Of all the rights that Americans cherish, freedom of enterprise receives the least protection under our law. Indeed, it’s far easier for the government to take away the opportunity to open a business or pursue a livelihood than it is to take away an entitlement to a welfare check.
Local, state, and federal governments use licensing laws, government-conferred monopolies, certificate of need requirements, and other regulations to make it difficult for entrepreneurs to start new businesses. Such restrictions often inflict their greatest burdens on people with little wealth or political clout, thereby cutting off the bottom rungs of the economic ladder.
The burden of proving that such restrictions are excessive should not be placed on those who want to earn an honest living; instead, governments should bear the burden of justifying the restrictions. States should enact a Right to Earn a Living Act to protect freedom of enterprise. By doing so they will ensure that economic opportunity is not merely a promise but a reality.
The Nature and Extent of the Problem
A hallmark of American freedom is the right to pursue one’s chosen profession to provide for oneself and family. This right was deeply entrenched in the British common law that formed the foundation for American liberty. After slavery was abolished, this fundamental right was expressly protected as a basic right of citizenship in the Civil Rights Act of 1866, and was among the “privileges or immunities” of citizens protected in the 14th Amendment to the U.S. Constitution.
Pursuant to their police power to protect public health and safety, the states always have had the authority to regulate businesses and professions, so long as they did not regulate so excessively or arbitrarily as to extinguish freedom of enterprise. Unfortunately, shortly after the 14th Amendment was adopted, the U.S. Supreme Court nullified the privileges or immunities guarantee in the Slaughterhouse Cases,1 which upheld a state slaughterhouse monopoly that destroyed the livelihoods of scores of butchers. Since then, U.S. Supreme Court decisions have virtually abandoned protection of economic liberty, subjecting economic regulations to so-called “rational basis” scrutiny, in which regulators are given free rein to limit competition and restrict entry into businesses and professions.2
The results are predictable. A recent report by the Obama administration found that occupational licensing controls entry into roughly one-quarter of all jobs in the workforce. Many licensed professions do not seem to present significant health and safety concerns, yet individuals who would like to join the profession must first fulfill costly and burdensome requirements. Such laws reduce employment opportunities, especially for those who lack education or language skills, and add to the cost of goods and services. Often the licensing rules are established and enforced by governmental bodies dominated by members of the regulated professions.3
Similarly, local governments often limit competition through monopolies for public services, such as trash collection. Certificate of need laws, typically enacted at the state level, require new entrants in businesses such as outpatient surgery centers, ambulance services, and taxicabs, to demonstrate that existing companies cannot meet demand. Still other state laws forbid sales of certain goods, such as automobiles, contact lenses, and wine, directly to consumers. Disruptive technologies such as Uber and Airbnb are shoe-horned into outmoded regulatory systems or banned altogether.
Such restrictions often greatly exceed legitimate public health and safety regulations. Complete bans of entire businesses, for instance, are sustained even when less-onerous regulations would suffice to protect the public. Excessive and costly training and regulations can unnecessarily limit competition and entry without commensurate benefits to the public.
Fortunately, in recent years, a number of federal court decisions have struck down restrictions on freedom of enterprise in industries such as Af- rican hair braiding and casket sales.4 Additionally, state constitutions can provide protections above and beyond those recognized under the federal Constitution. In 2015, the Texas Supreme Court invoked the state constitution to invalidate a requirement of 750 hours of training for eyebrow threaders, most of which were unrelated to the occupation, on the grounds that the regulations exceeded the scope of the government’s legiti- mate public health and safety objectives.5
But court decisions striking down excessive economic regulations are vastly outnumbered by new restrictions on competition and entry, often adopted at the behest of the regulated industries, seeking not to protect the public but to limit competition. When they exceed valid public purposes, such laws harm both producers and consumers.
In a nation doctrinally committed to freedom of enterprise, aspiring professionals and entrepreneurs should not have to prove to the government’s satisfaction that they deserve to pursue their chosen livelihoods. Rather, the burden of proof should rest with those who want to restrict entry into a profession. That is exactly what the Right to Earn a Living Act would accomplish.
The Right to Earn a Living Act
States can take a major step toward restoring the freedom of enterprise that is every American’s birthright by enacting model legislation called the Right to Earn a Living Act. The proposed law recognizes that the right of individuals to pursue a chosen business or profession, free from arbitrary or excessive government interference, is a fundamental civil right. The act provides substantive protection for those rights while at the same time preserving the ability of state regulatory agencies and local governments to protect the public through legitimate and proportionate health and safety regulations.
The act would require that any ordinance or rule that limits entry or competition in a business or profession “shall be limited to those demonstrably necessary and carefully tailored to fulfill legitimate public health, safety, or welfare objectives.” That language contains three essential components: legitimate, necessary, and tailored. “Legitimate” refers to traditional police powers such as the protection of health and safety. By contrast, economic protectionism— favoring some businesses over others — is not a legitimate object of government. “Necessary” and “tailored” refer to proportionality. Is a ban or monopoly necessary, or would free or regulated competition suffice? Is a particular rule properly applied to a specific profession, or is it largely unrelated to the products or services that are provided?
A classic example of excessive regulation is taxicab licensing. A local government might logically require minimum taxicab safety standards and insurance. But an arbitrary limit on the number of licenses issued serves only to reduce competition and consumer choices, increase prices, and restrict newcomers into the business for the benefit of existing companies. Likewise, is it necessary to subject African hairbraiders — who twist, braid, and weave African hair without the use of chemicals — to an entire cosmetology curriculum that focuses on white hair and the extensive use of chemicals? Both taxicab and African hairbraiding businesses can provide entry-level entrepreneurial and professional opportunities, but only if the regulations governing them are legitimate, necessary, and tailored. That is what the Right to Earn a Living Act would require.
After the law is enacted, agencies and local governments would have one year to review their regulations and bring them into compliance with the law. Anyone may petition a governmental entity to repeal or modify specific regulations, to which the entity must respond within 90 days.
Where the entity decides not to grant the petition, the individual who requested the agency action may challenge it in court. The court is instructed to rule in favor of the challengers if it makes two findings “by a preponderance of evidence.” First, that the challenged regulation “on its face or in its effect burdens the creation of a business, the entry of a business into a particular market, or entry into a profession or occupation.” Second, that “the challenged entry regulation is not demonstrably necessary and carefully tailored to fulfill legitimate public health, safety, or welfare objectives” or that “such objectives can be effectively served by regulations less burdensome to economic opportunity.” If the court makes those two findings, it is directed to enjoin the regulations and award reasonable attorney fees.
- The Right to Earn a Living Act restores the proper balance between freedom of enterprise and legitimate government regulation. It allows agencies and local governments in the first instance to review their rules to eliminate economic protectionism and to tailor them to legitimate public purposes. It does so in the second instance as well, giving governmental entities the opportunity to respond to requests to repeal or modify their rules. Only where the governmental entity chooses not to take corrective action is an aggrieved individual permitted to go to court. There both parties will find a level playing field in which each has the opportunity to prove that the rules are either excessive or appropriate.
- The Right to Earn a Living Act has been approved as model legislation by the American Legislative Exchange Council. It would bring back to the center of gravity a policy pendulum that has swung far too much in favor of government regulation and economic favoritism and against freedom of enterprise.
All public officials have a duty to ensure that the rules of the game are fair and that equal opportunities are available to all to pursue the American Dream. To fulfill that duty requires significant and effective corrective action. The Right to Earn a Living Act will insure that all Americans have a right to rise.