With a new year approaching, policymakers in Detroit and Lansing should make a New Year’s resolution to boost economic growth. But instead of giving handouts to special interests, they should try a different approach: Cut red tape and let entrepreneurs flourish. Here are three areas ripe for reform:
One avenue would be to deregulate the transportation industry. In Detroit, there is a strict limit on who can enter the taxi market, while the city imposes a one-hour minimum wait time for limos. According to the R Street Institute, which gave Detroit a D and F grade for its friendliness to taxis and limos, entrepreneurs are “encumbered with multiple regulations that undermine their ability to be competitive.”
But under a reform package that now awaits Gov. Rick Snyder’s signature, local laws would be pre-empted in four years, preventing cities from burying entrepreneurs in red tape. The bill would also regulate taxis, limos and ride-hailing firms like Uber and Lyft at the state level, and under similar regulations.
History shows that easing restrictions could help spur innovation. Consider Minneapolis. After the city deregulated its taxi industry ten years ago, the number of taxi licenses soared from 343 to 980 — a huge boon for both drivers and riders.
Lawmakers should also free the food trucks. Currently, it’s against the law for any street food vendor to operate within 100 feet of any business that sells similar goods, unless the vendor has the owner’s permission. Instead of protecting the public, those restrictions do little else but protect businesses from greater competition.
In sharp contrast, Los Angeles doesn’t micromanage where and when food trucks can park. Instead, its regulations are narrowly tailored to address genuine health and safety concerns. Thanks to its permissive regulations, the City of Angels is now legendary for having one of the best food truck scenes in the nation. Given just how popular food trucks are, slashing red tape could let even more entrepreneurs create their own small businesses (and let more consumers enjoy their tasty wares).
Finally, policymakers should reduce and repeal burdensome licensing laws. Once limited to vocations like medicine and dentistry, occupational licensing has skyrocketed in recent years. Today, nearly one in four Michigan workers needs either a license or certification before they can legally work. But in the 1950s, that figure was one in 20.
Many of these license schemes make little sense. Athletic trainers, barbers, cosmetologists and manicurists all need vastly more experience for their licenses than emergency medical technicians — who quite literally hold people’s lives in their hands — need for theirs. On average, a license for low- and middle-income jobs requires completing 256 days of training, according to a 2012 report by the Institute for Justice. And Detroit itself licenses at least 60 occupations, forcing workers to pay hundreds of dollars in additional fees and often redundant testing, the Mackinac Center reported.
The result of this red tape is reduced competition and higher prices for consumers. According to the Heritage Foundation, occupational licensing costs the average Michigan household $930 each year. By eliminating licenses or reducing their burdens, lawmakers can let workers and consumers prosper.
When confronted by a policy that cripples growth or just doesn’t make much sense, citizens and policymakers alike should ask, “Why? Why is the government doing this?” A simple change in mindset, from “we should regulate this” to “why are we regulating this?” can have an enormous impact for economic opportunity.
Nick Sibilla is a writer at the Institute for Justice.