–Coauthored with Mercatus MA Fellow Jessie McBirney

Flat standardized test scores, low college completion rates, and rising student debt has led many to question the bachelor’s degree as the universal ticket to the middle class. Now, bureaucrats are turning to the job market for new ideas. The result is a renewed enthusiasm for Career and Technical Education (CTE), which aims to “prepare students for success in the workforce.” Every high school student stands to benefit from a fun, rigorous, skills-based class, but the latest reauthorization of the Carl D. Perkins Act, which governs CTE at the federal level, betrays a faulty economic theory behind the initiative.

Modern CTE is more than a rebranding of yesterday’s vocational programs, which earned a reputation as “dumping grounds” for struggling students and, unfortunately, minorities. Today, CTE classes aim to be academically rigorous and cover career pathways ranging from manufacturing to Information Technology and STEM (science, technology, engineering, and mathematics). Most high school CTE occurs at traditional public schools, where students take a few career-specific classes alongside their core requirements.

In addition to building skepticism toward “college for everyone,” researchers have identified a “skills gap” between what employers want and the skills job-seekers offer. STEM training is a particularly trendy solution. Trump recently signed a presidential memo expanding the National Science Foundation’s STEM education initiatives and Virginia established a STEM Education Commission last year. With its many pathways, local customizability, and promise of immediate income upon graduation, CTE feels like a practical answer for young people and the economy.

As recent changes to the Perkins Act suggest, “alignment” between CTE courses and labor markets is a growing concern. Now, programs applying for federal funds must conduct a “local needs assessment” to ensure their course offerings align with local labor markets. One recent study attempted an early measure of this alignment in several metropolitan areas. Findings are mixed, but the quest for alignment itself shows how hope in career training programs has exceeded good economic sense.

Consider some of the phrases found in states’ CTE mission statements:

“…to prepare students for in-demand, high-skilled, and high-waged jobs.” (MD)

“…relevant experiences leading to purposeful and economically viable careers.” (AZ)

“…meeting the commonwealth’s need for well-trained workers.” (VA)

The desire to parse out an economy and plan accordingly is not new, but there are limits to predicting in-demand skills and future jobs. Friedrich Hayek conceives of the market not as a math problem to deconstruct but as a “discovery procedure.” The market changes, rapidly and unexpectedly, based on information identified only along the way. It is the cumulative and dynamic result of thousands of individual plans coordinating through prices and wages. Thus, a central authority could never collect enough information to make accurate predictions about market outcomes. Aiming at a particular social or economic goal—such as fixing a list of gaps in the labor market—will likely fall short of another outcome we didn’t even consider.

For this reason, Hayek explains in his Constitution of Liberty, flourishing societies must be economically and politically free, and public education should be offered to the extent that it nurtures the independent citizens that a free society requires. Education oriented toward a particular vocational end shortchanges the student. Hayek explains:

“We are not educating people for a free society if we train technicians who expect to be ‘used,’ who are incapable of finding their proper niche themselves … All that a free society has to offer is an opportunity of searching for a suitable position, with all the attendant risk and uncertainty which such a search for a market for one’s gifts must involve.”

(Hayek 1960, 144-45).

Picking training goals for a student body is no guarantee of long term success, and may block even better outcomes. It is no accident that Hayek does not count increased earning potential or national economic strength among the reasons to publicly subsidize education. Instead, he favors general education and literacy for social cohesion and democratic participation. Rising wages for high-demand skills should entice students into sparse job markets without extra encouragement from school programs.

Hayek is not alone in his insistence that individuals are in the best position to choose and experiment with their professions. In The Wealth of Nations, Adam Smith recognizes,

“In  a society where things were left to follow their natural course, where there was perfect liberty, and where every man was perfectly free both to choose what occupation he thought proper, and to change it as often as he thought proper […] every man’s interest would prompt him to seek the advantageous, and to shun the disadvantageous employment.”

(Smith 1776, 151)

Rather than encourage programs to narrowly direct CTE training towards local “needs,” the federal government should focus on clearing barriers to entry into those professions. It can preempt state occupational licensing laws for opticians and interior designers, among other professions. States can follow the lead of Arizona and recognize out-of-state occupational licenses.

It is worth noting that CTE advocates are not attempting to plan the American economy one web-design class at a time. High schoolers earn only 12 percent of their credits from CTE, and some of the most prominent proponents recognize the challenges a changing economy poses. But the language we use will shape our goals over time. Requiring districts to consider “labor market alignment” in their annual CTE budgets is exactly the choosing between different kinds of education Hayek cautions against. Today’s alignment can be tomorrow’s stagnation.

This is not to deny the academic and personal benefits of taking CTE classes. Teenagers who do are more likely to graduate high school, to get a job, and to earn higher wages right away. Other studies suggest non-academic benefits like increased attendance. It makes intuitive sense that students would welcome non-traditional learning opportunities to break up their daily studies, and that their high school experience would be better for it. But by insisting CTE programs be training for certain job categories, we may be selling students short.

Yesterday, the White House Council of Economic Advisers released an important new report entitled, “Occupational Licensing: A Framework for Policymakers.” (PDF, 76 pgs.) The report highlighted the costs that outdated or unneeded licensing regulations can have on diverse portions of the citizenry. Specifically, the report concluded that:

the current licensing regime in the United States also creates substantial costs, and often the requirements for obtaining a license are not in sync with the skills needed for the job. There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities,  and make it more difficult for workers to take their skills across State lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing.

The report supported these conclusions with a wealth of evidence. In that regard, I was pleased to see that research from Mercatus Center-affiliated scholars was cited in the White House report (specifically on pg. 34). Mercatus Center scholars have repeatedly documented the costs of occupational licensing and offered suggestions for how to reform or eliminate unnecessary licensing practices. Most recently, my colleagues and I have explored the costs of licensing restrictions for new sharing economy platforms and innovators. The White House report cited, for example, the recently-released Mercatus paper on “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem,’” which I co-authored with Christopher Koopman, Anne Hobson, and Chris Kuiper. And it also cited a new essay by Tyler Cowen and Alex Tabarrok on “The End of Asymmetric Information.”

Moreover, along with Christopher Koopman and Matt Mitchell, I recently submitted comments to the Federal Trade Commission for a sharing economy workshop. In those comments, as well as a recent paper on the same subject, we documented how occupational licensing rules were often “captured” by affected interests and are then used to discourage new forms of competition and innovation. This harms both consumers and workers by depriving them of new and better options. Many sharing economy operations are having great success in breaking down these barriers and proving that consumers and workers do better in an environment free of unnecessary and costly licensing restrictions. This suggests that consumer welfare would be improved even more by reforming other licensing regimes.

Mercatus has published dozens of other things related to this issue, many of which I have listed down below. Just recently, in fact, we published a new paper on “Breaking Down the Barriers: Three Ways State and Local Governments Can Improve the Lives of the Poor,” by economist Steven Horwitz. The report begins by documenting how “occupational licensure laws disproportionately burden the poor by requiring them to spend significant resources just to enter a market.” This is consistent with the findings from other Mercatus reports and other academic publications.

Anyway, check out the new White House report and, if you are serious about studying the issue of occupational licensing in more detail, you’ll want to take a closer look at some of these other Mercatus Center publications on the issue. The case for occupational licensing reform is strong and non-partisan, as the release of this White House report makes clear.

Mercatus Center publications and related material on occupational licensing & barriers to entry 

• Working Papers, Filings & Testimony
  • Mercatus research paper, “Breaking Down the Barriers: Three Ways State and Local Governments Can Get Out of the Way and Improve the Lives of the Poor” by Steve Horowitz (July 21 2015).
  • Testimony before the South Carolina Health Planning Committee department of Health and Environmental Control, “Certificate-of-Need laws: Implications for South Carolina” by Christopher Koopman, Thomas Stratmann, and Mohamad Elbarasse (June 12, 2015).
  • Mercatus on Policy, “Certificate-of-Need Laws: Implications for Arkansas” by Christopher Koopman, Thomas Stratmann, and Mohamad Elbarasse (June 9, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for West Virginia” by Christopher Koopman and Thomas Stratmann (June 2, 2015).
  • Mercatus working paper, “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the “ Lemons Problem” by Adam Thierer, Christopher Koopman, Anne Hobson, and Chris Kuiper (May 26, 2015).
  • Mercatus FTC filing, “The Sharing Economy: Issues Facing Platforms, Participants, and Regulators” by Christopher Koopman, Matthew Mitchell, and Adam Thierer (May 26, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Kentucky” by Christopher Koopman, Thomas Stratmann and Mohamad Elbarasse (May 26, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Michigan” by Christopher Koopman, Thomas Stratmann and Mohamad Elbarasse (May 19, 2015).
  • Mercatus publication, “How state CON Laws restrict Access to Health Care” by Christopher Koopman Thomas Stratmann, and Mohamad Elbarasse (May 13, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Missouri” by Christopher Koopman, Thomas Stratmann and Mohamad Elbarasse (May 11, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Georgia” by Christopher Mercatus on Policy, “Certificate-Of Need Laws: Implications for South Carolina” by Christopher Koopman and Thomas Stratmann (May 5, 2015).
  • Testimony before the Indiana Senate Commerce and Technology Committee, “Occupational Licensing Gone Wild? Why Licensing is Not Always the Answer” by Edward Timmons (April 16, 2015).
  • Koopman, Thomas Stratmann and Mohamad Elbarasse (March 31, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Tennessee” by Christopher Koopman and Thomas Stratmann (March 24, 2015).
  • Mercatus on Policy, “Certificate-of-Need Laws: Implications for Florida” by Christopher Koopman and Thomas Stratmann (March 3, 2015).
  • Mercatus policy recommendations, “Florida Fiscal Policy: Responsible Budgeting in a Growing State” by Randall Holcombe (February 26, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for Virginia” by Christopher Koopman and Thomas Stratmann (February 24, 2015).
  • Mercatus working paper, “Bringing the Effects of Occupational Licensing into Focus: Optician Licensing in the United States” by Edward Timmons and Anna Mills (February 17 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for North Carolina” by Christopher Koopman and Thomas Stratmann (February 12, 2015).
  • Mercatus on Policy, “Certificate-Of Need Laws: Implications for New Hampshire” by Christopher Koopman and Thomas Stratmann (February 4, 2015).
  • Testimony before the New Hampshire House Health, Human Services and Elderly Affairs Committee, “Certificate-of-Need laws: Implications for New Hampshire” by Christopher Koopman and Thomas Stratmann (January 28, 2015).
  • Mercatus publication, “The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change” by Christopher Koopman, Matthew Mitchell, and Adam Thierer (December 8, 2014).
  • Mercatus interactive publication, “40 Years of Certificate-of-Need Laws across America,” by Matthew Mitchell and Christopher Koopman (October 14, 2014).
  • Mercatus working paper, “Do Certificate-of Need Laws Increase Indigent Care?” by Thomas Stratmann and Jake Russ (July 15, 2014).
  • Mercatus working paper, “Regulatory Reform in Florida: An Opportunity for Greater Competitiveness and Economic Efficiency” by Patrick McLaughlin, Jerry Ellig, and Dima Yazji Shamoun (March 18, 2014).
  • Mercatus on policy, “A Tale of Two Labor Markets: Government Spending’s Impact on Virginia” by Keith Hall and Robert Greene, (September 20, 2013).
  • Mercatus publication, “The Pathology of Privilege: The Economic Consequences of Government Favoritism” by Matthew Mitchell, (July 8, 2012).
  • “Beyond Bailouts: What is Cronyism?” by Matthew Mitchell, (July 8, 2012).
• Journal Articles
  • Published in Econ Journal Watch, “Was Occupational Licensing Good for Minorities? A Critique of Marc Law and Mindy Marks” by Daniel B. Klein, Benjamin Powell, and Evgeny S. Vorotnikov (September 2012).
  • Published in Cato Journal, “Occupational Licensing and Asymmetric Information” by David Skarbek (Jan 2007).
• Charts and Videos
  • “The Wrath of CON | How Certificate-Of-Need Laws Affect Access to Health Care” by Matthew Mitchell (May 12, 2015).
  • “Occupational Licensing: Bad for Competition, Bad for Low-Income Workers” by Veronique de Rugy (March 25, 2014).
• Media
  • Christopher Koopman discusses certificate of need laws on The Bill LuMaye Show on WPTF in North Carolina (5/11/2015).
  • Edward Timmons and Anna Mills publish, “Short-Sighted Policy,” at S. News and World Report (2/17/15).
  • Veronique de Rugy publishes, “Free the Horse Masseuses!” in Reason Magazine (July 2014).
  • Veronique de Rugy discusses state occupational licensing on Richmond’s Morning News on WRVA in Virginia (6/6/14).
  • Veronique de Rugy publishes “Licensing laws protect special interests at the expense of opportunity,” at The Washington Examiner (3/28/14).
  • Patrick McLaughlin discusses occupational licensing on The Ed Dean Show in Florida (3/27/14).
  • Donald Boudreaux publishes “Occupational licensing: Reality differs from rhetoric,” in The Pittsburgh Tribune-Review (3/25/14).
  • Emily Washington blogs “Occupational Licensing Hurts Consumers and Limits Entrepreneurship,” at Neighborhood Effects (8/20/13).
  • Veronique de Rugy blogs “More State Occupational Licensing Law Abuse: Kentucky Edition,” at National Review’s The Corner (7/17/13).
  • Emily Washington blogs “Small steps in VA occupational licensing reform,” at Neighborhood Effects (6/25/12).