Wednesday, 18 February 2015

Occupational licensing: repo edition

Occupational licensing rules block too many Americans from entering protected professions.

Brookings covered some of the horrors back in January:
For example, some states require that florists and make-up artists satisfy expensive and time-intensive requirements before they are legally permitted to perform their jobs. Also subject to such requirements in various states are locksmiths, ballroom dance instructors, hair braiders, manicurists, interior designers, and upholsterers.

This regulatory practice is known as “occupational licensing,” and it has spread to cover around 30 percent of the U.S. workforce, up from just 5 percent in the 1950s. The practice now has a significant bearing on workers of all skill levels, and extends far beyond the occupations of doctors, lawyers, nurses, and teachers. 

It is important to realize that occupational licenses are not mere state-sponsored certificates to signal that workers have completed some level of training; occupational licensing laws forbid people from practicing in their occupation without meeting state requirements. If the rationale for licensing an electrician is to protect public safety, it is difficult to see what rationale supports licensing travel guides. Yet, twenty-one states require a license for travel guides. Among these, Nevada has created the highest hurdle: a person hoping to be a travel guide in that state must put in 733 days of training and shell out $1,500 for the license. 
Their policy paper on it is here.

The Mercatus Center agreed, showing how licensing requirements also push up costs for consumers.

So New Zealand wouldn't be dumb enough to start trying to catch up with America on this front, right?

Associate Minister of Justice Simon Bridges and Commerce and Consumer Affairs Minister Paul Goldsmith have today announced strict new laws that will better protect the public from repossession agents engaging in unscrupulous practises.
“The changes mean that all repossession agents, as well as their employees, must be registered and licensed from 6 June 2015”, Mr Bridges says.
Applications for licenses will be accepted from 6 March 2015.
“Those who breach the new laws can be fined up to $40,000 under the Private Security Personnel and Private Investigators Act”, he says.
Maybe there's a case for going after cowboy Repo people, but why not do it simply by enforcing the rules around lawful repossession rather than setting up a big licencing regime?

Why make labour markets more rigid? Was there any RIS on this?

And today I learned that New Zealand has a Private Security Personnel Licensing Authority, which will be running the Repo Agent licensing.


  1. This regulation is not solving the main problem. That is gang member and other scary looking people working as debt collectors.

    All they do is knock on your door and in very polite language ask you to pay the legally due debt. Their scary appearance does the rest.

    This new regulation will making it more difficult to collect arrears. The fixed cost of using a registered debt collector will make some small loans unprofitable.

  2. Ignoring the public policy aspect to it, it seems clear to me that politicians have an incentive to promote labour market licensing: it gives the appearance that a politician is doing something, it gives the appearance of an increase in skills (and control via state sponsored training programs), and it gives the appearance that the consumer is better protected as a result.

    This type of licensing also splits existing consumer lobbies - which generally have a low ability to resist the diffuse negative impacts on the many against the narrow (and positive) impacts on the few. Licensing regs which prima facie increase quality but also increase price are hard to mount a public campaign against: how do you find someone to argue in public that it should be okay to hire an unlicensed babysitter because it's cheaper?

  3. I think it might be a reaction to the decline of unions in the US. There's a lot more "professionals", and they do what professionals have always tried to do since forever - namely, organize and impose barriers to entry in order to protect their profit margins.

    Licensing debt collectors isn't going to stop abuses in New Zealand. For that, you'd need a better registry of debt and active pursuit and punishment of collectors who go off the registry.