What’s next, a license to blog?

Forbes has a cracker article on the sham of occupational licensing. As the article states:

The property of occupational licensing is that, by limiting the supply of performers of an occupation, it raises the cost of their labor, i.e. their wages, and the prices for the consumers.

Now, various occupational licensing rules–for doctors, nurses, pharmacists, lawyers, car dealers, et al.–are typically justified on two grounds: safety and quality. A licensing rule ensures, we’re told, that the performers of the occupation will do it more safely and with higher quality than in a laissez-faire system.

But then goes on to sensibly point out:

If there was a drive to create occupational licensing rules for nannies, middle and upper-middle class parents would immediately revolt (which is why it’s on nobody’s agenda). If that were to happen, wages for nannies would go up. But what about safety? What about quality? Don’t parents care about those for their children? Of course they do.

And yet, somehow, the system works. Somehow, most parents entrust their children to nannies without a law to say who can be a nanny and who may not and, somehow, the system works.

As Reason Magazine asked, “Why not license Nannies, if we want a Nanny State”? There’s actually a good reason – it increases costs and locks out unskilled labour. The examples they use are for the United States, but it is equally a big problem in Australia because licensing locks out workers and increases costs. In many cases the people who set the licensing standards are practising professionals whose interests are to keep registration requirements tight to make it harder for new practitioners to enter the marketplace and keep the supply of practitioners low leading to demand-driven price increases. The impact is so clear COAG has focused on it, especially for tradespeople.

Of course some professions do require certified skills to be confident, i.e. heart surgeons. That is why there are professional bodies that give credibility to their members. It’s a system of risk-pooled private certification that gives far greater confidence to the marketplace than licensing ever could, because if one member fails to live up to expectations it brings down everyone in that profession’s credibility. Consequently everyone has an incentive to keep standards high and consumers can be confident of the services they receive.

Voluntary private certification delivers better for consumers than compulsory licensing ever could.


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