One Reason That Lady Gaga Cannot Sing in the Paris Métro
For the right to perform in almost all of Paris’s 303 stations, you have to audition in front of a committee composed of 2 Métro employees, 2 members of the public and the artistic director. At spring and autumn tryouts, 2000 or so people compete each year. The Paris Métro artistic director (yes, there is one) has 300 permits, good for 6 months, that he awards to musicians. Winners have a potential audience of 5 million people daily.
Like any licensing authority, the artistic experts of the Paris Métro guarantee a quality minimum. I suspect they also create scarcity, value and prestige.
For economists, though, licensing has problems.
Licensing requires more time, usually money and perhaps excessive training. The extra cost acts as an entry barrier that decreases supply, increases prices and limits geographic mobility. It can mean that a local licensing authority is controlled by current practitioners who want to preserve the status quo. As a result, job growth is constrained.
And yet, license holders have multiplied. Between 1950 and 2006, the proportion of US workers who have a license has grown from 5% to 29%:
Looking at a list in a 2008 paper from Kreuger and Kleiner, I discovered that 36 states required a door repair contractor to be licensed, 13 states, a bartender and one state for a florist. I also found that becoming a licensed shampooer in Texas includes 150 hours of classes while a locksmith in Oklahoma has to pay a fee, take a test, and undergo a background check.
Our bottom line: Imposed by government, licensing has a cost. Instead of demand and supply functioning naturally in job markets, government enters the picture and impacts the supply side.
Do you want your barber to have a license? Wouldn’t the market eliminate anyone who is incompetent?
Sources and resources: A good summary but gated and dated (from 2/2011) this WSJ article summarizes the impact of occupational licensing. Then, for the academic perspective, this paper and this more recent study look at the economics while you can read more on the Paris Métro here.