However, if Kiwis had to get permission from other businesses before they could offer their new idea to customers, they might instead find themselves following the American model.
Despite its reputation for economic freedom, which encourages innovation and economic growth, the US has ranked below New Zealand in economic freedom for decades. An important factor in America’s score is labor market regulations like the thicket of occupational licensing laws covering the country. Although there is no official list of all licensing laws in the US, researchers have identified hundreds of occupations that require a license to work, covering almost a quarter of the US workforce. For a sense of scale, about 1% of American workers are on the federal minimum wage and 10% are represented by unions.
Occupational licensing laws often require completing specialised school programs and applicants must get permission from licensing boards – often staffed by their future competitors – before they can work. Licenses even cover jobs to cut hair, decorate homes, and trim trees, but working without a license can lead to criminal penalties. As licensing delays new businesses, it can also take the spark out of innovation. Imagine instead if there was occupational licensing for politicians!
US states have begun to reform their occupational licensing laws, and the burden from licensing to workers and customers may be the only thing about which the Obama, Trump, and Biden presidential administrations agreed. Although some argue that licensing protects the public from unqualified workers, research shows that licensing can actually reduce quality by insulating industries from competition.
Allowing providers to compete for customers with high quality services, certifying quality with third parties or professional associations, or requiring providers to carry liability insurance can protect consumers without licensing. These mechanisms do not generate the higher wages from licensing – but the high wages are paid for by keeping more people from working and by consumers paying higher prices.
It sure would be a shame if New Zealand had a problem like this!
Darwyyn Deyo is an Associate Professor of Economics at San José State University (SJSU) and Director of Regulatory Frontiers at the Knee Regulatory Research Center at West Virginia University. This article was sourced HERE
Despite its reputation for economic freedom, which encourages innovation and economic growth, the US has ranked below New Zealand in economic freedom for decades. An important factor in America’s score is labor market regulations like the thicket of occupational licensing laws covering the country. Although there is no official list of all licensing laws in the US, researchers have identified hundreds of occupations that require a license to work, covering almost a quarter of the US workforce. For a sense of scale, about 1% of American workers are on the federal minimum wage and 10% are represented by unions.
Occupational licensing laws often require completing specialised school programs and applicants must get permission from licensing boards – often staffed by their future competitors – before they can work. Licenses even cover jobs to cut hair, decorate homes, and trim trees, but working without a license can lead to criminal penalties. As licensing delays new businesses, it can also take the spark out of innovation. Imagine instead if there was occupational licensing for politicians!
US states have begun to reform their occupational licensing laws, and the burden from licensing to workers and customers may be the only thing about which the Obama, Trump, and Biden presidential administrations agreed. Although some argue that licensing protects the public from unqualified workers, research shows that licensing can actually reduce quality by insulating industries from competition.
Allowing providers to compete for customers with high quality services, certifying quality with third parties or professional associations, or requiring providers to carry liability insurance can protect consumers without licensing. These mechanisms do not generate the higher wages from licensing – but the high wages are paid for by keeping more people from working and by consumers paying higher prices.
It sure would be a shame if New Zealand had a problem like this!
Darwyyn Deyo is an Associate Professor of Economics at San José State University (SJSU) and Director of Regulatory Frontiers at the Knee Regulatory Research Center at West Virginia University. This article was sourced HERE
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