UNTANGLING HAIR BRAIDER DEREGULATION IN VIRGINIA.

• Author: Timmons, Edward J.
• Position: Report

We estimate the effects of removing the license requirement for hair braiding in Virginia in 2012. Using County Business Patterns and Nonemployer Statistics data from 2004 through 2014, we find evidence at the state level that deregulation has created more opportunities for smaller owner-operated beauty salons (an increase in proprietor density of more than 8 percent). A simple statistical test confirms that Virginia counties experienced beauty shop growth at a rate approximately 7 percent higher than that in contiguous counties in bordering states. Taken together, our findings support the notion that deregulation of hair braiding has enhanced economic opportunity for hair braiders in Virginia.

Thirteen U.S. states continue to require hair braiders to obtain a cosmetology license. However, the particular skills required for traditional, natural hair styles are generally not covered in the entry requirements for cosmetology licensure. Further, the unique risks to consumers from poor hair braiding practices (such as hair loss from braids that are too tight) are not addressed in cosmetology training. The result is that hair braiding licensure may not improve consumer safety, although it does lead to significant labor market costs.

In this article, we analyze Virginia's deregulation of the hair braiding occupation in 2012. Using the states of Kentucky, North Carolina, and West Virginia as well as bordering counties, we examine whether removing license requirements had a significant effect on the number of salons, the number of salon employees, or the level of salon employee wages. We hypothesize that removing this barrier to entry will ultimately increase the total number of beauty shops, potentially creating more opportunities for small beauty shops by decreasing the cost of becoming a practitioner and increasing the supply of braiders. Before turning to our analysis, we discuss the rationale for occupational licensing and provide some background on regulation of hair braiding.

Rationale for Occupational Licensing

The common defense for occupational licensing is that it improves the quality of services delivered to consumers. Some economists have proposed theories that occupational licensing improves the human capital of practitioners and serves as a signal of high quality (Shapiro 1986). If such theories are accurate, then although occupational licensing will increase the price of services, consumers will benefit by receiving higher-quality services. But valid arguments can be made against such theories. For example, in many instances, consumers demand proof of qualification on their own when they believe there is reasonable risk of harm. It is thus a mistake to assume that, without government-sanctioned licenses, consumers would have no indicators of service quality or would choose to ignore such indicators (Thierer et al. 2015). Indeed, advances in technology (e.g., internet rating services) have enhanced consumers' ability to compare the quality and reputation of professional service providers.

In several professions, arguments for occupational licensing are particularly weak. In the case of florists, for example, the risks associated with unlicensed florists amount to far less than the costs of licensing for consumers and aspiring florists, and hair braiding appears to belong to this category (Carpenter 2011). By their nature, licenses do not differentiate practicing professionals within a given field, but rather only differentiate those who can practice from those who cannot practice, even excluding licensed practitioners from another state. All license holders meet the same minimum entry standards, but whether those entry standards correlate with enhanced quality remains unclear. Licensing may instead serve as a barrier to entry for the profession and may even discourage hopeful professionals from aspiring to more than the minimum entry standards. The theory that licensing creates monopoly power for professionals by restricting entry to certain professions has emerged as the leading rationale for occupational licensing (Friedman 1962).

Empirical evidence supports the view that licensing exists because creating a barrier to entry benefits individuals already working in a given field--not because it enhances consumer welfare. Studies generally find that, although licensing is correlated with higher wages for professionals, it has ambiguous effects on the quality of services provided (White House 2015). Other studies on occupational licensing focus on employment effects in the field overall and on individual workers. Using national data from the Survey of Income and Program Participation and controlling for observable characteristics (including occupation), researchers find that licensed workers are more likely to be employed than are similar workers without licenses or certification (Gittleman, Klee, and Kleiner 2018). The same study also finds that those with federally issued credentials may earn 8.9 percent more than those without, while those with state-issued credentials may earn 6.1 percent more. An earlier study analyzing the effects of licensing and certification finds that licensed workers earn about 18 percent higher wages than do unlicensed workers (Kleiner and Kmeger 2013). Licensing may also restrict mobility. A recent study finds that state-specific licensing exam requirements are associated with a 36 percent reduction in mobility (Johnson and Kleiner 2017). Licenses are generally not transferable from state to state and as a result may result in professionals experiencing "job lock." Occupational licensing becomes particularly burdensome in the case of hair braiding because the service falls under the umbrella of cosmetology. The intent of policymakers is to ensure proper sanitation training in an effort to protect consumers, but an examination of the skills tested in the process of obtaining a license tells a different story. We now turn to a discussion of regulation of the hair braiding occupation.

Regulation of Hair Braiding Nationally

Table 1 and Figure 1 provide a snapshot of regulation of hair braiding across the United States as of October 2017. Thirteen states and Puerto Rico require aspiring hair braiders to obtain a cosmetology license. Fourteen states have specific hair braiding licensing requirements that are generally less burdensome than are the requirements for cosmetology licensing. The remaining 23 states and Washington, D.C., currently do not require hair braiders to obtain a license to work. Florida stands out as an interesting case--although a 2011 statute created a distinct hair braider license, the law prohibits hair braiders from providing hair extensions--an essential service for many braided hairstyles (Florida Department of Business and Professional Regulation). As a result, hair braiders in Florida are generally still required to obtain a cosmetology license.

Significant changes in regulation of hair braiding have come about

as a result of both legislation and litigation. The Institute for Justice (IJ), a nonprofit, public-interest law firm, has championed many of the legal challenges to licensure. In these cases taken on by IJ...