We estimate the effects of removing the license requirement for hair braiding in Virginia in 2012. Using County Business Patterns and Nonemployer Statistics data from 2004 through 2014, we find evidence at the state level that deregulation has created more opportunities for smaller owner-operated beauty salons (an increase in proprietor density of more than 8 percent). A simple statistical test confirms that Virginia counties experienced beauty shop growth at a rate approximately 7 percent higher than that in contiguous counties in bordering states. Taken together, our findings support the notion that deregulation of hair braiding has enhanced economic opportunity for hair braiders in Virginia.
Thirteen U.S. states continue to require hair braiders to obtain a cosmetology license. However, the particular skills required for traditional, natural hair styles are generally not covered in the entry requirements for cosmetology licensure. Further, the unique risks to consumers from poor hair braiding practices (such as hair loss from braids that are too tight) are not addressed in cosmetology training. The result is that hair braiding licensure may not improve consumer safety, although it does lead to significant labor market costs.
In this article, we analyze Virginia’s deregulation of the hair braiding occupation in 2012. Using the states of Kentucky, North Carolina, and West Virginia as well as bordering counties, we examine whether removing license requirements had a significant effect on the number of salons, the number of salon employees, or the level of salon employee wages. We hypothesize that removing this barrier to entry will ultimately increase the total number of beauty shops, potentially creating more opportunities for small beauty shops by decreasing the cost of becoming a practitioner and increasing the supply of braiders. Before turning to our analysis, we discuss the rationale for occupational licensing and provide some background on regulation of hair braiding.
Rationale for Occupational Licensing
The common defense for occupational licensing is that it improves the quality of services delivered to consumers. Some economists have proposed theories that occupational licensing improves the human capital of practitioners and serves as a signal of high quality (Shapiro 1986). If such theories are accurate, then although occupational licensing will increase the price of services, consumers will benefit by receiving higher-quality services. But valid arguments can be made against such theories. For example, in many instances, consumers demand proof of qualification on their own when they believe there is reasonable risk of harm. It is thus a mistake to assume that, without government-sanctioned licenses, consumers would have no indicators of service quality or would choose to ignore such indicators (Thierer et al. 2015). Indeed, advances in technology (e.g., internet rating services) have enhanced consumers’ ability to compare the quality and reputation of professional service providers.
In several professions, arguments for occupational licensing are particularly weak. In the case of florists, for example, the risks associated with unlicensed florists amount to far less than the costs of licensing for consumers and aspiring florists, and hair braiding appears to belong to this category (Carpenter 2011). By their nature, licenses do not differentiate practicing professionals within a given field, but rather only differentiate those who can practice from those who cannot practice, even excluding licensed practitioners from another state. All license holders meet the same minimum entry standards, but whether those entry standards correlate with enhanced quality remains unclear. Licensing may instead serve as a barrier to entry for the profession and may even discourage hopeful professionals from aspiring to more than the minimum entry standards. The theory that licensing creates monopoly power for professionals by restricting entry to certain professions has emerged as the leading rationale for occupational licensing (Friedman 1962).
Empirical evidence supports the view that licensing exists because creating a barrier to entry benefits individuals already working in a given field — not because it enhances consumer welfare. Studies generally find that, although licensing is correlated with higher wages for professionals, it has ambiguous effects on the quality of services provided (White House 2015). Other studies on occupational licensing focus on employment effects in the field overall and on individual workers. Using national data from the Survey of Income and Program Participation and controlling for observable characteristics (including occupation), researchers find that licensed workers are more likely to be employed than are similar workers without licenses or certification (Gittleman, Klee, and Kleiner 2018). The same study also finds that those with federally issued credentials may earn 8.9 percent more than those without, while those with state-issued credentials may earn 6.1 percent more. An earlier study analyzing the effects of licensing and certification finds that licensed workers earn about 18 percent higher wages than do unlicensed workers (Kleiner and Krueger 2013). Licensing may also restrict mobility. A recent study finds that state-specific licensing exam requirements are associated with a 36 percent reduction in mobility (Johnson and Kleiner 2017). Licenses are generally not transferable from state to state and as a result may result in professionals experiencing “job lock.” Occupational licensing becomes particularly burdensome in the case of hair braiding because the service falls under the umbrella of cosmetology. The intent of policymakers is to ensure proper sanitation training in an effort to protect consumers, but an examination of the skills tested in the process of obtaining a license tells a different story. We now turn to a discussion of regulation of the hair braiding occupation.
Regulation of Hair Braiding Nationally
Table 1 and Figure 1 provide a snapshot of regulation of hair braiding across the United States as of October 2017. Thirteen states and Puerto Rico require aspiring hair braiders to obtain a cosmetology license. Fourteen states have specific hair braiding licensing requirements that are generally less burdensome than are the requirements for cosmetology licensing. The remaining 23 states and Washington, D.C., currently do not require hair braiders to obtain a license to work. Florida stands out as an interesting case — although a 2011 statute created a distinct hair braider license, the law prohibits hair braiders from providing hair extensions — an essential service for many braided hairstyles (Florida Department of Business and Professional Regulation). As a result, hair braiders in Florida are generally still required to obtain a cosmetology license.
Significant changes in regulation of hair braiding have come about as a result of both legislation and litigation. The Institute for Justice (IJ), a nonprofit, public-interest law firm, has championed many of the legal challenges to licensure. In these cases taken on by IJ, individual hair stylists sue states for the right to practice without a license. IJ lawsuits have led to Arizona, California, Mississippi, Utah, and Washington fully deregulating hair braiding (Avelar and Sibilla 2014). Maryland, however, is an example of the opposite case: in 2015, a stylist actually petitioned the state to try to impose licensing requirements on new hair braiders (Maryland House Bill 1124 of 2015). The bill failed but was supported by natural hair stylists who were licensed cosmetologists and who were facing reduced business because of competition from new hair braiding businesses. One practitioner advocating for the license requirement said, “At least it will weed out those [stylists] who are really really bad” (DePhillis 2015).
A number of states have recently deregulated hair braiding. Arkansas, Colorado, and Washington removed licensing requirements for hair braiders in 2015, and Iowa and Kentucky followed soon after in 2016. A number of states (South Dakota and Indiana, for example) exempted hair braiders from cosmetology licensing requirements in 2017. Texas had a particularly interesting case that focused on the requirements for teaching hair braiding. That case, brought by IJ (Institute for Justice 2015), challenged a rule that required a hair braiding instructor to provide barber chairs and sinks, even though hair braiding courses addressed neither hair washing nor hair treatment.
Understanding Regulation of Hair Braiding in Virginia
Before 2012, individuals offering hair braiding services in Virginia were required to obtain a full cosmetology license. Obtaining a license required an individual to attend training for 170 hours, pass an exam, and pay annual dues to Virginia’s Board for Barbers and Cosmetology. To be eligible to sit for the cosmetology licensing exam, an applicant would be required to attend training at a state-approved cosmetology or hair braiding school.1 Previous experience could not be substituted for the training requirement for an initial cosmetology license. Table 2 contains a complete list of the fees required to obtain a cosmetology license in Virginia before 2012, including those associated with training.
Following a statement by the Virginia Board of Barbers and Cosmetology, a law introduced in 2012 completely removed the cosmetology license requirement for hair braiders. The statement cited the low number of interventions the board had had to make in instances of improperly practiced hair braiding during a five-year period from 2007 to 2011. These included two fines for hair braiders, one license revocation, and one fine for a hair braiding salon with unspecified infractions (Virginia Governor’s Executive Reorganization Plan 2012).
In contrast, few changes have been made in the states surrounding Virginia between 2004 and 2014. In 2011, North Carolina introduced a specialized hair braiding license that requires 300 hours of training (Burrows 2010). West Virginia required a full cosmetology license for hair braiders until 2017. H. B. 2131, a piece of legislation introduced in 2015 that would have removed the license requirement, failed to get passed into law. Kentucky eliminated its license requirement in 2016 (Powers 2016). For the present article’s period of study (2004 to 2014), both Kentucky and West Virginia required hair braiders to have a full cosmetology license. We therefore use Kentucky, North Carolina, and West Virginia, as well as bordering counties, as a control group to examine the employment effects of Virginia’s removal of hair braiding regulation.2
Few studies have been conducted on licensing for hair braiders. A recent study performed by IJ explores whether hair braiding presents risks to consumers (Erickson 2016). A review of data for nine states and Washington, D.C., from 2006 to 2012 indicated that just 95 complaints were filed against hair braiders (approximately 1 percent of the population of licensed hair braiders). In addition, virtually all of those complaints (94 of the 95) were filed by competing cosmetologists as opposed to consumers. The study also notes significant differences between Mississippi and Louisiana with respect to the number of professional hair braiders. Mississippi (no licensing requirements for hair braiders) had 1,200 hair braiders in 2012, whereas Louisiana (licensing requirements for hair braiders) had only 32 hair braiders.
As demonstrated by Maryland’s 2015 attempt to protect currently licensed hair stylists, there is some substitution among braiders and other cosmetology establishments. Cosmetology and barbering establishments cater to a broader clientele, and there are more kinds of establishments (Timmons and Thornton 2010). The market has also adapted to satisfy varying consumer preferences. Consumers can now frequent barbers dedicated to beard styling, blow-dry bars, unisex salons, traditional salons that offer complimentary alcoholic beverages with the purchase of a service, or hair braiding salons. Some customers prefer traditional salon services bundled with hair braiding. Other consumers prefer (and should be able to visit) salons that specialize solely in hair braiding — and that offer their services at a reduced cost because they have to neither outfit their facility for hair washing nor pay for cosmetology licenses for their stylists. Virginia’s deregulation of hair braiding allows for this very type of salon, and we seek to expand the existing literature by estimating the economic effects of the 2012 regulatory change on hair braiding in Virginia. Before discussing the results of our investigation, we turn to a discussion of the data.
We consider recent changes to Virginia law to empirically review the effects of deregulation of the hair braiding occupation. The investigation is divided into two parts: the first part is a state-level comparison of Virginia with contiguous states with different levels of hair braiding regulation; the second part discusses a simple statistical test to confirm the significance of our comparison in the previous section.3 Within these parts, we differentiate between trends in proprietor establishments that are run by the owner and trends in employer establishments with multiple employees.
Our analysis is based on data retrieved from the County Business Patterns (CBP) report and the Nonemployer Statistics (NES) reports published by the U.S. Census Bureau. Both are broken down by NAICS code: we focus on code 812112 — beauty salons. Beauty salons (also referred to as “beauty shops” in this article) include all establishments engaged in “(1) cutting, trimming, shampooing, coloring, waving, or styling hair; (2) providing facials; and (3) applying makeup (except permanent makeup).” Excluded from this category are establishments catering to men specifically, which are classified under NAICS 812111 — barber shops. Although it would be ideal to focus solely on hair braiding, we are not aware of any data that focus solely on that specialization. Instead, we rely on the broader beauty salon category while acknowledging the limitations of this approach — most notably, that we may be identifying exogenous changes in the cosmetology market that are unrelated to hair braiding.4 To our knowledge, there were no changes in the requirements for cosmetology licenses in our sample areas, but there may be exogenous changes to demand that are otherwise unaccounted for. We use four outcomes from the CBP report at the state level: number of establishments, number of employees, number of employees per establishment, and annual earnings per employee. Measures were adjusted for inflation and converted into 2009 U.S. dollars. At the county level, because of limited data, we are able to observe only the number of establishments. The NES reports fewer variables, and we can track only the number of sole proprietors of beauty salons.
Analysis of Removal of Hair Braiding Regulation
Figures 2 through 5 plot trends in the number of beauty shop establishments, the number of beauty shop employees, the number of beauty shop proprietors, the number of employees per beauty shop, and the average earnings per beauty shop employee from 2004 to 2014 in Virginia (which fully deregulated hair braiding in 2012) and in Kentucky, North Carolina, and West Virginia (which maintained some form of regulation of hair braiding throughout that time period). The numbers of beauty shop establishments, employees, and proprietors are weighted by the state population. In Figure 2, we observe little change in the number of beauty shops with employees (per 10,000 residents) in Kentucky and North Carolina in 2012. Both Virginia and West Virginia experienced more notable decreases. Most hair braiding salons are smaller beauty shops; thus, we may not expect to observe much difference with respect to the number of beauty shops with employees following the deregulation of hair braiding. Turning to Figure 3A, the number of beauty shop employees (per 1,000 residents) falls slightly in Virginia and West Virginia following deregulation and stays mostly consistent in North Carolina and Kentucky. In percentage terms, the decline in the number of beauty shop employees is 3.19 percent from 2012 to 2014, while the number of employee establishments increases by a modest 0.04 percent. Many hair braiding establishments are small and may not have employees, so perhaps it is not surprising to see little evidence of a positive trend in the number of employees following deregulation. In fact, the drop in the number of employees in Virginia may be a result of an overall decrease in the size of beauty shops following deregulation. In Figure 3B, we plot trends in the number of sole proprietors/owners of beauty shops (per 1,000 residents) in each state. Once again, these data are obtained from the NES (as opposed to the CBP). Virginia, Kentucky, and North Carolina experience increases in the number of beauty shop sole proprietors, and in West Virginia the number remains relatively flat. In percentage terms, the number of beauty shop proprietors increased by 8.2 percent from 2012 to 2014 in Virginia.
Figure 4 displays raw trends in the number of employees per beauty shop in each state. Three of the four states (all but West Virginia) experience a decrease in the number of employees per shop before Virginia’s deregulation in 2012. Following deregulation, the number of employees per shop falls sharply in West Virginia (by almost a full employee from 2012 to 2014) and increases modestly in both North Carolina and Kentucky. In Virginia, the primary state of interest, the number of employees per beauty shop declines modestly following deregulation in 2012 after several years of staying relatively constant. This trend seems to support increased economic opportunities for hair braiders, as new salon proprietors may have once been salon employees. Hair braiding establishments are generally smaller than are salons offering other cosmetic services; thus, the drop in the number of employees per shop in Virginia may reflect either an increase in the number of new small beauty shops with few employees or an increase in the number of owner-operated salons (with no employees) opening in the state following deregulation.
In Figure 6A, we plot the distribution of beauty shops in the state of Virginia. More than 65 percent of counties in the state have fewer than 13 beauty shops with employees. And, as shown in Figure 6B, most Virginia counties (a few more than half) have a relatively small number of beauty shops (fewer than 35) without employees (owner-operated shops). Although a state-level comparison is interesting, a county-level analysis allows for an opportunity to better isolate the effects of deregulation by focusing on geographic areas that may be economically similar despite being in different states — and that are thus subject to different regulation. We turn to a county-level analysis in the next section.
To further investigate the effect of Virginia’s deregulation of hair braiders, we present six simple tests, three testing employee establishments and three testing nonemployee (proprietor) establishments. To facilitate interpretation, we examine the number of proprietorships per 1,000 people and employee establishments per 10,000 people. No Virginia counties with reporting beauty shops are excluded in the regressions — the total sample includes 147 counties from 2005 to 2014. The equation that we estimate is:
ln(Beauty Shop Density) = α + β1 (DID) + β2 (county control variables) + β3 (county fixed effects) + ε
We control for county unemployment rate and real personal income per capita to account for possible county-level differences in demand for hair braiding services. In addition, all regressions include county fixed effects and standard errors that are adjusted for clustering at the county level.
We take the natural log of each beauty shop density (the number of proprietorships and employee establishments per capita) to facilitate interpretation of each coefficient as a rate of change. A summary of each test is presented below:
Our primary variable of interest in each regression is a simple interaction term of dummy variables. In tests (columns) 1 and 4 of Table 3, we interact a dummy variable for deregulation of hair braiding (equal to 1 after 2012) with a dummy variable denoting Virginia border counties. The resulting variable is labeled “Dereg|Border.”5 In addition, the hair braiding deregulation and Virginia border county dummy variables are both included separately as additional independent variables — fully specifying the difference-in-difference (DID) coefficients. Both interaction term coefficients are negative (the coefficient on proprietors is statistically significant), suggesting that deregulation resulted in more growth in the number of proprietor beauty shops within the inner counties of Virginia than in the border counties. Most important, it does not appear that the number of beauty shop establishments grew more quickly in Virginia border counties relative to inner counties.
For the remainder of the tests (columns 2, 3, 5, and 6), we compare Virginia counties to contiguous counties in Kentucky, North Carolina, and West Virginia. Our main variable of interest is also a simple interaction of dummy variables — in this case, a dummy variable denoting a Virginia county interacted with the same dummy variable from tests 1 and 4 denoting the period of hair braiding deregulation. This variable is labeled “Dereg|VA.” As in the previous tests, we also include each dummy variable from the interaction term separately. Tests 2 and 5 focus exclusively on Virginia border and contiguous out-of-state counties (resulting in the noticeably smaller sample size). Although we do estimate that Virginia border counties had a higher rate of growth in the number of beauty shops (particularly for the employee shops in test 5), neither of the coefficients is statistically significant. Considering our results from tests 1 and 4, we reran this test including all Virginia (border and inner) counties. The results from this final test are reported in columns 3 and 6. In this case, we consistently estimate that Virginia counties had more growth in the number of beauty shops (approximately 7 percent) than did contiguous counties in bordering states after deregulation. This result is very similar to the difference we noted in our state-level comparison in the preceding section.
Summary and Limitations
In the preceding sections, we find that deregulation has expanded opportunity for smaller beauty salons (measured by as much as an 8 percent growth rate in owner-operated salons after deregulation). A county-level regression analysis produces similar results that the number of beauty shops grew approximately 7 percent faster in Virginia relative to contiguous counties in bordering states. In short, the evidence presented seems to support the hypothesis that deregulation of hair braiding has resulted in more opportunity for hair braiders in Virginia relative to bordering states. We should note that there are limitations to our analysis. First, there are several cases of missing data that make it difficult to present a more complete comparison. The CBP publication often does not report data because either the data are redacted to protect the privacy of businesses or the data have not met certain standards. Such reporting irregularities result in many gaps in the data, with some counties having to be excluded from the model because too many years of data were missing. The NES is more robust with respect to the number of observations but includes only counts of establishments.
Another limitation of our analysis is that the beauty shop category is broad. Ideally, we would have specific data on hair braiding salons. Unfortunately, to the best of our knowledge, such data are not available. Finally, having data that end in 2014 limits our ability to identify longer-term effects of deregulation. It is possible that there is a lag in seeing the effects of deregulation. Hair braiders who offer their services unofficially in the underground economy may continue to not report their activity, which may limit our ability to isolate the effects of deregulation.
In this article, we have estimated the effects of Virginia’s deregulation of the hair braiding profession in 2012. Our results suggest that beauty shops in Virginia at the county level experienced approximately 7 percent higher growth rates than did those in contiguous counties in bordering states. State-level analysis confirms this result and is also supportive of the view that deregulation has expanded opportunity for smaller beauty salons (measured by as much as an 8 percent growth rate in owner-operated salons after deregulation).
As policymakers reconsider regulation of hair braiding, our results should provide very clear guidelines. Having no regulation of the profession seems to provide more opportunities for business development than burdensome regulation (as in Kentucky and West Virginia, where hair braiders were previously required to obtain a cosmetology license) and slighlty less burdensome regulation (as in North Carolina, where hair braiders and cosmetologists obtain separate licenses) improves business outcomes. The past several years have proved to be fruitful, with many states choosing to deregulate the hair braiding profession. Nevertheless, 13 states continue to require hair braiders to obtain a cosmetology license — a process that seems unnecessarily onerous to aspiring practitioners and may not be generating benefits for consumers.
Avelar, P., and Sibilla, N. (2014) “Untangling Regulations: Natural Hair Braiders Fight against Irrational Licensing.” Washington: Institute for Justice Report (July). Available at www.ij.org/images/pdf_folder/economic_liberty/untangling-regulations.pdf.
Erickson, A. (2016) “Barriers to Braiding: How Job-Killing Licensing Laws Tangle Natural Hair Care in Needless Red Tape.” Washington: Institute for Justice Report (July). Available at http://ij.org/report/barriers-to-braiding.
Florida Department of Business and Professional Regulation (n.d.) “Hair Braider Registration (COSMO 5).” Available at https://www.myfloridalicense.com/CheckListDetail.asp?SID=&xactCode=1030&clientCode=0506&XACT_DEFN_ID=5312.
Institute for Justice (2015) “Texas Hairbraiding Instruction.” Washington: Institute for Justice Report. Available at http://ij.org/case/txbraiding.
__________ (2017) “Braiding Freedom: A Project of the Institute for Justice.” Washington: Institute for Justice. Available at http://braidingfree.wpengine.com.
Johnson, J., and Kleiner, M. M. (2017) “Is Occupational Licensing a Barrier to Interstate Migration.” NBER Working Paper No. 24107. Available at www.nber.org/papers/w24107.
Maryland House Bill 1124 (2015) Available at https://legiscan.com/MD/bill/HB1124/2015.
Thierer, A. D.; Koopman,C.; Hobson, A.; and Kuiper, C. (2015) “How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the ‘Lemons Problem.’” Mercatus Center Working Paper, George Mason University.
U.S. Bureau of Labor Statistics (2015) “Certification and Licensing Status of the Civilian Noninstitutional Population 16 Years and Over by Employment Status.” Available at www.bls.gov/cps/certifications-and-licenses-table-1-2015.htm.
U.S Census Bureau (2012) “2012 NAICS: 812112 — Beauty Salons.” Available at https://www.census.gov/econ/isp/sampler.php?naicscode=812112&naicslevel=6.
White House (2015) “Occupational Licensing: A Framework for Policymakers.” Report prepared by the Department of the Treasury Office of Economic Policy, Council of Economic Advisers, and Department of Labor (July). Available at https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf.
1 No distinction was found between the two types of schools. There may be additional regulations when institutions are regulated as cosmetology schools, including what training schools must offer and what certifications teachers must have, which would have indicated additional barriers to entering either profession.
2 It is also possible to measure the effect of changes in states that have not completely removed licenses. Some may remove the fee for a license, decrease the number of exams, or decrease the hours of training required. We chose to focus instead on the complete removal of regulation.
3 Tennessee also borders Virginia, but we were unable to find any data at the county level on bordering counties in Tennessee. We therefore omitted Tennessee from this part of the analysis.
4 We are not aware of any significant changes in cosmetology licensing (besides changes to hair braiding) over our time period of study.
5 The full results of the regressions are available upon request.