Monday, November 07, 2011

Government getting in the way of employment

Jeff Jacoby has a great column on the ludicrous way in which government sets limits on how many people can have a certain job so that they are in the business of protecting those who have the job already against anyone who wants to enter the market. The most ridiculous example is the sale of taxi permits or medallions. A medallion to drive a taxi in New York City recently went for one million dollars! It is unimaginable.
Can you imagine City Hall trying to fix the number of shoe stores or Web designers or CPAs allowed to operate in town? Arbitrary limits on the number of taxicabs should be considered just as ridiculous. The government has no right playing favorites, or crushing competition. The Institute for Justice describes itself as advocating for fairness and economic liberty; what it really seeks to protect is the American Dream. In Milwaukee today. In New York and Boston, perhaps, tomorrow.
In other examples, the government requires licenses for certain jobs that should not require a license such as hair-braiding or interior decoration. Often these limits are placed on entry-level jobs that don't require special education. Driving a taxi shouldn't cost hundreds of thousands of dollars just to get government permission.
This is a classic illustration of what economists call “rent-seeking’’ — manipulating the political system to gain economic benefits without providing any additional value to society in exchange. Imposing caps on the number of taxis enriches existing owners with windfall profits. But by making the cost of cab ownership obscenely high, it prevents countless would-be cabbies from going into business for themselves. And by stifling competition, it drives fares through the roof while lowering the quality and availability of service.
The only people with an interest in continuing this silly system are those already employed. Don't these local government officials have an interest in taking an easy step to help ordinary people start up such businesses? Apparently not.