Topic: Regulatory Studies

It’s Irrational to Require 1,000 Hours of Training to Be Able to Braid Hair

Becoming an EMT in Missouri requires 144 hours of training, including instruction in CPR, trauma care, handling hazardous materials, and medical ethics. But Ndioba “Joba” Niang and Tameka Stigers don’t want to be EMTs. They both want to run salons offering traditional African-style hair braiding. Braiding hair, however, requires at minimum 1000 hours of training, 90 percent of which isn’t even generally relevant to African-style hair braiding.

That’s because the Missouri Board of Cosmetology and Barber Examiners (an administrative board made up primarily of practicing barbers and cosmetologists, as well as the owners of in-state cosmetology/barbering schools) has declared that anyone wanting to braid hair professionally must be a licensed cosmetologist or barber—despite the fact that neither licensing program offers any training whatsoever in the services Niang and Stigers intend to offer. Defended as necessary to protect Missouri’s consumers from the health, safety, and fraud risks caused by untrained hair braiders, this licensing regime is actually a thinly disguised cartel in which insiders have built up arbitrary and expensive licensing requirements in an effort to limit competition.

It is for this reason that Niang and Stigers, with the assistance of the good people at the Institute for Justice, have filed suit challenging Missouri’s licensing regime as a violation of the Fourteenth Amendment’s Due Process and Equal Protection clauses. A federal district court upheld the licensing regime, using an extremely deferential form of judicial review that requires judges to blindly accept the government’s justifications of its actions, and even supply their own if they don’t find the government’s compelling enough. Under that form of review, as long as there is any potentially conceivable “rational basis” for the law, courts will not strike it down.

Cato, joined by the Reason Foundation, Individual Rights Foundation, and Senator Rand Paul (R-KY), has filed an amicus brief urging the U.S. Court of Appeals for the Eighth Circuit to reverse the district court and reject its rubber-stamp approach to the core judicial function of keeping the other two branches in check. The district court’s application of the rational basis test undermines the constitutional guarantee of procedural due process by denying plaintiffs both the right to a meaningful opportunity to be heard and to have their case judged by an impartial tribunal.

Deprivations of economic liberty require meaningful judicial scrutiny that actively engages with the facts of the case without putting a finger on the scales in favor of the government. As the Supreme Court has held in other contexts, meaningful scrutiny is especially important in situations like this one, where there are strong indications that the government’s proffered justifications are just pretextual smokescreens for illegitimate anti-competitive cartel behavior—and when the victims of the regulations lack sufficient numbers and resources to overcome the cartel through political means.

In Niang v. Carroll, the Eighth Circuit should reverse the lower court because Missouri’s licensing scheme for traditional African hair braiders isn’t rationally related to any legitimate governmental purpose.

Low-Level Bureaucrats Shouldn’t Be Changing Federal Law

The debate over transgender rights has risen in prominence in recent years, with the fight over access to public restrooms and locker rooms receiving particularly heavy public attention. The legal question at the heart of the first such lawsuit to reach the Supreme Court, however, is one not of civil rights, but of administrative law: Should courts defer to agency interpretations of their own regulations, even when those interpretations constitute major, substantive changes to public policy via informal, non-binding pronouncements?

G.G. is a transgender high school student—minors are identified by letters in sensitive cases—who argues that Gloucester (Va.) High School’s policy disallowing him from using the facilities that correspond with his preferred gender identity violates federal law (Title IX of the Education Amendments) regarding sex discrimination in education. Upon being informed of G.G.’s conflict with the Gloucester County School Board, James Ferg-Cadima—a civil servant in the U.S. Department of Education’s Office of Civil Rights (OCR)—wrote a letter purporting to interpret the relevant regulation. This letter stated that “[w]hen a school elects to separate or treat students differently on the basis of sex in [situations like this], a school generally must treat transgender students consistent with their gender identity.”

While the federal district court rejected this interpretation, the U.S. Court of Appeals for the Fourth Circuit reversed that ruling and deferred to the agency’s new understanding of its Title IX regulations. The Supreme Court took the case and Cato, along with the Cause of Action Institute and four respected law professors (Jonathan Adler, James Blumstein, Richard Epstein, and Michael McConnell), has filed an amicus brief supporting the school board.

We do so not because we necessarily oppose OCR’s position as a matter of policy or even whether the relevant federal law can properly be read to support that policy—those are questions for another day—but because we oppose its unconstitutional method of enacting that policy. OCR seeks to change federal law not through the procedures spelled out in the Administrative Procedure Act, but via an informal, unpublished letter written by a low-level bureaucrat.

Current Supreme Court precedent under Auer v. Robbins (1997) says that courts must give such agency interpretations of their own regulations controlling deference. But deferring in this way incentivizes agencies to write vague regulations because they will then be free to reinterpret them at a later date without having to go through the trouble and expense of the rulemaking process—changing the law with no notice to regulated entities or the general public. Auer deference also allows executive agencies to consolidate legislative and judicial power by effectively rewriting regulations beyond the scope delegated by Congress and then judging for themselves whether they’ve overstepped that authority.

The Court appears unwilling to overrule Auer in its entirety, but we call on it to take this opportunity to limit Auer to a more appropriate scope by holding that only agency interpretations that have received the public scrutiny of notice-and-comment rulemaking merit judicial deference.

One final note: The justices are expected to hear Gloucester County School Board v. G.G. this spring and decide it by the end of June, but the case could be made moot before it’s heard or decided. The Trump administration could simply withdraw the Ferg-Cadima letter or take other actions that would moot the case and leave the important issues it raises unsettled. Considering the importance Gloucester County may hold for the state of administrative law, we chose to file our amicus brief under the assumption that it will remain a live controversy—and to make a strong statement about constitutional structure and the rule of law.

The Chilling Effect of the Government’s Subpar Subpoenas

Here we go again. History repeats itself with classified-ad website Backpage.com’s announcement yesterday that it’s shuttering its “adult” section after years of unrelenting pressure from public officials at all levels of government. 

Most recently, the Senate’s Permanent Subcommittee on Investigations (PSI) hauled several Backpage.com officials before it for a public shaming without bothering to wait for a ruling on the legality of its “investigation.” In California, just before Christmas then-attorney general (now U.S. Senator) Kamala Harris refiled criminal charges against Backpage’s CEO and its former owners in the face of a December 9 ruling throwing her initial charges out.

These tactics represent a marked escalation since September 2010, when Craigslist caved in to pressure from a group of 17 state attorneys general and shut down its “adult advertisements” section. As a federal court had already ruled at that time—and numerous courts have held since—the government cannot assume that ads that mention sex are advertising illegal transactions, much less coercive sex-trafficking. Laws censoring such websites have been roundly and repeatedly held to violate the First Amendment.

But the law is one thing, and less-direct pressure tactics are quite another. It’s harder to hold government accountable when it tries to hide what it’s up to with public letters, demands, and investigations, even if meritless.

Can States Forcibly Unionize Small Businesses?

Imagine that you run a family daycare out of your home. You have no direct connection to the state government, but its bureaucrats decide that because you lack an “organized voice” as a profession, they’re going to appoint a union representative to speak on your behalf. So you get a union you didn’t choose and which you refuse to join. This union is now representing your “interests” before the state, which isn’t even your employer. All this despite the fact that you might not even agree with what the union is saying!

It sounds far-fetched, but this is what’s happening to Mary Jarvis and several others in New York. These plaintiffs have sued the Empire State, arguing that the imposition of an exclusive representative violates their First Amendment freedom of association.

In the 2014 case Harris v. Quinn, the Supreme Court ruled that states that unionize healthcare aides and other home-based workers who are “not full-fledged public employees” cannot require those who do not wish to join the union to pay fees to support it. This new case asks the question Harris left unanswered: May a state even mandate exclusive representation for those who are “not full-fledged public employees”—or not employees of the state at all?

The U.S. Court of Appeals for the Second Circuit said that the case is easily resolved under Abood v. Detroit Board of Education (1977)—which allowed the imposition of “agency fees” on union nonmembers—and does not require further First Amendment scrutiny. Abood, however, is like a house built on the sand: It treated the First Amendment concerns public unions (should) raise as already resolved by earlier cases when in fact those cases merely resolved the question of whether Congress has the constitutional authority to regulate those public unions. Abood’s reliance on the notion of “labor peace”—which was significant in those old cases but shouldn’t be a valid First Amendment interest—conflicts with the First Amendment’s ban on compelled speech and association absent a substantial government interest.

Although the Second Circuit treated this case as automatically resolved under Abood, it would actually be a vast expansion of precedent to say that “labor peace” justifies forcibly unionizing at-home workers who are independent from the state government. States are already doing this in a number of jurisdictions—including in the First Circuit, which recently upheld a similar Massachusetts law that Cato earlier urged the Supreme Court to hear—but expanding Abood here would enable the states to mandate exclusive representation for almost any private business.

Where does it stop? Cato has filed a brief asking the Court to answer that question once and for all, and ultimately to rule that Abood should not be read to give the states free rein to unionize individuals at the expense of their First Amendment rights. The case is Jarvis v. Cuomo.

Campaign-Finance Rules Chill Speech Unrelated to Election Campaigns

In 2014, the Independence Institute—a Colorado think tank—wanted to run a radio advertisement supporting the Justice Safety Valve Act, a bill granting federal judges greater discretion in sentencing nonviolent offenders. The text of the ad asked listeners to “call Senators Michael Bennet and Mark Udall”—Colorado’s two senators at the time—and tell them to support the bill.

But under the Bipartisan Campaign Reform Act of 2002 (BCRA, better known as McCain-Feingold), any organization that spends at least $10,000 on “electioneering communications” in one year is required to make several public disclosures, including “the names and addresses of all contributors who contributed an aggregate amount of $1,000 or more” toward the advertisement. Further, an “electioneering communication” is defined as any broadcast that “refers to a clearly identified candidate for Federal office” within 60 days of a general election. Since Udall was running for reelection that year, the ad would have qualified even though it had nothing to do with Udall’s campaign.

The Independence Institute challenged the rule as an unconstitutional burden on its First Amendment right to speak on issues of public concern. After losing before a three-judge district court, the Institute has now appealed directly to the Supreme Court. Cato, joining the Institute for Justice, has filed a brief urging the Court to grant the case a full hearing on the merits.

We make two broad points. First BCRA’s disclosure provision is undeniably content-based, which should subject it to strict scrutiny under the First Amendment (meaning the government needs to provide a compelling justification). The law applies only if a speaker chooses to make reference to a candidate for office, so the law expressly draws distinctions based on the expressive content of speech.

Second, mandatory-disclosure laws chill speech by forcing people to surrender their “privacy interest in keeping personal facts away from the public eye,” as the Supreme Court put it in U.S. Department of Justice v. Reporters Committee for Freedom of Press (1989). In the context of reviewing disclosures made under the Freedom of Information Act, the Court has recognized that “embarrassment in … social and community relationships” is among the consequences of disclosure that “must be given great weight.” U.S. Department of State v. Ray (1991).

Exactly the same analysis holds true for donors to advocacy organizations. For many people—without tenure, without salary protection, and without security details—government-mandated disclosure of their political leanings and personal data is a real barrier to political participation. Forcing people to divulge their personal information threatens to expose them to reprisals, and this deterrent effect is pervasive precisely because it is impossible to predict whether your viewpoint will trigger retaliation.

BCRA’s disclosure rule is content-based, intrudes on speech and association, and has not been shown to serve a legitimate governmental interest. Because enforcement of the rule raises a substantial question under the First Amendment, the Court should take up Independence Institute v. FEC and ultimately overturn the district court.

Removing Barriers to Infrastructure Investment

As Obama administration officials head for the door at the Department of the Treasury, they have released a new study on infrastructure. The study—completed by outside consultants—profiles 40 large transportation and water projects that the authors believe would generate economic growth.

For each project, the study gives the estimated benefits, costs, and benefit-cost ratio. Many of the 40 projects appear to be worthwhile, such as an $8 billion Hampton Roads highway project with a benefit-cost ratio of 4.0. The report is silent on who should fund each project, but such high returns suggest that the states have a strong incentive to invest by themselves without aid from Washington.

What the states need from Washington is not money but to get out of the way. The Treasury report suggests that some “major challenges to completion” of projects are imposed by governments.

One challenge is “significantly increased capital costs:”

Capital costs of transportation and water infrastructure have increased much faster than the general rate of inflation over the past 20 years … Increased capital costs are also a product of enhanced design standards and regulatory requirements related to performance, safety, environmental protection, reliability, and resiliency.

Another challenge is “extended program and project review and permitting processes:”

Successful completion of the review and permitting processes required by the National Environmental Policy Act of 1969 (NEPA), which requires federal agencies to assess the environmental effects of their proposed actions, is an important part of project development. NEPA helps promote efforts to prevent or eliminate damage to the environment, but has also extended the schedule and generally increased the cost of implementing major infrastructure projects. This is a long-standing challenge that has spanned the last 20 to 30 years. Studies conducted for the Federal Highway Administration (FHWA) concluded that the average time to complete a NEPA study increased from 2.2 years in the 1970s, to 4.4 years in the 1980s, to 5.1 years in the 1995 to 2001 period, to 6.6 years in 2011.

Other FHWA data show that the number of environmental laws and executive orders creating barriers to transportation projects increased from 26 in 1970 to about 70 today, as shown in the chart below sourced from a trade association.

The upshot? The incoming Trump administration can spur infrastructure investment by working with Congress to repeal rules that unnecessarily delay projects and increase costs. Other steps include cutting the corporate tax rate to increase private investment and ending the bias against the private provision of facilities such as airports.

For more on infrastructure, see here, here, and here.

 

Workers Will Get a Raise Today — or Will They?

The legal minimum wage will increase in 20 states today. The Wall Street Journal news story on that fact starts out accurately enough:

Minimum wages will increase in 20 states at the start of the year, a shift that will lift pay for millions of individuals and shed light on a long-running debate about whether mandated pay increases at the bottom do more harm or good for workers.

But it quickly segues into the same error that afflicts most such stories:

In California, the minimum goes up 50 cents, to $10.50 an hour, boosting pay for 1.7 million individuals.

Wages are also going up in many Republican-led states, where politicians have traditionally been skeptical of the benefits of minimum-wage increases.

In Arizona, one out of every nine workers is slated to receive a wage increase….So will tens of thousands of workers in Arkansas, Michigan and Ohio….

In all, about 4.4 million low-wage workers across the country are slated to receive a raise because they earn less than the new minimum in their respective states.

Every one of those sentences assumes facts not in evidence. What these new laws do is ensure that no worker can be paid less than a statutory minimum. They cannot ensure that every worker with a minimum-wage job will still have one if his employer required to pay more. They won’t prevent employers from replacing labor with technology, such as these McDonald’s order-taking kiosks. McDonald's kiosk

The Journal isn’t alone, of course. Here’s the Associated Press lead:

It will be a happy New Year indeed for millions of the lowest-paid U.S. workers. 

And CBS:

Millions will ring in the new year – with a raise. The minimum wage is going up in 20 states and Washington, D.C. as well.

And a Washington Post headline:

There’s some really good news for low-wage workers this weekend

What all these chipper stories fail to take into account is the possibility that some low-wage workers will lose their jobs because their work just isn’t worth the new minimum wage or the employer can’t be profitable with higher costs. There’s abundant evidence that higher minimum wage laws reduce employment, especially among young and minority workers. If only Journal reporter Eric Morath had read this op-ed headline in the Journal a year ago:

The Evidence Is Piling Up That Higher Minimum Wages Kill Jobs

Economist David Neumark, perhaps the leading student of the effects of minimum wage laws, wrote:

Economists have written scores of papers on the topic dating back 100 years, and the vast majority of these studies point to job losses for the least-skilled. They are based on fundamental economic reasoning—that when you raise the price of something, in this case labor, less of it will be demanded, or in this case hired. 

Among the many studies supporting this conclusion is one completed earlier this year by Texas A&M’s Jonathan Meer and MIT’s Jeremy West, which reaffirmed that “the minimum wage reduces job growth over a period of several years” and that “industries that tend to have a higher concentration of low-wage jobs show more deleterious effects on job growth from higher minimum wages.”

The broader research confirms this. An extensive survey of decades of minimum-wage research, published by William Wascher of the Federal Reserve Board and me in a 2008 book titled “Minimum Wages,” generally found a 1% or 2% reduction for teenage or very low-skill employment for each 10% minimum-wage increase.

I hope these stories will prove accurate, that millions of low-wage workers will get higher wages and that the new minimum wage rates will not reduce the growth in jobs that Americans need. But I’d have to shut my eyes to economic theory and empirical evidence to believe that. In fact, you’d pretty much have to be an economics denier to believe that a mandated increase in the price of labor won’t reduce the amount of labor demanded.