Using new data from a Thumbtack.com survey of small business owners we once again confirm the difficulty occupational licensing presents for entrepreneurs. However, instead of objecting to enforcement of regulation, many business owners actually complained there wasn’t any enforcement at all.
State and local governments have laws on the books they are not enforcing and in doing so they are actively encouraging moral hazard. Feedback from individual business owners across the country indicates that those individuals who do not adhere to regulatory standards are promptly allowed to keep operating while business owners who have crossed their t’s and dotted their i’s are left out the cost and time of a license, potentially disadvantaging them. A system that provides incentives to skirt the law is one that creates inefficiency. State and local governments would be better off slashing any requirements they are not fully ready to enforce.
Full paper here.