How Interior Design Insiders Use Government Power to Exclude Minorities & Burden Consumers

Designed To Exclude How Interior Design Insiders Use Government Power To Exclude Minorities & Burden Consumers February 2009 Institute for Justice David E. Harrington Jaret Treber In states where interior designers are regulated, consumers are paying higher prices for design services, fewer entrepreneurs are able to enter the market, and blacks, Hispanics and those wishing to switch careers later in life are being disproportionately excluded from the field. Designed To Exclude How Interior Design Insiders Use Government Power To Exclude Minorities & Burden Consumers February 2009 Institute for Justice David E. Harrington Jaret Treber Kenyon College 1 Executive Summary Americans used to be free to practice interior Drawing upon national census data, this design work and succeed or fail based solely on report finds that interior design regulations their skills. But, to the detriment of consumers not only create serious barriers to entry and would-be entrepreneurs, that is changing. for entrepreneurs, but also raise costs for The American Society of Interior Designers, consumers. an industry trade group, would like state governments to define what it means to be an We find evidence that in states where interior interior designer and then dictate who may designers are regulated, consumers are perform that work. The group and its allies have paying higher prices for design services, successfully lobbied 22 states and the District fewer entrepreneurs are able to enter the of Columbia to impose stringent education and market, and blacks, Hispanics and those training requirements that create a single route wishing to switch careers later in life are to practicing interior design or to using titles being disproportionately excluded from the associated with interior design work. field. Specific findings include: • Interior design firms in regulated states earn significantly more than those in unregulated states—about $7.2 million in a city with a population of one million. That means higher prices for consumers, as lower-cost competition is simply outlawed by the licensing regulations. • In regulated states, the number of interior designers fell by an estimated 1,300 between 1990 and 2000, demonstrating that regulation is limiting economic opportunity in interior design. • Black and Hispanic interior designers are nearly 30 percent less likely to have college degrees than white designers. Thus, regulations with academic requirements disproportionately shut minorities out of the field. • Similarly, older interior designers are 12 percent less likely to have college degrees in regulated states, indicating that these regulations keep out those who switch to an interior design career later in life. By creating a single, costly path to entering the the 1950s to about 20 percent today. Interior interior design market, these regulations also design is just one of the many fields where threaten the diversity of services offered— licensing laws have grown. effectively placing government in the role of designing our interiors, rather than leaving the Previous research from state agencies and choice of designers up to consumers in an open independent groups has demonstrated that market. interior design regulation has no public benefit. This report shows that such laws also come with Occupational licensing laws are ever more serious costs. The negative effects of interior pervasive in the U.S. economy, as the design regulation on consumer freedom percentage of people who need a license and expenses, as well as on entrepreneurs, from the government to practice their chosen should give lawmakers reason to pause before occupation has grown from just 4.5 percent in adopting more or stricter interior design laws. Introduction 2 Some interior designers work in paint stores changing the shades of gray into black and helping people choose between shades white categories that would be enforced by of gray; others work in home remodeling the powers of the state. The group and its centers explaining the advantages of Corian allies have convinced 22 states to impose countertops and in furniture stores advising stringent education and training requirements people on pieces that blend well together. that create a single route to practicing interior At the other end of the spectrum are award- design or to using various titles associated with winning interior designers who use their that work, a route that passes through post- creativity, knowledge and experience to secondary interior design schools. create interior spaces for everything from chic Manhattan lofts to five-star luxury hotels and Such occupational regulation is increasingly high-tech office buildings. There are many pervasive in the United States, with shades of interior designers between these approximately 20 percent of workers needing two extremes, some of whom have graduated a license to practice their occupation, up from from prestigious interior design schools only 4.5 percent in the early 1950s.2 Figure 1 like the Art Center College of Design,1 while illustrates the growing scope of interior design others—including many at the very top of the laws, which now cover more than half of all profession—are entirely self-taught. Interior designers. In 1993, only 36 percent of interior design is also a popular second career for designers were subject to state regulations. By people from myriad other occupations and 2007, that number ballooned to 60 percent. life experiences that did not require or include ASID continues to lobby aggressively for more formal training at post-secondary design and more stringent interior design regulation. schools. ASID and other proponents of regulating The American Society of Interior Designers interior designers argue that the laws are (ASID) would like state governments to define necessary to protect vulnerable consumers what it means to be an interior designer and from unqualified designers who may mislead then dictate who may perform that work, consumers regarding their professional Figure 1 Total Number of Interior Designers All States Unregulated States Regulated States 300,000 250,000 200,000 150,000 100,000 50,000 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 3 qualifications or even threaten public health able to enter the market, blocking economic and safety by performing substandard work. In opportunity and leading to a less diverse attempting to support those claims, ASID has offering of services available to consumers. mostly provided hypothetical stories of how Moreover, the regulations disproportionately unregulated interior designers could harm or exclude from the interior design industry bilk consumers, with little or no evidence of blacks, Hispanics and career-switchers. actual harm. Indeed, several state commissions and Dick Carpenter at the Institute for Justice Our estimates of the costs of licensing have searched for consumer complaints interior designers underestimate the long- against interior designers and have found run costs because these regulations are only only a few alleging harm.3 As part of its in their infancy and are being softened by “sunrise” review that led to the rejection of a the grandfathering provisions, which permit proposed licensing law for interior designers, current designers to continue practicing or the Washington State Department of Licensing calling themselves interior designers even if examined deaths in home fires and could they do not meet the law’s requirements. For find none that were due to building code example, licensed interior designers in Florida violations, much less violations due to errors are only required to have graduated from made by unregulated interior designers.4 design school if there was a state-approved Finding no evidence of harm likewise led program at the time they completed their Colorado’s sunrise commission to conclude education. According to the 2000 census, that “it is difficult to see a benefit to the public only 60 percent of people working as interior in regulating interior designers.”5 designers in Florida had any sort of college degree, suggesting that many of the designers This paper focuses on a different part of the were practicing under the grandfathering question of whether interior design regulations provisions of the law. The effects of interior are justified: the costs of licensing interior design regulation will grow as grandfathered designers that are created as states move interior designers in Florida and elsewhere from having unregulated markets of interior retire and if more states adopt or expand their designers of different shades to regulated licensing laws for interior designers. We hope ones of a single shade, one chosen by the that the evidence presented in this paper government. Using data on interior designers and that produced by sunrise commissions from the 1990 and 2000 U.S. censuses, we find and Carpenter will convince legislators and evidence that in states that regulate interior governments to think twice (or many times) designers, design services are more costly before either adopting new licensing laws or for consumers and fewer entrepreneurs are expanding existing ones. ASID has mostly provided hypothetical stories of how unregulated interior designers could harm or bilk consumers, with little or no evidence of actual harm. State Licensing of Interior Designers: Practice Versus Titling Laws 4 Despite aggressive lobbying efforts by ASID The requirements these laws establish are and others during the past 30 years, the

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