Labour Market

Occupational licensing – again

The latest push to license an occupation concerns the building trade. In line with Milton Friedman’s observation, the initiative comes not from the public which is ostensibly to be protected, but from the Federation of Master Builders.

In its new proposals, the Federation raises predictable concerns: the “scourge of rogue and incompetent builders”, the need for greater consumer protection, the hope of boosting skills and the need to “improve the image of the industry among the general public and prospective clients”.

Not letting a tragedy go to waste, the FMB calls in aid the Grenfell Tower fire. The claim is that this has “raised serious questions about the standards, regulation and compliance within the built environment”. Perhaps, but although we cannot anticipate the findings of Sir Martin Moore-Bick’s enquiry, it seems more likely that that material, design and inspection flaws were the underlying cause of the disaster rather than cowboy builders.

Some of the Federation’s concerns may be legitimate, but there are other means to mitigate them than to require the state to impose yet more costly regulation. Reform of the Construction Industry Training Board might be one sensible step. And perhaps consumers might be more careful in their choice of contractors who offer a cheaper rate for cash in hand.

Occupational licensing is growing rapidly, and we are beginning to resemble the United States, where lobbying by occupational bodies has made everything from flower arranging to interior decorating subject to regulation on training and entry standards.

In this country around 20% of all workers require government permission to practise their trade or profession, but already this year it has been agreed that mainline train drivers and estate agents are to be newly subject to government licensing. The government is also still apparently sitting on the results of a consultation over the introduction of a newly licensed category of ‘nursing associate’, scheduled for later this year.

Nursing associates are, incidentally, to be regulated by the Nursing and Midwifery Council. This body has just been castigated by the Professional Standards Authority for its failings over the Morecambe Bay deaths, where it took many years to discipline or strike off the midwives responsible. Licensing and regulatory bodies do not always have a great record in protecting the public or improving the quality of service. They are sometimes, as in this case, insufficiently responsive to public concerns and blur responsibilities which ought to belong to the employer or service provider.

They also raise the cost of providing services, and reduce competition. They make entry into an occupation more difficult and expensive, and membership consequently less diverse. At a time when new technologies offer the possibility of huge productivity gains, they may act to inhibit innovation as they entrench existing practices and processes.

One problem with trying to keep tabs on what is happening across the economy is that licensing of different occupations comes under many different government departments, each with their own concerns – and their own lobbyists.

The government really needs to take an across-the-board look at the process of creeping occupational regulation so we can consider where it can usefully be rolled back – and, where it remains necessary, best practice instituted. We should not be allowing licensing to spread like Japanese Knotweed.


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Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

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