Gains of competition in hairdressing!

Daniel Hamermesh has this interesting explanation for the low haircut prices in Germany ($15-20, compared to $35 in the US).

The once regulated sector was liberalized with more easier licensing requirements, thereby lowering entry barriers, and leading to a proliferation of hairdressing salons. The the EU expansion drew in Polish barbers, thereby shifting the supply curve far to the right and lowering prices drastically.

All this has made German consumers and Polish hairdressers obviously better off. Young German hairdressers, who enter the market with the full knowledge of the lower prices, benefit from the increased business opportunities. It is conceivable that people cut their hair more frequently with lower prices, and the number of people who earn livelihood from haircutting also increases as the entry barriers get lowered. Only the older German hairdressers lose out by way of reduction in their incomes. But as Hamermesh concludes, this is a small price to be paid for the gains accruing to everyone else.

There cannot be a better illustration of the benefits of de-regulation which lowers entry barriers and liberalized labour mobility which fosters competition. Many of the regular services like plumbers, carpenters, mechanics, masons etc are similarly expensive in the US. The example of hairdressing in Germany gives a compelling enough reason for easing restrictions on immigration of these professionals to the US, especially from the developing countries where these professionals are available in large numbers. The net benefits from this will far outweigh the small price paid by a few.