A Cosmetology Board Capture Index: Measuring the Influence of Self-Interest in Occupational Licensing
Occupational licensing policies are widely understood to suppress employment and entrepreneurial opportunities as well as raise prices to consumers. What has not been studied much is the mechanism by which occupational licensing restrictions are influenced by the boards created to enforce them. Those boards are often dominated by existing licensing holders and other active market players who have a direct self-interest in keeping the barriers to entry into the occupation high.
This study focuses on the specific example of cosmetology boards to create an index that measures the extent to which that industry’s licensing boards are “captured” by incumbent license holders as well as representatives from cosmetology schools. Many states require that board seats be awarded to members of the public, ostensibly for the purpose of providing some balance in deliberations. However, those members rarely have a majority of seats and can be easily outvoted.
The most heavily “captured” cosmetology boards — those with zero public representatives — are New York and North Dakota. Following closely behind are Louisiana, Massachusetts, Mississippi, Oklahoma, Vermont, and Wyoming.
Maine and Arkansas are the least captured due to the state legislature eliminating the state licensing board in 2009. Of the states with licensing boards, Arizona and California are the rare boards on which public members have a majority. (Arizona is in this category thanks to reforms passed in the state in 2020 to expand the number of seats of members of the public and reduce the number awarded to incumbent licensing holders and cosmetology school representatives.)
There is some preliminary evidence that cosmetology board capture is related in some form to higher barriers to entry. In the eight states with the most strongly captured licensing boards, it takes 50 more calendar days than the national average to fulfill the state requirements to obtain a cosmetology license.
States should be encouraged to reform the occupational licensing board system in a number of ways. Those reforms can run along the lines of the recent Arizona board reforms. Other ideas include requiring the timely filling of public board seats, changing quorum rules to require at least one public member be present, and requiring that public members have no direct financial stake in the industry they are regulating. More fundamental reforms could be to make licensing boards subordinate to other executive branch agencies (or eliminating the boards altogether) and enacting universal licensing (often called “reciprocity”) which would neutralize the influence of the board on new entrants coming from out-of-state.