Occupational licensing
[4][5][1] Alternatives to individual licensing include only requiring that at least one person on a premises be licensed to oversee unlicensed practitioners, permitting of the business overall, random health and safety inspections, general consumer protection laws, and deregulation in favor of voluntary professional certification schemes or free market mechanisms such as customer review sites.
In the United States and Canada, licensing (the term registration is sometimes used) is usually required by law to work in a particular profession or to obtain a privilege such as to drive a car or truck.
[7] Examples of professions that require licensure in some jurisdictions include: actuary, architect, certified public accountant, electrician, engineering, general contractors, financial analyst, geologists, hedge fund manager, insurance agent, interior design, investment banker, licensed professional counselor, nurse, physical therapist, plumber, private investigator, psychologist, landscape architect, lawyer, nutritionist, physician, real estate broker, speech-language pathologist, school counselor, social worker, stockbroker, surveyor, and teacher.
In many cases, an individual must complete certain steps, such as training, acquiring an academic degree in a particular area of study, and/or passing an exam, before becoming eligible to receive their license.
Upon the successful attainment of a license, individuals append an acronym to their name, such as CPA (Certified Public Accountant) or LPD and PI (Private Detective and Investigator) PE (Professional Engineer).
[8] The No Child Left Behind Act of 2001, enacted to improve performance in US schools, has led to an intensification of license requirements for both beginning and experienced educators.
[9] In the case of UK medical practitioners, the government has recently proposed that they should all be legally required to produce formal proof, every five years, that they are upgrading their standard of practise.
[10] This tightening of the UK medical licensing system has largely been a response to public and government unease about a series of recent and well-publicised cases of alleged medical incompetence, including the Harold Shipman case, the Alder Hey organs scandal[11] and those involving David Southall, Rodney Ledward[12] and Richard Neale.
Introducing economics to this otherwise mechanical model by noting that a key discipline on incumbents—the threat of revoking one's license—may not mean much if incumbents can easily re-enter the profession, such as by moving to a new firm, or by shifting to an alternative occupation with little loss of income.
Such additional steps could include the imposition of fines, improved screening to prevent expelled practitioners from re-entering the occupation, or requiring all incumbents to put up capital that would be forfeited upon loss of the license.
Individuals who attempt to enter the occupation in the future will need to balance the economic rents of the field's increased monopoly power against the greater difficulty of meeting the entrance requirements.
Moreover, individuals who have finished schooling in the occupation may decide not to go to a particular political jurisdiction where the pass rate is low because both the economic and shame costs may be high.
For example, high demand and low supply for nurses or for teachers, in any particular region, can be alleviated if the red tape is reduced, as long as that reduction does not truly harm competence and preparedness.
[16] A 2020 follow up study by the same authors found that "the magnitude of the effect can only account for a small part of the overall decline in [interstate migration] seen in recent decades.
"[17] "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."
[18] Licensure restricts entry into professional careers in medicine, nursing, law, business, pharmacy, psychology, social work, teaching, engineering, surveying, and architecture.
Advocates claim that licensure protects the consumer[citation needed] through the application of professional, educational and/or ethical standards of practice.
Economist Milton Friedman opposed this practice, believing that licensure effectively raises professional salary by placing limits on the supply of specific occupations.
"It is hard to regard altruistic concern for their customers as the primary motive behind their determined efforts to get legal power to decide who may be a plumber.
This estimate may partially reflect a premium for higher unmeasured human capital, but it is also consistent and likely in large part due to rents.
[28][29] A 2019 National Bureau of Economic Research paper found that occupational licensing contributed to an average welfare loss of 12 percent.
[34][35][36][37] While it is not possible to precisely estimate the effects of substantially reducing occupational licensing at the present time, both theory and the available evidence suggest that such a reduction could translate into significantly higher employment, better job matches, and improved customer satisfaction.
[38][39] Without doing a detailed analysis at the occupation-by-occupation and state level, economists cannot say which occupations can be justified based on quality-consideration, though studies have been conducted they have found at least in a number of cases at different stages of licensing reduces employment, but does not result in better services.
For example, chefs are generally unlicensed, though opening a restaurant may require permits, inspection, and employee training or instructional signage.
[3] Restrictions to employment without licensure can prevent people with criminal records or severe mental health issues from working in occupations that require public trust.
The subsequent 'Proportionality Directive' passed in 2018 requires national governments to assess whether new barriers to practice are proportionate to achieve objectives in the public interest.
