Proportion of UK employees needing a licence to work has doubled in the last 15 years

Summary: 

  • Around one in five UK employees requires a licence from government to practice their chosen occupation. This proportion has probably doubled in the last fifteen years. A further fifth of workers are certified by government agencies, and such certification is often necessary for employment.

  • Occupational regulation is usually justified by the need to protect an uninformed public from harm caused by incompetent or unscrupulous practitioners. However regulation has increased at a time when consumer information has been expanding rapidly and there are new ways of ensuring quality and value for money.

  • Another argument for government involvement is that there is a market failure in the provision of skills, and this is a cause of lower productivity. But increased regulation has not achieved very much, and there are other ways to promote skill acquisition. Productivity growth may actually be reduced by excessive occupational regulation.

  • Regulation and licensing is sometimes a knee-jerk response to a sudden problem rather than a thought-through policy. And often occupational organisations themselves are the driving force for regulation as a means of keeping out competition.

  • The case for occupational regulation has traditionally been held to be strongest for professions such as medicine and the law which currently require many years of study. However new technology is undermining the traditional arguments for exclusivity for professional practitioners.

  • Evidence from various countries suggests that occupational licensing raises pay levels for most regulated occupations, reduces employment and does little to raise quality.

  • Differences in occupational regulation between countries seems to have little impact on the quality of services provided. However it reduces mobility between countries and has been one of the factors preventing an effective single market for services within the European Union.

  • Restrictive barriers to entry to occupations block off better-paid work from some disadvantaged groups and reduce social mobility.

  • A thorough review of the effectiveness of occupational licensing is needed. Such a review should reduce government intervention generally, but where some intervention is still required, registration is often preferable to licensing, certification to registration, and private accreditation to state certification.

  • More onus should be placed on employers and consumers to decide on suitable qualifications for a job, and less on external regulatory bodies which have agendas of their own.


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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.