). Alabama was the last state to license barbers in 2013 (Burkhalter 2014). Today all states and the District of Columbia regulate barbering. In 1976, barbering was heavily regulated with average education and experience requirements of 1,460 hours and a mean apprenticeship period of approximately 18 months (Thornton and Weintraub 1979). By 2012, average education and experience requirements were 890 days and average fee requirements were $330 (Carpenter et al. 2012).
While many studies have focused on occupational regulation and economic outcome variables, such as changes in earnings and employment (Kleiner 2000) and migration (Mulholland and Young 2016), few studies have examined the impact of occupational regulatory burdens on low-income professions such as barbering. Some previous studies have estimated the relationship between regulatory burdens and the supply of barbers (Fuchs and Wilburn 1967, Maurizi 1974, Thornton and Weintraub 1979). Thornton and Weintraub (1979) find that average minimum grade level affects the supply of barbers. Timmons and Thornton (2010) find that state barber licensure has increased barber earnings by between 11 and 22 percent.
In this study, we estimate the relationship between the state-level regulatory burden on the practice of barbering and the number of barber shops in a state. Since many barber shops are one-or two-chair shops, restrictions on the profession of barbering are restrictions on the number of barber shops. We hypothesize that states with higher regulatory burdens on becoming a barber should have fewer barber shops per capita. Utilizing the one year of regulatory data on barbering from Carpenter et al. (2012), we find that the number of exams required to become a barber in a state is negatively related to the number of barber shops per capita in that year. Conversely, we find that fees, minimum grade levels, and minimum age requirements do not explain state variation in the number of barber shops per capita.
We use barber shops per 100,000 inhabitants for all 50 states and the District of Columbia in 2011 as our measure of entrepreneurial barber activity. Our data come from the U.S. Census Bureau's Nonemployer Statistics database, and we use the North American Industry Classification System (NAICS) code for barber shops (812111) to identify "establishments known as barber shops or men's hair stylist shops engaged in cutting, trimming, and styling boys' and men's hair; and/or...