is new york city killing entrepreneurship?

8/7/2019 Is New York City Killing Entrepreneurship?

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William H=Mellor

A Dr set of the institute for Justice ~~...:§



Executive Summary

Today, tens of thousands ofNewYorkers seeking to followa rich tradition

of entrepreneurship face a bewildering array of laws and regulations that

prevent or stifle enterprise. The entrepreneurs featured here, and countless

others like them, deserve a chance for a better future made possible when

economic liberty-the right to pursue an honest living without arbitrary

government interference--becomes a reality for all NewYorkers.

NewYorkCity's spirit of enterprise is in many ways an inspiring picture

until one looks a bit more closely. For in a city in which some 10percent of the

population is on public assistance, any or an of the self-employed entrepreneurs

described in this report face daunting government Irarassment-c-and even

arrest-at a moment's notice for the "crime"ofpursuing productive livelihoods.

This report:

examines the government-created barriers of licensing and permitting

laws and public monopolies, and their effect on entry-level

entrepreneurship in NewYorkCity;

documents how, in occupation after occupation, obstacles to

enterprise often far exceed any legitimate exercise of government's

authority to protect public health and safety;

highlights the heroism and tragedy among those who seek nothing

more than to earn an honest livingin their chosen trade, but who find

this aspiration frustrated by rules and requirements whose mainpurpose appears to be to limit entry and competition in particular

occupations; and

makes recommendations designed to ease legal entry into such

endeavors, while recognizing government's role in protecting public

health and safety.

The city's regulatory system seems swamped by a wave of the self-

employed who find that if they were to complywith the law, they would have to

abandon their activities. Instead, they pursue them outside the law. These

activities cannot be considered criminal but, except through luck or a Significant

capital stake, they cannot become legal.

Their impact is enormous. Thecity'smainstream "formal"economylost some

400,000 jobs inthe late 1980s and early 19905. At the same time, the underground

economy has grovm and may now represent as much as 20 percent of the city's

economyoverall



Restrictive laws-whatever their justification-force entrepreneurs

underground. Once underground, these entrepreneurs have little hope of

growing their business or obtaining necessary capital. Banks and other

financial institutions simply cannot make loans to businesses-whether in-

home catering or community transportation-which, although benign and

profitable, are not legal. When they seek to operate within the above ground

economy, they face time-consuming credentialing or paperwork requirements

with practically no chance of ultimately realizing their goal.

It is beyond the means of this study to examine the full gamut of

occupational license and permit laws in NewYork: They occupy no fewer than

73 pages in the OfficialDirectory of the City ofNewYorkwith listings of various

types of licenses, permits or other forms of certification which one may need

from either state or city authorities to own or operate a business or simply to be

employed in one. One needs a license to repair video-cassette recorders, to work

as an usher or to sell tickets at wrestling matches, to remove and dump snow

and ice, to set up a parking lot or a junk shop.

This report looks specifically at a sample of occupational permitting and

licensing requirements that affect the unskilled and/or entry-level, minimally-

capitalized entrepreneur seeking the first rung on the ladder of upward

economic mobility.

Restrictions that limit the self-employed from legally pursuing their

occupations can be divided into three broad categories, listed here with

examples which this report will explore:

Ceilings (a cap on the number of permits in entry-level occupations for which

there are few, if any, qualifications or credentials required by law) [see page 5]:

Entry ceilings affect taxicabs, merchandise vendors, food vendors, and

newsstand owners. Street vendors represent perhaps the greatest disparity

between the numbers of those trying to conduct business and an arbitrary legal

ceilingmeant to limit entry. By law, no more than 4,000 foodvendors and 1,700

merchandise vendors may operate on the streets of NewYork. Estimates of the

number of non-licensed vendors currently operating-over and above those

holding permits-range up to 18,000.

occupational Licensing (onerous licenses that minimize competition and go

well beyond public health and safety concerns) [see page 18]: Theserequirements affect hairdressers, child care center operators, and car services.

Such regulations often have little relevance to public health and safety. For

instance, in NewYork one needs 900 hours of training to become a licensed

hairbraider, 116 hours to qualify as an emergency medical technician with

advanced training in the use ofheart defibrillation: and 47 hours to be a security

guard trained in the use of deadly force.

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Public Monopolies (government reserves certain services for public employees

and will not allow private companies to compete) [see page 22]: NewYork City

has tried to quash private competition to its heavily subsidized public

monopolies by jitney van driver/owners and residential trash pick-up providers.

Even though jitney vans are highly sought after by paying passengers, more

efficient, less costly (a dollar per ride) and more flexible than public buses (some

of which require subsidies of more than $3 for each paying passenger), jitney

entrepreneurs face shut down because they compete with public buses.

How, then, can New York come to grips with its wave of hopeful

entrepreneurs and provide the .legalregime necessary to spark positive forces so

desperately needed in its low-income communities? How can it reconcile the

need for some regulation with the deadening effect posed by its current mass of

regulation? The goal should be the formulation of a consistent policy across

ranges of occupations, a policy designed:

" to encourage entry-level entrepreneurship (and employment generally);

" to discourage the use of regulation to create competitive advantage for private

businesses; and

.. to articulate expressly the legitimate public interests that merit gov-

ernmental concern (e.g., congestion, health or safety) and then to tailor

laws or regulations to meet that end.

11 1



ontents

Introduction 1

Historical Warnings . . . . . , . . . . . . . . . . . . . . . . . . . . . . . 4

Ceilings 5

Occupational Licensing , 18

Public Monopolies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Conclusion. , . , , , , , , .. 25

Endnotes , 27

Biography 29



Introduction

The chance to earn an honest living without arbitrary government

interference is the hallmark of the American experience. For generations,

America has offered hope and opportunity for individuals of modest means

through an economy that provided plentiful occupations for those 'with little

capital and formal education. No city is more famous for its history of

bootstraps capitalism than New York City, where traditionally waves of

immigrants joined the native-born to create vibrant communities whose pillars

were the local merchants, vendors and shop owners.

Today, NewYorkers seeking to follow in this tradition of entrepreneurship

face a bewildering array of laws and regulations that prevent or stifle honest

enterprise. This report examines such government-oreated impediments as they

impact entry-level occupations throughout the New York metropolitan area. In

occupation after occupation, obstacles to enterprise often far exceed any

legitimate exercise of government's authority to protect public health and safety.Without a close connection between legitimate health or safety goals and the

means government chooses to meet those goals, government's statutory and

regulatory regime expands inexorably to the detriment of honest entrepreneurs

and the communities in which they live. This tragic process is already well

underway throughout New York.

This report describes licensing and permitting laws and related

regulations affecting entry-level entrepreneurship in New York City.

Recommendations designed to ease legal entry into such endeavors, while

recognizing government's role inprotecting public health and safety, are offered.

The report chronicles the heroism and tragedy among those who seek nothing

more than to earn an honest living in their chosen trade, but who find this

aspiration frustrated by rules and requirements whose main purpose appears to

be to limit entry and competition in particular occupations. These individuals

and countless others like them deserve a chance for a better future which will

be realized when economic liberty, the right to pursue an honest livingwithout

arbitrary government interference, becomes a reality for all New Yorkers.

This report was made possible through the support ofThe J.M. Kaplan Fund. 1 also

wish to express my sincerest gratitude toHowardHusock, Director of Case Studies at

the John F . Kennedy School of Government at HarvardUniversity. He served as

research director for this report and for forthcomingreports on Baltimore, Boston,

Charlotte, Detroit, San Antonio and San Diego. Pamela Varley and Maureen Flynn of

the Kennedy School provided invaluable research under Howard Husock's direction.

The Institute for Justice undertook this study as part o f a systematic examination 01

government-created barriers to entry-level entrepreneurship in the seven selected

UnitedStates cities. These studies willprovide the most comprehensive current

examination of the legal and regulatory impediments that stand inthe way of honest

enterprise in urban America.

AW



TIlls report's findings may seem surprising because NewYorkCity is being

swept by a wave of enterprising persons of modest means. Newly arrived

immigrants join U.S.-born poor inenergeticpursuit oftheAmericanDream through

occupations ranging from car servicesto street vendors. Consider some examples.

.. In the boroughs of Brooklyn and Queens, hundreds of vans, most of them

owned and operated by immigrants from the Caribbean, regularly carrypassengers from the end of the subway lines to the city's growingmiddle-class

minority neighborhoods. The fare is less than that of the public bus and

regular patrons appreciate that vans gowhere riders want to go and provide

enhanced safety through door-to-door service.

10 In Harlem, as well as black neighborhoods inBrooklyn and Queens, salons

specializing inAfrican-style hairbraiding spring up almost overnight, offering

specialized, stylish services, popular enough that they can fetch prices up to

$200. New York is at the center of this nationwide phenomenon; one

Brooklyn hairbraider is nationally-known for a book aimed at those aspiring

to enter the field.

... On street corners, inotherwise vacant lots and inweekend street fairs, from

Harlem to the Jamaica section of Queens, street vendors, some Caribbean,

some West African, hawk a wide range of basic commodities such as ties,

umbrellas and T-shirts, along with imported Afrocentric books and novelties.

Southern-born African-Americarls, too, are involved in individual enterprises,

preparing foods (such as barbecue or sweet potato pie) inkitchens at home, for

sale on street corners or in neighborhood "farmers' markets." Estimates place

the number of regular street vendors at more than 25,000.

.. Throughout the city's "outer boroughs," residential areas outside Manhattan,

there are more than 20,000 providers of "car service," informal radio-

dispatched taxis that pick up customers who phone and take them to their

destination for a pre-arranged fee. Car service drivers can get into the

business using their personal cars in a city where almost half of all

households either cannot afford or choose not to own a car.

It is in many ways an inspiring picture until one looks a bit more closely.

For in a city in which some 1° percent of the population is on public assistanceand thousands are incarcerated for their involvement in the illegal drug trade,

any or all of the self-employed entrepreneurs described face c1almtinggovernment harassment--and even arrest-vat a moment's notice for the "crime"

of pursuing productive livelihoods.

Van drivers-cor self-described providers of "community transportation"--

face long odds in an attempt to gain a license. Even if they succeed, they face

fines or even confiscation of their vehicle for such offenses as picking up

passengers at public bus stops. In essence, their activities are deemed illegal

because they compete with public buses.

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Hairbraiders, unless they take more than five months of state-mandated

classes totaling 900 hours (most ofwhich teach irrelevant styling and treatment

unused by African hairbraiders], carmot be licensed by the state ofNewYork and

face peremptory shut-down. Particularly in and around Harlem's 125th Street,

many are forced to move from one clandestine location to another to avoid such

a fate, simply because they ply a trade the government sees fit to over-regulate

well beyond any legitimate public health and safety concerns.

Street vendors seeking a legal permit to sell their wares find that there are

three to four times as many working vendors (and who knows how many would-

be vendors) as there are .street sales permits available. The city's Office of

Consumer Affairs sets the number ofpermits it issues so low that it will not even

give out the permit application, so it is unlikely that one of the legal permits will

become available.

Car service drivers face no such limit on their number. However, should

they seek customers not through a radio-dispatch service, but by responding to

a simple hail on the street, they face discipline by the city's Taxi and Limousine

Commission, which prohibits them from operating as traditional taxis. If drivers

aspire to operate a taxi in the city's lucrative midtown and lower Manhattan

markets, ferrying passengers around town or to the airports, they will find doing

so legally next to impossible. An artificial ceiling on the number of taxi

"medallions," which allow drivers to pick up passengers on the streets of New

York, has pushed the price on the private market to $175,OOO--a figure well out

of range for the average entrepreneur, never mind those at the bottom rung of

the economic ladder.

Thus New York City today is a metropolis in which a burgeoning,seemingly inextinguishable spirit of enterprise often confronts a regulatory

system that clearly was not designed with such a large number of aspiring

entrepreneurs in mind. The city's regulatory system seems swamped by a wave

of the self-employed who find that if they were to comply with the law, they

would have to abandon their activities. Instead, they continue them outside the

law. Theirs are activities which cannot be considered criminal but which, except

through luck or a significant capital stake, cannot become legal. Their activities

are outside the city's regulatory oversight, even as to legitimate health and safety

concerns. As a result, potential tax revenues are lost to the city.

The impact is enormous. The city's mainstream "formal" economy lost

some 400,000 jobs in the late 1980s and early 19908. At the same time, the

underground economy has grown and may now represent as much as 20

percent of the city's $50 billion econorny.! The vast preponderance of the

underground economy consists of non-licensed and non-criminal activity, such

as street vending or driving "gypsy"vans. License and permit laws have

a role in dictating the size and nature of that informal economy. Restrictive

laws, whatever their justification, force entrepreneurs underground. Once

underground, these entrepreneurs have little hope of growing their business or

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obtaining necessary capital as they would in the formal economy. Enormous

resources, human capital and energy must be devoted to avoidance of

enforcement. When they seek to operate within the above-ground economy, they

face time-consuming credentialing or paperwork they are ill-equipped to handle.

The cumulative effect of such an environment suppresses the very dynamic of

initiative, self-help, and economic growthmost needed in NewYork's low income

communities today.

Historical Warnings

The use of license and permit laws to limit entry to various fields, and

thus protect existing businesses from competition, has long been recognized.e A

1972 report to the United States Department of Labor, which surveyed

occupational licensing laws nationwide, wrote of "those who gain not only

prestige but tangible economic benefits from the existing structure. "3 A studyfor the federal Employment and Training Administration focused on specific

labor market effects_forminority groups and concluded: "Given the persistent

high unemployment rates among youth and among minority groups and the

desirability of lessening barriers to entry and mobility in the labor market,

occupational licensure is an important area for analysis. "4 And the NewYork

State Bar Association has said, "Licensing tends to have the clear effect, if not

the clear purpose, of excluding worthy practitioners from the occupation in the

self-interest of those already admitted. [The] exclusionary effect bears

disproportionately on those who can least afford the time or money to assemble

the necessary credentials. "5

It is beyond the scope of this study to examine the full gamut of

occupational license and permit laws in NewYork: They occupy no fewer than

73 pages in the OfficialDirectory of the City of NewYorkwith listings of various

types of licenses, permits or other forms of certification which one may need

from either state or city authorities to own or operate a business or simply to be

employed in one. One needs a license to repair video-cassette recorders, to work

as an usher or to sell tickets at wrestling matches. to remove and dump snow

and ice, to set up a parking lot or a junk shop. So extensive is such regulation

that one knowledgeable observer has been moved to write that "NewYork is a

place where government dispenses access to the economy to a favored few."6

The Giuliani Administration has undertaken notable reforms to make the city

more hospitable to small businesses, but these reforms still leave in place a vast

array of obstacles to honest enterprise.

This report looks specifically at a sample of occupational permitting and

licensing requirements that affect the unskilled and/or entry-level. minimally-

capitalized entrepreneur seeking to climb the first rungs on the ladder ofupward

economic mobility. In looking at such occupations, it becomes apparent that the

warnings ofolder studies about the extent towhich regulation can dampen legal

4



employment are especially relevant today. Restrictions that limit the self-

employed from legally pursuing their occupations can be divided into three

broad categories. listed here with examples.

.. Ceilings (a cap on the number of permits): As they affect taxis, merchandise

vendors, foodvendors and newsstand owners.

" Occupational Requirements: As they affect hairdressers, child care center

operators, and car services.

.. Public Monopolies: As they affect jitney van driver/owners and residential

trash pick-up providers.

Ceilin s

Time and again in NewYork City, one finds entry-level occupations for

which there are few, if any, particular qualifications or credentials required by

law. And yet it is difficult, even impossible, for would-be taxi driver/owners.

food vendors, merchandise vendor or newsstand owners actually to get into

business. The reason lies instrict ceilings set by lawon the number of activity

permits. Frequently, such ceilings have been inplace for many years and are

now effectively overwhelmed by persons pursuing their occupations without

benefit of a permit.

THE T.A.XIAND FOR~HlRE VEHICLE INDUSTR.Y

In addition to its theaters, restaurants, and museums, NewYorkCity is

known around the country for one of its many forms ofbusiness regulation: the

limit on the number of legal taxicabs. In 1937, the New York City Council

capped the number of taxi medallions, the officialcity permit that allows taxis

to pick up and discharge passengers on the street, at 13,595. At the time, the

Council sought to help those already in the industry by limiting the overall

number of cabs. At first the cap had little effect. By the late 1940s, the number

of "medallion cabs" had decreased (through attrition) to 11.787.

Many areas of the city cannot get taxi service and there are far moreprospective owners and drivers than there are legal taxis. Over time, this has

had a series ofunanticipated and unpleasant side effects. which have continued

to multiply. The Giuliani Administration's recent move to add 400 new

medallions at a cost of $175,000 each generates revenue for the city, but does

little to alleviate the problems inherent in the medallion system. It is

see the sales as much more than the city's move to capitalize on

shortage it has created.

5



As early as the 1950s, it became clear that medallion taxis were getting

enough business in lucrative areas, in particular the lower two-thirds of

Manhattan (the midtown office district and the lower Manhattan financial

district, as well as affluent upper East Side and WestSide residential areas), and

the two NewYorkairports. It also became clear that they had no interest in

serving poorer sections of Manhattan or the other boroughs (Brooklyn, Queens,

the Bronx and Staten Island.) At the same time, the lucrativeness of the

Manhattan and airport markets, coupled with the statutory limit on the number

of taxi medallions and the fact that medallion owners are allowed to sell and

lease them, combined to make entry into the taxi industry extraordinarily

difficult and medallion prices ever escalating.

The high medallion price contrasts with relatively basic requirements for

those whowant to drive a cab. One must get a chauffeur's license from the state

Department ofMotorVehicles at a cost of $20, renewable every four years. One

must take a training class offered by the city'sTaxi and Limousine Commission-

-a 14-hour course if one can show proficiency in English and map-reading, upto 80 hours in training ifone cannot. These test requirements are a window into

the demographics of those who would be NewYork cabbies today. Half of all

applicants take a 40-hour course for those unfamiliar with the city; another 20

percent take an 80-hour course designed specificallyfor those for whom English

is a second language. By such counts it is clear that would-be taxi drivers are

largely poor immigrants, looking for a classic path upward. In a city in which

more than 50 percent of the population does not own a car, owning and driving

a taxi would seem to be an attractive, entry-level occupation.

The limit on the number of legal cabs sharply constrains such

aspirations. Taxi and Limousine Commission figures show that some 40,000people now have chauffeur'S licenses to drive medallion taxis in NewYorkCrty,

although there are only 15,000 such jobs legally available." Thus, as with

regulated activities described throughout this report. there is a wave of

ambitious would-be entrepreneurs confronting a government-imposed

occupational limit. Drivers must pay high prices to lease the use of a medallion,

prices driven up by the fact that medallion owners contract the work of leasing

to "lease managers," who buy and maintain cabs on behalf ofmedallion owners

and lease them to drivers. Because new medallion owners mayhave taken out

large loans to buy a medallion, and because lease managers also want a share

of profits, the result has been a high lease cost for drivers, as well as the use of

older, less-expensive vehicles as cabs. Lease managers, whose profits come from

the lease charges paid by drivers, have little incentive to compete by providing

the best possible cars. Thus, it is common formedallion cabs to be former police

cars that have been refurbished.

In this system--neither envisioned nor designed by those who Ion0 :

passed the medallion statute--someone driving a legal cab may pay a $?~S to

SlOO lease charge for each 12-hour shift for the privilege of driving for someone

else when they wouldjust as soon drive for themselves. (This is the cost of both

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cab and medallion. About 5,350 cabs are leased this way.) Or one may lease

by the week with prices ranging from $450 to $650 per week. There are, thus,

high fixed costs for each driver, to which is added the cost of gasoline. The

typical driver of a medallion cab must work 10-12 hours a day, six days a week

to earn $6.25 an hour, or just under $20,000 a year. The fact that fares are

regulated--capped in their own way--adds to the pressure. High fixed costsrelated to the lease price of a medallion contribute to what some have called a

"sweat shop on wheels." Drivers tend to work long hours, drive fast, and avoid

unprofitable trips in order to maximize their incomes. But this can lead to

further, sometimes heartbreaking, side effects. Some drivers do seek to become

their OV1Tl boss by buying a medallion. Collectively,NewYork City medallion

owners have taken bank loans totaling no less than $1 billion. Those who lack

the means to secure a loan may make installment payments to a current

medallion owner inwhat is called a conditional sale. In this arrangement, those

who purchase medallions build up no equity through their payments; in other

words, if they stop making payments, they lose everything. The New York Times

has reported the story of a 52-year-old driver who, having paid $100,000 overeight years toward the purchase of a medallion, developed a heart condition that

prevented him from working. He lost the entire $100,000.

The current medallion-based system also creates a "boomerang effect,"

which emerges in highly-regulated markets that numerous newcomers would

like to enter. The barriers to entry to the taxi business have led to the advent of

an estimated 30,000 so-called "gypsy cabs+non-authortzed privately-owned

cars that respond to street hails. Some have gone so far as to paint their

vehicles yellowand to install rooflights to pass for medallion cabs. On the one

hand, such stories have a certain poignancy, reflecting the difficulty faced by

those who enter the taxi business. At the same time, such gypsy cab drivers

bypass even the relatively modest and common-sense regulations that protect

NewYorkers: taxi inspections, driver background checks, tests of basic driver

competence and familiarity with the city, and insurance. The barriers posed by

medallion ownership has, thus, boomeranged by spawning a far larger,

completely unregulated business.

Faced with a system in which drivers are faring poorly, the condition of

taxis has been deteriorating, and vast segments of the city are underserved, the

city's Taxi and Limousine Commission has initiated a series of complex fixes. In

January 1996, the City Council agreed to a 20 percent fare increase coupledwith a cap on lease rates designed to givedrivers 60 percent of the higher fares.

At the same time, the city imposed strict new rules as to the age of cars used as

medallion cabs: new cabs must be less than three months old; cars owned by

those who operate fleets of cabs will have to be retired within three years; those

owned by individual owner-operators will have to be retired after

Those who lease cabs may well fare better; those who want to drive

cabs will face the increased cost of new car payments.

&

7



Attempts at adjustment. however, beg the core question about NewYork

City's taxi system: why should there be a limit on the number ofmedallions, and

what is the justification for the specific numerical limit that exists? A case can

be made that there is limited public space to accommodate taxis on the city's

streets in congested areas. Likewise, there is limited curbside space for taxi

stands. But there is also a case to be made that, were there to be open entry to

the taxi market, coupled with an unregulated fare structure. that a variegated

taxi industry could form. Such an industry might be one in which low-income

owner/operators offer lower prices than more luxurious, name-brand cabs. It

might be one in which regular taxi users find drivers or fleets they prefer and

choose them on a regular basis. In short. it might well be more like markets for

most other consumer goods and services in American life.

One would be naive in the extreme to think that any sort of easy

transition is possible from the current capped and regulated market to a free-

entry alternative. Too many people acting in good faith on the basis of

established rules have too great a financial interest in the existing system for atransition to be easy. That does not mean that NewYork should not try to map

its way, over time, toward an open and fair taxi industry. One could imagine a

number of strategies that would abet such a change. A system that allowed

current medallion owners to operate for a fixed period, with the ability to sell

medallions, would allowthem to amortize their cost. at the same time the system

was being phased out. Amodest rate increase could provide a pool ofmoney to

compensate existing medallion owners during a transition period. The city

would then face the decision as to whether there were public safety reasons for

restricting the number of taxis in its congested sections and, if so, what such

restrictions might be. One possible form: a system in which medallions, if there

were a limited number, were free and transferable, in the context of a market inwhich fares were unregulated as well. Taxi owners would then compete as other

Americans do: on price and quality. Clearly, there is no guarantee that any

individual entrepreneur would fare better than at present, but nor would there be

today's likelihood that would-be drivers stay poor while medallion-holders.

through an accident ofhistory and regulation, reap gains while consumers suffer.

CAR SERVICES

Even short of a wholesale transformation of the medallion taxi industry,there is a step the city can take quickly and, it would seem, relatively more easily

to help those in the for-hire transport industry. It concerns car services. These

are services in which drivers pick up passengers only by pre-arrangement. in

response to a telephone request. In the financial district and midtown

Manhattan, car services provide a popular supplement to taxis. Meanwhile, the

lack of cab service outside core areas of Manhattan has led the city, over tile

past 40 years, to permit neighborhood car services to fill the void. By 1993, the

Taxi and Limousine Commission estimated there were some 20,000 car service

cars in New York.S (If one combines them with medallion cabs. their total

8



number represents more than half of all the "taxis" in the United States.)9

Today, car services must pay relatively modest city fees ($275 per vehicle, $60

per driver) and be affiliated with a radio-dispatching base wtth a permanent

headquarters ina commercial area and at least 10 affiliated vehicles. Drivers

must obtain a state chauffeur's license, but unlike medallion drivers, need not

demonstrate English proficiency.

Even these relatively modest requirements are too great a barrier to entry

for some. Numerous vehicles and bases operate Without proper licenses. In

early 1990-91, the Taxi and Limousine Commission issued 39,400 summonses

over a 12-month period for car service vehicles, buses or drivers operated

without licenses. In a six-month period in 1992, the Commission went so far as

to seize 1,819 vehicles and, in an II-month period that same year, padlocked 16

bases.Iv It is hard to understand why, apart from the relatively insignificant

revenues they produce, such services should be asked to register with the city,

or face such steep sanctions for not doing so. Encouraging self-employed drivers

and a climate of economic opportunity, properly licensed by the state as driversand required to maintain adequately insured, safe vehicles, would seem to

outweigh the importance of license fees, especially in a city concerned about

unemployment and its extent of public assistance. It should be noted that car

services often are operated by people of modest means for people of modest

means. ATaxi and Limousine Commission survey found that 75 percent of car

service vehicles are O\V11edby their drtvers and most commonly use Chevrolets

and Oldsmobiles between seven and eleven years old.11

The most important change the city could initiate relative to car services

involves a right now reserved for medallion taxis: the right to pick up potential

passengers who hail from the street. The current ban on such hails, coupled

with the ceiling on taxi medallions, acts to buffer medallion owners from

competition from car services. It is time for the city formally to recognize that

its low and middle-income residential areas, where car services operate, are

markets distinct from the midtown, lowerManhattan and airport markets. Even

without the development of open access to the taxi market generally, the city

should allow car services to pick up street hails in their own speciflc service

areas. In many ways, New York City is a vast collection of distinct

neighborhoods. Allowinga Harlem car service to serve Harlem, a Canarsie car

service to pick up hails in that part ofBrooklyn--at the same time not permitting

them to do so in the lucrative Manhattan markets--makes sense no matter whatthe ultimate form of the taxi market. Both Mayors Edward Koch and D,lVJd

Dinkins proposed such a change. There is no reason it should not be enacted.

ON-STREET FOOD AND MERCHANDISE VENDORS

The sale of food and goods from carts and tables on the streets of New

York City has long been a Signature of the city, something that distingu1:cc,hes it

from other American cities. NewYorkers relish the hubbub and vi , the

MM&¥

9



bargains and the array of ethnic foods and NewYork specialties such as hot

pretzels and roasted chestnuts. What's more, as Lincolnwas known for the log

cabin of his birth and his long walk to school, so have NewYorkpoliticians been

known for modest origins among the merchants of the streets. Former Mayor

Edward Koch frequently connected with constituents by noting that his father

had been a street peddler. Another former mayor, David Dinkins, was himself a

street merchant as a youth. 12

Yet despite these traditions, NewYorktoday has simply not come to grips

with the demand by new generations ofNewYorkers to followin the footsteps of

those who have used the streets and vacant lots of the city to sell food and

goods. In no other area is there a greater disparity between the numbers of

those trying to conduct bustness and the number allowed by the arbitrarily set

legal ceiling. By law, no more than 4;'000 foodvendors and 1,700 merchandise

vendors may operate on the streets of NewYork. Estimates of the number of

non-licensed vendors currently operating range as high as 18,000.13 As with

thetaxi

ceiling, the number of legal permits appears to have been set for reasonsthat are obscure. It does :not, as best can be ascertained from the city's

administrative code, appear to have been based on criteria such as the capacity

of the sidewalks to accommodate carts and tables, or other tangible measures.

The city does, of course, have authority to keep streets and sidewalks

accessible by limiting congestion that might be caused by vendors of various

stripes. But surely it is also in the city's interest not to arbitrarily limit the

impulse of entrepreneurs who are looking for entry-level employment. It would

seem wise for the city to seek to uphold its public safety responsibilities without

quashing the entrepreneurial impulse of would-be merchants. As things

currently stand. however, the city leans more toward restriction thanemployment: it restricts both the number of legalvendors, through permits and

licenses, as well as, the places and hours in which they can sell. (There are 33

city streets, many in midtown Manhattan, in which it is illegal even for fully-

licensed food vendors to operate.) With thousands of non-licensed vendors

looking to conduct business. the city's regulations mean tension and, inevitably,

selective enforcement. Unlucky vendors who try to occupy too busy a corner or

run afoul of an individual police officer risk having their goods confiscated.

Such confrontations do not often resolve much. Periodic confiscation is taken

as a cost of doing business; vendors are known for giving the police false

addresses, among them Gracie Mansion, official residence of the mayor.

FOOD VENDORS

In significant ways, the vendor situation mirrors that of taxis. In food

vending. for instance. as with taxi drivers, one must get a personal license to sell

food before one can get a permit (the equivalent of a medallion) to operate a food

cart. Even getting the personal foodvendor's license is not an easy matter. One

can get the license application itself only by appearing in person at a single

location in lower Manhattan: the Department of Health office at 125 Worth

t& fW&€f

10



Street. Simply going to that office can take the better part of a day for someone

who lives in the Bronx, Queens or Staten Island. The applicant must take a 15-

hour course that costs $100 and is offered only by the City of NewYorkthrough

its Health Academy. NewYork is unusual in requiring specific food handling

training. Cities, more commonly, require health inspectors to approve the

cleanliness of the cart and the safety of the food. For those whose first language

is not English, waiting times for the IS-hour course can be lengthy: courses in

such languages as Spanish, Korean, Chinese and Greek are offered only when

there are a minimum of 50 enrollees=no more often, the city estimates, than every

3 months. It is difficult to understand why the city cannot permit the community

college system or other non-profit, private providers to offer such training.

As with taxi drivers, however, obtaining the personal license is the easy

part. A far greater hurdle is obtaining the pushcart "decal" which allows cart

operators to sell legally on the street. The city awards only:

.. Three thousand two-year permits at a cost of 8200 for those who cook and$50 for those (such as pretzel merchants) who do not.

.. One thousand six-month permits, generally sought by summer ice-

cream vendors.

Again, as with taxis, pushcart decals were generally issued long ago to

individuals and corporations who continue to hold them and renew them every

two years. There is one notable difference: foodcart decals may not be bought,

sold or leased. Corporate permit-holders have gotten around this law, however,

by leasing not the decal but a cart with a decal for two-year periods, at costs

ranging from $4,000 to $9,000. The profits to be had in such leasing, and in thefact that there are a limited number of legal food stands altogether, has, as with

taxis, led to domination of the food pushcart market by a small number of decal-

holders. Nearly one third of the permits are in the hands of eight corporations,

which have formed a trade group called the BigAppleFood Vendors Association.

One vendor controls 499 of the decals himself and reportedly earns more than a

million dollars a year--in part thanks to the artificial limits on competition that

the city's regulation imposes.

In an attempt to deal with this artiflcially-constrained Situation, the New

York City Council has trted to make incremental adjustments. In 1995, for

instance, the Council approved the issuance of200 newtwo-year pushcart decals,

50 each for the boroughs of Queens, Brooklyn, the Bronx and Staten Island. At

the same time, the city has moved to limit the number of food decals that can be

owned by one corporation--pushing the city toward a standard of one-owner, one-

decal. Finally, the city has established an administrative Street Vendor Review

Panel to consider congestion caused by licensed foodvendors. It is noteworthy

that the Panel's first rules were struck down by a Manhattan court as "arbitrary

and without objectivecriteria."

11



It is hard to avoid the conclusion that this is an overly complex system

that helps neither the entrepreneur nor those concerned about congestion. It

would seem both simpler and more fair to allowopen-entry into the food vendor

market, eliminating the arbitrary limit on the number of pushcart decals. At the

same time, there is nothing to prevent the city from limiting the number of carts

on given blocks+if it can show that there are public safety problems that might

be caused were there to be more than a set number of carts in a given area. The

city might even charge more for pushcart permits good for prime locations than

for those in outlying neighborhoods as a means of limiting congestion and

competition for specific corners. Decals, as at present, should be limited in

duration, thus allowing regular auctions for the opportunity to sell at high-

volume corners. Such a procedure would mirror procedures already adopted,

ironically, by the city's Park Department, which accepts requests for bids for

specific locations. There is no formal cap on the number of park vendors. Some

permits command $500 a year; one other+-the right to sen on park land adjacent

to the Metropolitan Museum of Art--costs no less than $288,000 a year. 14 A

market process is thus used to limit congestion, instead of arbitrarily restrictingentry. In the long run, however, this is only a means of limiting the grmvth of

successful vendors and encouraging them to engage in subterfuge to hide their

ownership. Open entry, in the context of limited restrictions on sale so as to

limit congestion, is a far better alternative.

Selling food on the street is a traditional and obvious way for poor

entrepreneurs to capitalize on ethnic cuisines and to get started in business. A

limited number oflicenses, long waiting periods for training, and arbitrary limits

on how many pushcarts one firm can hold all combine to make this a far more

difficult business than it should be for those whowant to sell on the sidewalks

of NewYork.

DISCRmnNATION AGAINST HOME·BASED FOOD PREPARATION

There is at least one additional side effect caused by the ceiling on food

vendor permits. It involves those who would sell food they prepare at home. In

1993, a group ofAfrican-American women in Brooklyn founded the Hornebased

Entrepreneurial Network (HEN), a support group for those eager to start

businesses in their homes. The group's members engaged in a variety ofwork,

for instance, in-home catering and food preparation, sometimes for privateparties, sometimes with an eye toward public sale. Such entrepreneurs run

afoul of a wide variety of regulations. In residential neighborhoods, in-horne

businesses are simply not permitted by zoning laws. Even if they were, local

Department of Health regulations prohibit the use of a private kitchen for

preparation of food to be sold to the public. And, as noted above. the

the number of public food vendors makes on-street sales of homemade

whether sweet potato pie, barbecue sauce or fried chicken--impossible. By law.

an individual who wants to prepare food for sale must lease space from an

established commercial kitchen. Some try to do so by leasing kitchen time in

${§ q

12



off-hours, such as the middle of the night. Others simply giveup. One member

of the HEN group, for instance, former vice-president Louise Crenshaw, had a

cookie-baking business in her Queens home. The law, she recalls, "forced me

out of the house to find a leased commercial space." Eventually, she gave up

cookie-baking although her enterprising spirit found release in successfully

establishing a neighborhood coffeebar. Ofcourse, even access to a legal kitchen

does not guarantee a baker/entrepreneur a place in which to sell, thanks inlarge part to the cap on foodvendor permits. Somemembers of the now-defunct

HEN group were forced to use a loophole in the law to sell their foods,

establishing stands in an indoor market in which many vendors sell in a mall

run by the Jamaica Queens non-profit community development corporation.

Such a sale is permitted as long as the mall is registered as a "farmers' market."

Apparently, the law presumes that food made in a rural farm home must be

sanitary, but that made in an urban home or apartment must not be. Were the

city to be serious about encouraging enterprise, itwould re-examine regulations

barring home-based businesses and allowthe Health Department to inspect and

approve private kitchens for catering and specialty food preparation.

GENERAL MERCH.ANDISE

The disparity between the number ofgeneral merchandise vendor permits

and the number ofpeople who would like to sell goods on NewYork's streets and

sidewalks is even greater than that which distorts the food vending business.

There are but 1,700 merchandise permits available. another 300 for sale in the

city's parks. Half of the 1,700 city permits are, moreover. reserved for veterans

and their spouses. And yet there is a wave ofstreet vendors throughout much of

the city, whether in neighborhood commercial districts--where they spark conflict

with storeowners--and at neighborhood weekend street fairs, where they take

advantage of a loophole in the law which allows 30-day permits with no cap.

"Merchants bounce from one fair to another, sellinga depressingly familiar array

ofT-shirts, socks, potted plants, gyro sandwiches and knickknacks," 15 according

to a New York Times editorial, reflecting an unfortunate disdain for the city's wave

ofmerchants, rather than an appreciation of their efforts at self-support.

Merchandise sales permits are not the onlyway the city regulates the sale

of goods on the streets. As with food vendors, to minimize congestion. the

Department of Consumer Affairs also sets the hours and locations at whichpermit holders may legally operate. General vendor regulations include a 27-

page schedule listing individual locations and the days and times at which

vending is legal. fAseparate schedule is provided for booksellers, whom the city

presumes to have a constitutional right to sell their wares but who are,

nonetheless, barred from sales during hours at which all vending is barred at a

given locatiori.)

MffiMF!\i _ ! ' l O !@@jj@**

13



As with other occupations. the logistics of getting licensed would be

difficult, even if a greater number of permits were actually available. Nomatter

what sort of merchandise permit one is seeking. applications for permits are

available at only one location, the Department of Consumer Affairs, 42

Broadway in lower Manhattan. Licensed vendors are all required to obtain a

sales tax identification number, but are not required to carry insurance.

Taken as a whole, such policies make it rational to conclude that the city

has seen the advent of so many vendors as a liability rather than an opportunity,

a problem to be managed or contained rather than a wave to be channeled. The

city's policy ofwhat can be called double regulation, requiring both licenses and

limiting the hours and locations of sale, has proved, not surprisingly, to be

difficult to enforce, given the sheer number of street merchants. The

combination of a limited number of licenses and a huge number ofwould-be and

actual vendors has arguably laid the groundwork for tension and controversy.

In the present regulatory environment. there are several complaints

leveled against the non-licensed merchandise vendors. Unlike small store

owners, the vendors pay no rent and no taxes. In fact, the city has estimated

that if the illegal vendor sales were taxed, they would bring $25 million to the

city's treasury each year.l6

There is inaddition the issue of public safety. Along streets most popular

for street vending, competition for sidewalk space is fierce and sometimes even

violent. Pressed for space, vendors set up their tables in front of residential

doorways and shops. They form a solidwall, flanking both sides of the sidewalks,

so that passersby may be jostled or even robbed when they squeeze through. In

response, some pedestrians take their chances by walking inthe streets, which arealso crowded, full ofvehicles double and triple parked, as customers pull up to buy

from the vendors and wholesalers pull up to sell to them. In some medical crises,

emergency service personnel have had trouble getting through the crowd. And

some vendors gerry-rig wires SO as to steal electricity from nearby utility poles, a

practice both illegal and unsafe.

There also has been vocal opposition to the street vendors from the owners

of storefront businesses in areas of heavy street vending. They object to the

congestion around their stores, which makes it difficult or intimidating for

customers to enter. They object to the fact that vendors get "prime real estate" but

pay no rent or taxes. They are angry at being undersold by the vendors-vespecially

if the vendors are selling illegal goods or counterfeit name brands. But perhaps

their biggest complaint is that the vendors leave behind mounds of garbage in

front of their stores which, by law, the store owners must clean up. (Store owners

are legally responsible for cleaning the sidewalks and gutters directly in front of

their property.) Some have stopped cleaning up and are refusing to pay

to 8250 fmes they are assessed by the Department of Sanitation, a srtuation that

has contributed to "the many filthy neighborhood business strips seen in recent

years." according to a city report on the topic. 17

M so *+'0

14



Such complaints led, in the fall of 1994, to the controversial step of evicting

unlicensed street vendors from 125th Street in Harlem-sa street that has been

called "Harlem's Soul." The street had become a mecca for street vendors, and by

some estimates as many as 1,000 vendors came there regularly to sell. Business

people along the street had been vigorously pressing for their ouster for some time.

Several things conspired to make the situation especially charged. For one,

the employment picture in Harlem is dire. Citywide, 9.3 percent ofmen and 8.7

percent of women are unemployed; in Harlem, 22.3 percent of men and 13.7

percent ofwomen are officiallyunemployed.lf In addition, West 125th Street has

been "gentrifying"=wealthier newcomers have been moving in. Small black-owned

businesses along the street have been under the economic pressure of higher

commercial rents, and are being displaced by national chain stores, such as Foot

Locker, the Body Shop, and Ben and Jerry's. These are developments some have

greeted happily as a sign of economic rejuvenation, while others view them as a

white corporate incursion into a local black area. Most explosive of all, more than

half the store owners on the street are white, but nearly all the vendors threatenedwith eviction were black.

In October 1994, nearly 200 city police equipped with riot gear and large

tractor-trailers for hauling away merchandise descended on the vendors and

cleared them out. The action was an extension of Mayor Rudolph Giuliani's

emphasis on reducing "quality of life" crimes, small crimes that create a climate

of lawlessness in which more significant crimes can occur. In the process of the

police sweep, there were scuffles, protests, marches, arrests, store windows

smashed, and local merchants threatened, but at the time, no serious injuries.

The black activist, Rev.AISharpton, who has an officeon 125th Street, took up

the cause of the vendors, joining a leader in the vendor community, Morris

Powell, to file suit against the city, arguing that its eviction of the vendors had

"obliterated the cultural roots and diversity of Harlem's African community.r lf

In what has since been adjudged a crucially important move, the city

made a city lot at the corner of Lenox and 116th Street available to the

unlicensed vendors, and convinced the local Malcolm Shabazz Mosque, to which

many of the vendors belonged, to manage the market. Most vendors were

cynical about the newmarket in the beginning, and some remain so. "Youhave

to want to come down here to 116th," observed one Gambian vendor, working at

the new market. "On 125th Street. everybody is already there."20 Still, perhapsowing to the credibility of the mosque, about 200 vendors agreed to give the

market a try, paying $6 per day for a spot and accepting a tax identification

number. The 116th Street market must be considered among the most

enlightened initiatives the city has undertaken to nurture rather than suppress

the wave of entrepreneurship on its streets. The new market offers free 11ghLing

and storage, round-the-clock security, business seminars and advice, public

toilets, a snack bar, an automatic teller machine, and the more ineffable comfort

of respectability. As legitimate, tax-paying operators, the vendors began to

accept credit cards. Notably. six vendors quickly opened small storefront

k ilW dlA Wi4 '? ¥£ ,% WIi1 i# ·@ W¢ i@ ilM 4M A4!f& 1IllSM §S it@ iW !!§ §iii§ ?i& M ; a #f\ii%\Wif4IUl4 WW¥MfN¥M¥MWH 4 #

15



businesses. What's more, with the help ofthe city, the MalcolmShabazz Harlem

Market has become a tourist attraction and several tour buses began making

regular stops there. The city considers the market a great success and has

plans to replicate the 125th Street strategy on vendor-congested streets in

Queens, Brooklyn. and the Bronx.

Indeed, the advent of city-facilitated, open-air markets for otherwise

unlicensed vendors does have to be considered a tacit acknowledgement of their

value as entrepreneurs and contrasts markedly with a simple crackdown. The

development of such open-air markets, which effectivelylegalize large numbers

of merchants outside the legal ceiling, might be termed "license equivalency," a

creative means to provide a legal umbrella for vendors who are not individually

licensed. There is, however, simply no getting around the fact that, in the move

from 125th to 116th Street, many vendors were clearly discouraged from

pursuing their trade, and that some vendors were sure to make less money in

the new market. Carlos Pesante, who had sold toys and games for seven years

on 125th Street, earning as much as $150 a day, has said that in the newmarket, he earned half as much.v! Moreover,a horrifyingset of events unfolded

in conjunction with th-e eviction of the 125th Street vendors. Some of these

vendors joined in a daily picket -protest of a clothing store on 125th Street,

owned by a white, .Iewish businessman, targeted because he was no longer

willing to sublet part of his space at below-market rent to a record shop owned

by a black immigrant from South Africa. In December 1995, one of the street

vendors involvedin the protests entered the clothing store with a gun, shot four

people, and set fire to the store. In all, eight peopledied, including the gunman,

and four were wounded. Some of the gunman's friends and relations attributed

this burst of rage to his eviction from 125th Street. "Hefelt they were driven out

like dogs," a friend told the Daily News.22 One cannot dismiss the idea that the

impossibility of attaining legal status may be an incentive, though certainly not

an excuse, for street vendors to engage in other illegal acttvtties-vranging from

the sale of stolen goods to the unfortunate events of 125th Street.

An enlightened policy might be based. as with foodvendors, on removing

the ceiling on permits. Common-sense public safety regulations can be

established and enforced, with no one barred arbitrarily, from selling

merchandise on the street. In such a system, the city could still deal with

congestion and merchants angling for the best selling corners. Permits could

be sold for the right to do business in specific areas. Again, marketmechanisms could be used: permits for more attractive corners would simply

cost more. The city could build on its constructive policy of offering vacant lots

to vendors by making such space available at little or no cost. Allvendors could

be required to pay a minimal city occupancy tax. Wouldthis protect all existing

businesses from the competition of ambitious vendors? Of course not. But it

is not the city's role to make such guarantees. There is nothing, however, to

prevent the city from insisting that legal vendors not only clean up their

garbage or face a fine. but also pay the sales taxes.

16



The key first step, however, is legalization and an end to the system

of double regulation: a permit ceiling along with time-and-place

restrictions. Once merchants are brought on to the right side of the law,

the city can begin to craft reasonable permit rules-designed to foster, not

frustrate, entrepreneurship.

NEWSSTANDS

There are, by law, only 230 legal newsstands in NewYorkCity. Permits to

operate the stands are issued for twoyears by the city'sDepartment ofConsumer

Affairs and cost $1,100. Avariety of preferences for veterans, immigrants and

the elderly have been designed to favor certain entrepreneurs. But the overall

ceiling on the number of permits has tended, as with taxis and food vendor

licenses, to have another effect. A small group of family owners, primarily from

India, is said to have gained control of most of the city's newsstands by paying

those with licenses. These operators are then said to illegally hire employees,rather than to operate the stands themselves, as the regulation contemplated.

The city currently is considering what would appear to be a quite

different approach, one in which corporate and non-profit bidders would

compete for the right to construct and operate newsstands, licensed through a

request-for-bid process similar to that which the Park Department uses for food

vendors. Bidders would compete for the right to use publicly-owned space. The

city anticipates bids of approximately $10,000 per permit; operators would be

limited to one license. In addition, they would have the right to sell advertising

space on the side of the newsstands.

There is a question here, however, as to whether this is a policy designed

to aid entrepreneurs or to maximize revenue for the city. It is ironic that those

who sell books on the street are, under a city interpretation of the First

Amendment. exempt from the cap on general merchandise permits while no

such interpretation has been applied to newsstands. It would seem

fundamental for a policy designed to encourage newsstand ownershtp to drop

the overall ceiling on permits. As suggested above in regard to vendor licensing,

the city might still, in order to reduce congestion and eliminate overly

aggressive competition for specific locations, charge varying prices for different

newsstand locations. It is difficult, however, to see why the city would want toinsist by law that those who start newsstands should remain small

businessmen or women. Absent a legal limit on the number of stands, the

entry-level owner of a small stand could coexist with larger firms owning more

stands. As with vendors, the city's ceiling on the number of operating permits

cries out for re-examination.

¥$k&¥& *WM¥

17



ccupational licensing

In the areas described above, permits for activities such as driving a taxi

or selling food on the street, are nearly impossible forwould-be entrepreneurs in

NewYork to obtain. QualifYing to do the job is not, in comparison, that hard,

though it could be logistically difficult to take a required training course,

however brief. There are, however, a wide range of other regulations that apply

to NewYork City residents but are administered by boards overseen by the office

of the Secretary of State of the State of NewYork. These regulations frequently

set education and training requirements that potential entrepreneurs find not

only arduous to meet but also unrelated to legitimate regulatory concerns.

COSl"iiETOLOGY

New York City has become a national center of a national phenomenon:

African-style hairbraiding. TIlls West African-influenced hair style for African-

Americans can be seen among people in allwalks oflifeand at all economic levels. Its

stylistic influence is not confinedonly to blacks. To a great extent, this is a business

of sole proprietors and small shops, oftenpracticed in privatehomes and apartments

or small storefronts. "Salonsseem to crop up overnightalong 125thStreet and around

the city to meet the growingdemand for African-inspiredhairbraiding," TheNew York

Times reported in the summer of 1994.23 So well-established is the hairbraiding

industry inNewYorkthat it has come to influenceentrepreneurs in other cities as well.

One of the nation's best known hairbraiders, Nekhena Evans, sells her how-to guide

for aspiring hairbraiders, "Everything You Need toKnou.about Hairiockinq," from her

home-based firm in Brooklyn, New Bein' Enterprises. It is not uncommon for

prominent hairbraiders to work out of their homes. As Diane Bailey of the

International Braiders Networkhas observed: 'The industry is so underground. This

is a cottage industry done in our homes, on our stoops, inour kitchens.Y"

Hairbraiding is done this way because it is, for the most part, performed

by unlicensed practitioners. As with home-based catering, in-home hair salons

are by definition not legal. But the central complication for "braiders" lies in the

fact that, because they provide a service involving hair, they are subject to the

occupational licensing laws affecting the entire fieldofcosmetology. In NewYorkstate, that means that. to become a licensed hairdresser and thus qualify to

practice hairbraiding legally, one must attend no less than 900 hours of classes

focused on such areas as haircutting techniques as well as general business

training. Nine hundred hours represents a 1994 modification, a modest attempt

to accommodate braiders and other so-called natural hair stylists. Tl)C:

requirement had been 1000 hours and the mandatory course which included

chemical treatment of hair, a process never used by hairbratders. That

requirement had been scheduled for an increase to 1,200 hours prior to a

regulation freeze imposed in 1994 by Governor George Pataki.

18



New York is by no means unusual in requiring that these courses apply

to hairbraiders. There are no exceptions for "braiders" in the laws of California,

North Carolina or Massachusetts, which require 1,600, 1,500 and 1,000

training hours respectively. It is not within the scope of this report to critique

the training process required for beauty enhancement licenses. Suffice it to say

that the extent of training is significantly greater than that for other seemingly

demanding state-licensed occupations. In NewYork, one needs only 116 hours

to qualify as an emergency medical technician with advanced training in the use

of heart defibrillation: and 47 hours to be a security guard authorized in the use

of deadly force.25

Other training periods may be shorter because of a desire of employers in

those fields to train as many qualified employees as possible to filljobs for which

people are urgently needed. The cosmetology requirements, on the other hand,

may reflect a desire to restrict entry into the field so as to minimize competition.

This view has been well-documented historically. A 1975 Department of Labor

economic analysis of occupational licensure demonstrated a correlation betweenthe number of applicants judged to fail cosmetology exams and the rate of

unemployment ina given state. The study concluded that exams were used as

a way to exclude potential new entrants to the field during times when

hairdressers had additional motivation to reduce the number of cornpetttors.vf

There is reason to believe that cosmetology laws in NewYork are similarly

inspired. Consider the case of manicurists, who may also offer hair removal

service. The growth of such nail salons, many run by Korean and Russian

immigrants, inspired a new regulation, adopted in April 1994, to require 250

hours of training for those who would work as manicurists. In addition, those

who would offer hair removal service were required to obtain a full-fledged

cosmetology license. Members of the Korean American Nail Association have

charged that the regulations were anti-competitive. "My feeling," one salon

owner has said, "is that the American beauty salons felt they were losing

business to the Koreans and felt they needed some protection. "27

As with vendors, it is important to distinguish between legitimate

interests of the state-vlnvolvtng health and safety--and anti-competitive

regulations that make use of the force of law. In the case of cosmetology, it is

difficult to see how the public would be harmed by confining state inspections

to the sanitation of the premises of hair salons, whether in-store or in-home.The idea of inspection of premises rather than the licensing of individuals also

has been raised in a report cornmiseioned by the U.S. Department of Labor,

which drew an analogy with restaurants: "Restaurants are inspected

periodically by sanitarians who work under the jurisdiction of a health

department. They have the authority to close any establishment that fails to

meet standards established by a local board of health. The questtori gocsback

to whether it is necessary to license individuals when the objectives of

may be achieved just as well or even better by licensing an establishment. "28

em hUiIl itt 1m; 4& 44&4W464!4&M¥§§&%W&tWW Ii!i!i AM

19



Apprenticeships, too, could offer those who cut or set hair a means to

learn their trade. Those who chose to attend beauty academies could still

advertise that fact, in order to seek competitive advantage. Those who employ

chemical treatments of the hair may want to emphasize their specialized

training. In general, however, it is difficult to envision a risk to the public

commensurate with the current level of regulation--especially when that

regulation has the effect of driving underground a service which the public

wants and which hairbraiders want to offer. The greater risk, in fact, may be

that posed by the status quo. By driving legitimate hairbraiders underground

one risks, as with gypsy cabs, the same boomerang effect. Maximum regulation

becomes the enemy of basic reassurance, which, in this case, might be health

inspections of hairbraiding premises,

CHILD CARE

The need for high-quality child care centers has become Widespread over

the past two decades. The growth of women in the workforce and the increased

pressure on women receiving public assistance to seek employment combine to

keep demand for child c-are high. And yet legal requirements seem to make it

more difficult for private providers to offer "affordable" child care,

In New York. opening a group day care center (defined as a freestanding

facility for seven or more children) outside one's own home is an elaborate

process--one that requires approval of the premises by inspectors from the city's

Building Department, Fire Department and Department of Public Health. In

addition, there are demanding occupational licensing requirements. The

regulations of the city Department of Health's Bureau of Day Care require that

prospective employees in a child care center meet the same certification

requirements as school teachers.

A center director must either have obtained a master's degree or enroll in

a master's program upon being licensed. At least. one staff member rmrst have

child abuse prevent.ion training, CPR training and two health-related courses in

child development. All of this in addition to programmatic requirements, which

limit the number of children in specific age groups and specify the type of snacks

to be served, even requiring that there be enough snacks for children to get

second helpings,

It may be hard to find fault with the motivation behind such regulations~-

protection and education of children=but such occupational requirements, in

particular, raise questions. Are educational credentials the best or the only

assurance for parents as to the wholesomeness of a child care center's environment?

Child care techniques can be and are learned from experience by people

than master's degree levels of education. Should such persons be excluded as clay

care center directors? Just as cosmetology license requirements are a boon to

beauty academies, master's degree requirements and teacher certification are

a boon to schools of early childhood education at the expense of child care supply.

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20



It is worth noting that NewYorkCity sets considerably higher standards for

day care center operators than many other jurisdictions. The teacher certification

and master's degree requirements are particularly unusual. In other places

experience with children substitutes for formal education. Massachusetts

regulations, for instance, allow program supervisors to have only a high school

diploma if they have four years of experience caring for children. North Carolina,

Similarly, does not require any sort of advanced degree. California allows day care

center directors to have a high school diploma and 15 credits of early childhood

education or four years ofexperience ina day care center or group child care program.

"FAMILY" DAYCARE

The onerous demands for formal day care center directors and staff ironically

contrast with NewYorkState-regulated requirements for another form of day care.

"Family"day care is provided inprivate homes or apartments, limited to six children

under the age of six:or twelve school-aged children. It is a regulated activity but nota licensed one. In other words, there are operating rules and a permit for operations

must be obtained, although a license based on personal qualifications is not

necessary. Those who seek the services of a family day care provider assess

competence based on conversation, observation and common sense.

The relatively modest family day care requirements include a 15-hour free

orientation offered in a variety of languages, two to three times a week in all five

boroughs of NewYorkCity, as well as two years experience with children sL"Cweeks

to six years. Interestingly, a required 1I5-hour refresher course, necessary for

permit renewals, is offered by community-based non-profit groups raising the

question as to why food handler training cannot be offered by institutions other

than the city's Health Academy. There are also the less stringent occupational

standards for family day providers. There are more than 5,000 registered family

day care providers inNewYorkCity. Byway ofcomparison, there are an estimated

4,000 such providers inthe entire state ofNewJersey. Still, state regulators believe

that there are numerous unlicensed providers, as well.

Not that this is viewed by local officials as a success worth butldmg on.

City officials complain that zoning laws do not apply to family day care

operations, which are not considered a "commercial use." This precludes local

officials from applying a host of local regulations to family day care centers, asituation local regulators would like to change.

The fairly minimal family day requirements, however, and the large number

ofproviders who have obtained permits. appear todemonstrate that sensitively set

regulation can solve the problem ofpractitioners driven underground,

a city maintain its role inprotecting public health and safety. Formal child care

centers in New York provide both employment for their staff and options for

parents. How many more might there be if the precedent of family day care

applied to child care centers generally?

l ! i !

21



Public Monopolies

A public monopoly is an economic activity that a government reserves for

public employees. Such monopoliesare, intheory at least, based on the belief that

some activities are what economists call "public goods"--products or services thatare ofbenefit to society at largebut the efficientprovisionofwhich is not profitable

through the private market. For example, national defense is a public good. New

York City reserves a number of activities to public employees, though one can

question whether these are truly public goods. In one important instance a public

monopoly, in fact, has clashed with private competitors. What was NewYork's

response? Quash the private competition.

VANSERVICES/"COMMUNITY TRANSPORTATION"

When Hector Ricketts calls a meeting of the Interborough Alliance for

Community Transportation, as many as 25 local businessmen and women,

many the owners of fleets of vehicles, show up. People like Ricketts, the owner

ofQueens Van Plan, or Vincent Patterson, owner ofPatlinTransportation, or Pat

Harvey, president of Pat's Carriers, are, to all appearances, law abiding citizens.

They run businesses that seem quite straightforward, ferrying passengers

throughout immigrant and minority neighborhoods of Queens and Brooklyn,

typically taking them from subway stations, downmajor commercial streets and

into residential neighborhoods. The "dollar van," indeed charges a dollar per

ride and run throughout the day and much of the night. There are an estimated

5,000 vans, carrying some 20,000 passengers a day--a larger number than mostbus systems in the United States.29 The van services have been the route by

which their owners, many ofwhom now employ numerous drivers, have worked

their way up the ladder of economic mobility. Virtually all are Caribbean

immigrants, from Barbados, Jamaica, St. Kitts, Guyana and assorted islands,

who have escaped poverty through this enterprise.

Appearances are deceiving, however. Everyone at an Interborough

Alliance meeting knows that he or she is at risk. City and state inspectors, or

local police, may, on any givenday, slap vans with a variety of citations. In one

IS-month period, for instance (July 1990 through December 1991), 11,700 city

citations and 6,500 state citations were issued to vans for offenses such as

stopping at or near public bus stops to pick up or discharge passengers. Those

found to have numerous previous offenses today risk immediate confiscation of

their vehicle and possible shut down of their entire business.

"You invest $30,000 in equipment and insurance," observes Hector

Ricketts, "and you have to run and hide. You're part of a $50 million industry

and you're running like a crook."

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This results from a fundamental problem that the van services face.

Although some have licenses, none is or can be licensed for what drivers and

customers really want to do: pick up passengers wherever they find them and

drop them offwherever they might like along the van's route. This innocuous-

sounding goal flies in the face ofa public monopoly: the exclusive right of buses

owned and operated by the independent public agency called the MetropolitanTransit Authority (MTA)to run on NewYorkCity streets. The theory behind the

MTAis that of the public good; that a public transportation system is vital and

that a public agency must run such vehicles. By law, no private transit service

may compete with a public bus route.

Such theory did not, however, anticipate small, flexible-route vehicles

such as vans and mini-vans that can be operated at a profit by private owners.

One could imagine NewYorkwelcoming the advent of such a service, especially

because public buses are expensive and heavily subsidized. The buses, infact,

lose money--a lot of money-eon every run. Citywide, the revenue received from

passengers (which reflects various fare discounts for students and the elderly)averaged $1.08 for each local ride. (Thefull posted fare is $1.50). On an average

weekday, it costs the Transit Authority $2.66 to provide that ride, accounting for

an average subsidy of $1.58 per rider per ride. Subsidies are even higher on

many of the routes on which the public buses compete with dollar vans. The Q5

bus in Queens receives a subsidy of$3.94 per rider; the Q84, a substdy of $3.13.

Such subsidies help to support. wages for bus drivers which, including fringe

benefits, top $25 an hour, or more than $53,000 a year. And yet despite such

high levels of tax dollar support. public bus lines lose riders tovans whose dollar

fare must not only cover costs but allowowner/operators to make a profit.

Why could dollar vans attract riders despite heavily-subsidized

competition? The answer lies inthe unpopularity ofpublic bus service, especially

in outer boroughs, such as Brooklynand Queens. Service is sporadic (in part to

control costs), Typically,bus routes may lack sufficient capacity at rush hour and

have too much capacity at other times. Buses will not pick up or drop off

passengers where they want. To provide as much service as possible at peak

hours, the Transit Authoritymayhave to incur overtimecharges for its work force

of unionized drivers. In addition, the public bus fare (81.50) is half as costly 2S

that of the dollar vans. Thiswasnot a small matter inthe city's so-called "twofare"

zones--neighborhoods inwhich residents took a bus simply to get to the city's

subway syst.em, where they had to pay a second fare. The Transit Authorityrecently announced plans to provide free transfers from surface lines to subways

thus eliminating the two-farestructure.

All this notwithstanding, NewYorkCity regulation is stacked, formidably,

against van owners, who provide a far less expensive and more popular

Historically, a relatively small number (SOO-plus)of van owners were able to

obtain New York State Department of Transportation licenses to operate as

commuter vans transporting passengers from one fixed point to another (for

example, a shopping plaza to a subway terrninus.) Even toobtain these licenses,

*S i 1 t ? d H



however, van owners had to pledge that they were not competing with public

buses and that, infact, public buses did not run within twomiles of their routes.

More recently, the authority to regulate vans has been givento the NewYorkCity

Council, which has issued only two licenses in more than a year.

However, even those vans holding state licenses or those which are ableto gain city approval cannot be licensed to do what they really want to do:

compete wit.h public buses. Such competition is illegal. Moreover, if a van is

able to identify and gain a license to serve a route not served by a public bus,

the public system has the right to initiate service along that route and demand

that the private provider cease and desist. Just to reiterate: the city prohibits

vans that cost a dollar and turn profit for private owners from running in

competition with public buses. Instead, the Transit Authority runs buses which

lose so much money on every run that, in order to cover costs, some require

subsidies of more than $3.00 for each paying passenger.

It is easy to see why the Metropolitan Transit Authority and the Transit

Workers' Union would resist the dollar vans. By one internal MTAestimate, the

authority loses between $30 and $50 million annually to these non-legal

competitors. Unionized drivers, who earn more than twice what van drivers

earn (average pay $20,000 a year), clearly have an incentive to keep out the

vans. But it is much harder to identify how the public would suffer were such

vans to be legalized as overt competitors to the public buses and regulated to

protect public health and safety. It is possible that certain populations, such as

the handicapped, might not be served. More broadly, it is possible that there

are services offered by public buses which are, indeed, public goods and should

be addressed. Similarly, an open market for dollar vans may pose congestion

problems, givenlimited curb space in crowded neighborhoods. But such issues-

-if they truly are issues--can be dealt with directly. They hardly merit the

suppression of an entire industry.

RESIDENTIA.L TRASH REMOVAL

The only people who pick up household trash in NewYork City are the

employees of the City's own Department of Sanitation, a department with more

than 11,000 employees and a budget of almost $600 million. Although

commercial trash is picked up by private haulers, the Department of Sanitation

alone is responsible for the pick-up and disposal ofthe 14,000 tons oftrash New

Yorkers generate daily. Morethan 8,000 uniformed "san men" (sanitation men)

fan out daily over 59 localdistricts in more than 1,000garbage trucks. Another

200 trucks pick up curbside recyclable materials. The salaries of san men start

at $23,000, the highest in the nation, and is complemented by a

package worth an additional $13,500. When overtime is considered, however, it

is not uncommon for those who pick up garbage inNewYorkto take home salary

and benefits worth more than 855,000.

24



But why is the pick-up of household trash a public monopoly in New

York? Historically, the city has feared the influence of organized crime on the

private "carting" industry. The recent entry of major national garbage pick-up

firms into the NewYork market, along with indictments of the owners of a

number of small carters, may mark a change, however.

It is extremely common for cities to contract with private haulers to dosuch pick-ups. Some cities, with an eye toward retaining their own capacity to

pick up trash and to keep equipment on-hand that might be useful in snow

emergencies for instance, have developed systems that combine public and

private pick-up. In Indianapolis, for example, the city is divided into nine

districts; bids from both public employees and private firms compete for the

right to pick up trash in each district.

There is, by no means, a guarantee that an end to the public trash

monopoly will favor the small, entry-level entrepreneur whose interests are

paramount in this report. Indianapolis has chosen to reserve some districts for

locally-owned trash haulers but such a system poses its ownpotential problems

of Inefficiency and unaccountability. It may be, too, that the pick-up of

recyclable materials could be bid on a district-by-district basis in a way that

could include small haulers, who might need only a relatively simple truck in

order to do the job.

Trash hauling is currently a public monopoly. There are many reasons,

including budgetary ones for the city, to re-examine that monopoly. The small

entrepreneur would be among the beneficiaries ofa competitive market system.

Conclusions

The revival of a culture of enterprise, one inwhich thousands of poor but

ambitious people routinely pursue their occupations, aids both those in

business for themselves and others whom they may inspire or, ultimately,

employ. Such a culture of enterprise is an essential and powerful catalyst for

community building. For as Jane Jacobs, the famed observer of urban life and

the lifeof NewYorkinparticular, has pointed out, small ideas can become bigger

ideas, and the lives of the poor can be fertile ground for innovation. "Acutepractical problems incities," Jacobs has written, "oftenbear most heavily upon

people lowest in social hierarchies, and thus are noticed, and also often

understood, by those people long before they are taken seriously by those who

lead more sheltered lives." The example of the dollar vans of Brooklyn and

Queens as a response to the gaps in public transit service clearly comes to mind.

Htstorically small scale entrepreneurialism was called "penny capitalism."

As such, it has a contemporary echo in the burgeoning movement known as

"trucrofinarice," the creation of mechanisms to direct capital to very small-scale

25



entrepreneurs. Common in developing countries such as Bangladesh, there is

growing interest on the part of philanthropic donors such as New York's

Citibank (through its "CitiCorps" foundation) in transplanting the microfinance

model to poor neighborhoods ofAmerican cities, including NewYork. Regulatory

barriers are a significant hurdle to such an effort. Banks and other financial

institutions simply cannot make loans to businesses+whether in-home catering orcommunity transportation+which, although benign and profitable, are not legal.

How, then, can New York come to grips with its wave of hopeful

entrepreneurs and provide the legal regime necessary to spark positive forces so

desperately needed in its low income communities? How can it reconcile the

need for some regulation with the deadening effect posed by its current mass of

anarchic and archaic regulation? The goal should be the formulation of a

consistent policy across ranges of occupations, a policy designed to encourage

entry-level employment [and employment generally)' to discourage the use of

regulation to create private, competitive advantage, and to articulate expressly

the legitimate public interests that merit governmental concern (e.g., congestion,

health or safety) and then to tailor carefully laws or regulations to meet that end.

Every current regulation on entrepreneurship should be re-examined now and

on a regular basis to conform to these criteria.

Among specific topics should be the issues of permit ceilings, public

monopolies and occupational licensing standards. Such issues should be

considered in the context of encouraging entrepreneurship and employment,

which is nowhere mentioned as a succinct public goal in the administrative

histories of any of the city's activity regulations. Reformers should keep in mind

the words of the NewYorkBar Association, which has observed that "regulation"should be considered "undesirable" when "adverse consequences are not

substantial" and "the consumer has available bases other than state licensure

upon which to evaluate [the] practitioner, such as referrals and inspection. "30

As things stand now, regulation has given NewYorkentrepreneurs a blighted

future. These individuals, their customers, indeed the city itself, deserve a

vibrant, hopeful future in which enterprise and aspirations for a better life can

be a driving force throughout the metropolitan area.

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Endnotes

Deborah Sontag, "Hidden Economy: Immigrants Underground," TheNew York Times,

June 13, 1993, sec. 1, col. 3, p.I. The informal economy was estimated at $54 billion.

2 Milton Friedman, Capitalism and Freedom, (The University of Chicago Press, 1982)

p. 148 (Licensure "almost inevitably becomes a tool in the hands of a special producer

group to obtain a monopoly position at the expense of the rest of the public. There

is no way to avoid this result."]

3 Benjamin Shimberg, Barbara F. Esser, Daniel H. Kruger, Occupational Licensing and

Public policy, Final Report to the Manpower Administration of the us Department. oj

Labor (Educational Testing Service, Princeton, NewJersey, October 1972) pp. 343, 365.

4 Elton Rayack, An EconomicAnalysis oj Occupational Licensure, US Department of

Labor, Employment and Training Division, Washington, DC, September 1975.

5 NewYork State Bar Association, New York State Regulatory Reform,April 1982, p. 27.

6 Steve Mariotti as paraphrased in "It's Not the Same America," Inc.. May 1994.

7 NewYork City Taxi and Limousine Commission, The New York City Taxicab Fact

Book, May 1994 (34th edition), p. 41.

8 NewYork City Taxi and Limousine Commission. TheNew York City For-Hire Vehicle

Fact Book, February 1993, p. 39.

9 Fidel Del Valle, former chair, NewYork City Taxi and Limousine Commission, as

quoted in Emily Sachas' "Viewpoints," New York Newsday, January 26, 1994, p. 87.

10 The New York City For-Hire Vehicle Fact Book, supra note 8, pp. 34-36.

11 The New York City For-Hire Vehide Fact Book, supra note 8, p. 11.

12 Deborah Sontag, "Unlicensed Peddlers, Unfettered Dreams," Part IIfrom "Hidden

Economy: Immigrants Underground," The New York Times, June 14, 1993, sec. A.coL 1, p.l.

13 Lennit Bligen. director, and Fred Leopold-Hooke, deputy director, New York City

Vendor Initiative Program, Addressing the Problems of Street Vending: Strategies that

incorporate concernsfor public safety, street vendor entrepreneurship, and small More

relief, undated, p. 15.

14 Information regarding parkland adjacent to the Metropolitan Museum of Art comes

from an interview with Mark Feinstein of the Parks Department, Revenue Division.

15 Editorial Desk. "Street Fairs Need Reform," The New York Times, January 24, 1996.

sec. A. col. 1, p.1S.

16 'unlicensed Peddlers, Unfettered Dreams," supra note 12.

17 "Addressing the Problems of Street Vending," supra note 13, p. 7.

18 Dan Barry and .Johnathan Hicks, "WithHarlem at a Crossroads, Visions for Economic

Future Diverge," The New YorkTimes, December 24, 1995, sec. 1, col. 2, p. 19.

19 Dan Barry and Johnathan Hicks, "Protester is Caught in Fatal Fire's Glare: New Look

at a Harsh Message." The New York Times, December 15, 1995, sec. B, col. I.

20 Guy Trebay. "Speech Defects: Word War One on 125th Street," Village Voice.

December 26, 1995, Citystate, p. 18.

21 Karen Hunter, "125U 1 Street Solution Still Getting Mixed Reviews," New Yoric Dully

News. July 5, 1995, Business, p. 45.

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27



22 Jere Hester, "Fiend a Vendor With a Gnldge Gunman Mad at Being Moved," New

YorkDaily News, December 11, 1995, News. p. 7.

23 Claudine Williams, "Hair Wars: Underground on 125tl1 Street," The New YorkTimes,

August 21. 1994, sec. 13, col. 2, p.4. Braiders are said to earn from $70 to $200 per

customer.

24 Patricia Reynolds, "Homespun Hair: Kitchen Salons Hold the Key,"The Boston

GLobe, October 25, 1995, Living, p. 71.

25 Information regarding the hours needed to qualify for state-licensed occupations

comes from the Governor's Office ofRegulatory Reform, State ofNewYork, Albany, NY.

26 Elton Rayack, An Economic AnaLYsis of Occupational Licensure, US Department of

Labor, Office of Research and Development, September 1975, p. 147. "When labor

market conditions worsen, licensing boards tend to fail a higher percentage of

applicants, in order to reduce the flowof new entrants into the market and thereby

strengthen the competitive position of the licensed."

27 Rosalyn Retkwa, "Korean salons' polish chipped; Manicurists menaced by state

rules," Crain's New YorkBusiness, November 1, 1993, Women's Business, p. 46.

28 Occupational Licensing and Public Policy, supra note 3, p. 372.

29 Information about the dollar van industry and level of subsidy for public buses

comes from the Officeof Management and Budget, NewYorkTransit Authority.

30 New YorkState Regulatory Reform, supra note 5, p. 30.

28



Biography

WILLIAMH. MELLOR

President and General Counsel

William H. (Chip)Mellor serves as President and General Counsel of the

Institute for Justice. Mellor litigates cutting-edge constitutional cases

nationwide protecting economic liberty and challenging the Regulatory Welfare

State. Among his accomplishments are breaking open Denver's 50-year-old taxi

monopoly and defending of NewJersey's welfare reform.

The Wall Street Journal wrote of the Institute, "Meet the new civil

rights activists. Their belief is that the right to earn a living free from

excessive regulation is guaranteed by the Constitution." "The Institute for

Justice's influence is being felt across the nation," noted Investor's Business

Dailv, and Barron's National Business & Financial Weeklv remarked, "So givea cheer and a wink for Clint Bolick and Chip Mellor, legal gunslingers with a

taste for entrepreneurs."

Mellor's views and writings have appeared in The Washington Post, The

New York Times, The Wa11Street Journal, Los Angeles Times, Chicago

Tribune, National Law Journal, Reason, Investor's Business Dailv, "CBS

Evening News", CNN, "Today", ABC News "Nightline" and numerous other

publications and programs.

From 1986 until 1991, Mellor served as President of the Pacific Research

Institute for Public Policy, a nationally recognized "think tank" located in San

Francisco. Under his leadership, the Institute commissioned and published the

path-breaking books on civil rights, property rights, and technology and the

First Amendment that serve as the Institute for Justice's long-term, strategic

litigation blueprint.

Prior to Pacific Research Institute, Mellor served in the Reagan

Administration as Deputy General Counsel for Legislation and Regulations in

the Department of Energy. From 1979-1983, Mellor practiced public interest

law with Mountain States Legal Foundation in Denver, Colorado. Mellor

received his 3.D. from the University of Denver School of Law in 1977. Hegraduated from Ohio State University in 1973.

Through strategic litigation, training, communications, and outreach, the Institute for Justice

advances a rule of law under which individuals can control their own destinies as free and

responsible members of society. We litigate to secure economic liberty, school choice,

property rights, freedom of speech, and other vital individual liberties, and to restore constitutional

limits on the power of government. Through these activities we challenge the ideology of tilE) welfare

state and illustrate and extend the benefits of freedom to those whose full enjoyment or is

denied by government. The Institute was founded in 1991 by William H. Mellor and Clint Bolick.

W'4@9Mci; # 1 Q W i \ W \ M i O

29



The Institute tor Justice is a nationally acclaimed public interest law firm

that pursues strategic public interest litigation and outreach to ensure that

individuals have the opportunity to pursue their chosen occupation and gain a

foothold on the economic ladder. Scripps Howard News Service wrote, "the

Institute for Justice [is] a public interest group fighting for something our cities

desperately need more of: economic opportunity at the grassroots."

The Institute tor Justice is now in seven cities across the country analyzing

government-created barriers to entry-level entrepreneurial opportunity. At a time

when there is widespread recognition of the need for less government and more

opportunity, these studies identify specific laws and regulations that stand in the

way of people trying to earn an honest living.

This report, Is New Yarl: City Killing Entrepreneurshipi, by Institute for

Justice President and General Counsel 'William Mellor, addresses significant barriers

to economic opportunity at the grassroots in New York City. This study, the Erst

of its kind ever commissioned, will soon be followed by the release of similar

reports detailing the conditions in Baltimore, Boston, Detroit, San Antonio,

Charlotte and San Diego.

For more information, please contact:

I JINSTITUTE FOR JUSTICE

1717 PENNSYLVANIAAVENUE, N.W.

SUITE 200

is new york city killing entrepreneurship?

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