Regulatory Capture in Cosmetology Licensing Boards
I’ve previously written about the regulatory capture of occupational licensing boards, citing Missouri’s cosmetology board as an example. It seems I’m not the only one to recognize this problem. The Center for the Study of Economic Liberty at Arizona State University recently released a report that indexes and ranks the regulatory capture of each state’s cosmetology board—Missouri ranked 14th.
Regulatory capture occurs when special interests gain control of regulatory agencies governing their own industries—regulators making the rules for themselves. You may think that a captured licensing board would have lenient regulations (who wants to subject themselves to strict rules?) but it’s much more common to see stricter rules with a captured licensing board. This is because the licensed board members directly benefit from punishing competitors and making it harder for newcomers to enter the market.
According to the report, cosmetology is licensed in all 50 states and the District of Columbia. Cosmetology boards typically consist of members who currently hold a license (incumbent members), members who represent cosmetology schools, and members of the public. Boards that are dominated by members who currently hold a license are more captured than boards dominated by members of the public. Missouri’s cosmetology license board has 11 members: 7 incumbent members, 2 school owners or instructors, and 2 public members. It’s clear where the balance of power is on the Missouri board.
Regulatory capture is one reason lawmakers should implement a five-year sunset provision on occupational licenses and licensing boards. With this provision, legislators would review each board every five years, and legislators could implement changes to fix problems (such as regulatory capture).
Unfortunately, regulatory capture doesn’t only affect those in (or who want to be in) the industry. Limiting competition lowers the supply of cosmetologists and raises the cost of your haircut. Everyone loses—except those already holding the occupational license, of course.