Licensing and Permitting Laws: Barriers to Upward Mobility

By:  Walter Williams
08/03/2011
       
Licensing and Permitting Laws: Barriers to Upward Mobility

What does it take to be able to own and operate a taxi and earn $30,000, $40,000 or more a year? You need to purchase a used car and liability insurance. Compared with other businesses, the startup cost to become a taxi owner/operator is modest; that's until you have to come up with money for a license. In May 2010, the price of a license, called a medallion, to own one taxi in New York City sold for $603,000. As referenced in my recent book, Race and Economics, New York City is not alone. In Chicago, a taxi license costs $56,000, Boston $285,000, and Philadelphia $75,000. It's not rocket science to understand the effect of laws that produce these prices: They discriminate against anyone getting into the taxi business who lacks tens and hundreds of thousands of dollars or bank credit to be able to get a loan.

What does it take to be able to own and operate a taxi and earn $30,000, $40,000 or more a year? You need to purchase a used car and liability insurance. Compared with other businesses, the startup cost to become a taxi owner/operator is modest; that's until you have to come up with money for a license. In May 2010, the price of a license, called a medallion, to own one taxi in New York City sold for $603,000. As referenced in my recent book, Race and Economics, New York City is not alone. In Chicago, a taxi license costs $56,000, Boston $285,000, and Philadelphia $75,000. It's not rocket science to understand the effect of laws that produce these prices: They discriminate against anyone getting into the taxi business who lacks tens and hundreds of thousands of dollars or bank credit to be able to get a loan.

Suppose you're a trucker with an interstate license to ship goods but you want to expand to shipping goods within your state. Is it fair for the government to permit your competition to show up at your hearing, with their attorneys, to protest that your services are not needed and therefore you are denied what's called a "certificate of necessity," which would allow you to ship goods within the state? Attorney Timothy Sandefur discusses this despicable process in his recent article "CON Job," published by the Cato Institute (summer 2011).

Click here to read the entire article.

Walter Williams (photo)

 

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