Wednesday 9 April 2014

Occupational licensing: NZ Edition

David Smith points out that New Zealand isn't as pure as I'd like. In comments over on last week's post on New Zealand's generally "less stupid" policy stance, he wrote:
Eric,I'm afraid your comment on NZ occupational licensing is not correct. You can see the official list here.This just refers to regulations that have a specialist body. (Even so, it includes Real estate agents!) You will find many interesting anomalies in the way these organisations work. For instance, of particular interest to a Cantabrian would be the building regulatory bodies that have set up a system that means the average age of an apprentice is 28 (twenty eight). There is no overview whatsoever of how these bodies go about their regulatory task. Such overview is not about specialist knowledge, but simply asking those organisations how they implement legal obligations to protect consumers. e.g. I do not know how to be a dentist, but they could be obliged to show how they assess patient safety and the criteria they use to decide whether or not a procedure could safely be done by a non-professional. No regulatory body in New Zealand is asked to do this.However, this is scratching the surface. The two tricks in New Zealand are highly restrictive "health and safety" laws that in practice exclude many low skilled people from jobs because they have not done low value courses costing a few hundred dollars. Low cost to you and me, high cost to a kid on welfare if they have no guarantee of a job. The other restrictions are demanding academic qualifications. Three decades ago it was possible to be an an academic with a masters degree. Now a PhD from an overseas university is needed. That's what I call a restrictive practice!
David Smith
Here's the list provided by Immigration NZ:
SM19.5 Occupations requiring registration
In New Zealand registration is required by law in order to undertake employment as one of the following:
Barrister and solicitor
Cable jointer
Clinical dental technician
Clinical dental therapist
Dental hygienist
Dental technician
Dental therapist
Dispensing optician
Electrical appliance serviceperson
Electrical engineer
Electrical inspector
Electrical installer
Electrical service technician
Financial adviser
Immigration adviser
Line mechanic
Medical laboratory scientist/technologist
Medical laboratory technician
Medical practitioner
Medical radiation technologist
Nurses and midwives
Occupational therapist
Plumber, gasfitter and drainlayer
Real estate agent
Cadastral (land title) surveyor

I last week also discussed how doctor licencing in New Zealand works to support what's effectively a cartel.

I don't know how binding a barrier any of these licensing requirements prove in practice. It would be a pretty interesting research project for someone like the New Zealand Initiative to find out. But in all of these with which I've had any experience as consumer, the barriers here seem lower than those in the States, with evidence mostly coming from prices.

Here's one example. Dentists are pretty cheap here relative to the US. I typically pay about $150, including GST, for me and the two kids when we get a check up and cleaning - we have no dental insurance, and there's no kid subsidy.* This survey of NZ dentist fees says an exam and x-ray is $95 and a filling is $160. Susan had a root canal, under sedation, for about $600. Dentistry is an undergrad degree here with a registration exam after your degree. In the US, it's a graduate degree after a biology-heavy undergraduate programme. Here's the US recommended undergrad prep for entry into dental school. Raise the entry bar, you lower the number of people passing through and so hike the fees.

Dentistry still does have restricted entry: the only school in the country allowed to teach it is Otago, and they only take 54 domestic students per year. But foreign dentists are allowed to practice here; I have no sense of how onerous the examination and registration requirements are for those wishing to do so.

While I agree with David that we'd do well to have a much better sense of the scale and severity of occupational licensing here, it's also worth noting that the problem's really rather worse in the States. Colorado's list** includes acupuncturists, addiction counselors, athletic trainers, barbers, funeral home operators, massage therapists, private investigators and social workers, for example. Don't try braiding people's hair for money in Utah, or many other states. Here's the Reason Foundation's work on occupational licensing. Kleiner and Krueger estimated that 29% of employed Americans were fully licensed by the government for work in their profession; licensing brings a 14% wage premium. I wouldn't be surprised if the wage premium in New Zealand were on that order, but I would be pretty surprised if the proportion of Kiwis working under occupational licensing were over 20%.

File under future honours projects.

* There is a no-cost-to-patients dental service for kids, but we don't use it. We don't want to clog up the public system when we can afford to pay and I don't want the hassle of having different appointment times for me and for the kids. For a while, we kept getting voicemail from the government-provided dental service. They sounded pretty annoyed that we're not using their service. I'd left a message on their voicemail saying the kids are with our family dentist; that didn't stop the calls. I don't know whether our message didn't get through to them or whether their KPIs involve having all kids seeing a government-provided dentist rather than just seeing a dentist. There's also cheaper medical visits in general for those qualifying for Community Services Cards, eligibility for which is based on household income. The price I'm quoting is the full-price, no-subsidy version.

** Not trying to pick on Colorado: they just came up first on a Google search.


  1. Part of it is probably the divided government. Groups trying to get license regimes put in place to protect themselves have more power to do it with local and state governments here than if they had to try and get it through the US Congress (although some do - see the Car Dealerships Association).

    Granted, some of those licensing requirements can be pretty banal. For example, there are jobs that require a Food Handler's Permit, which at least when I needed one you could get for about $10 and an hour's worth of time.

  2. Eric,
    Apologies for the tone of the previous post. I don't know enough about the US to comment how it is relative to NZ and I would not want to imply otherwise.
    What is interesting in NZ is the complacency of government agencies about the issue. It is commonplace to hear people from the ministry of Business, Innovation and Employment (sic) claim "there are no barriers to labor market participation, so the reason for NZ's low growth is obviously a lack of government intervention..."
    The most egregious symptoms of the problem can be found in the same ministry's immigration department because they are at the cutting edge of implementing restrictive practices. If you look at:
    You will find NZ has "long term skill shortages" in such professions as chef, diesel motor mechanic and "electrician (general)". The short term ones include assistant herd manager for beef cattle, medical photographer (for which you need a masters degree plus 5 years experience!) and snow sport instructor.
    A country as small as NZ will always need to import people to do some highly specialist tasks. In fact there would be something wrong if we had the kind of perverse autarchy that stopped us importing skills from elsewhere. But how restrictive must a system be if we need to import diesel mechanics and snow board instructors when the unemployment rate is more than 6%?
    David Smith

  3. the correct figure is at least 20% of the NZ workforce covering 120+ occupations.

    your list forgot those 40,000 or so bar managers. accountants? auctioneers? all are regulated occupations

  4. I'd be keen on seeing a cross-country figure where the regulatory threshold is drawn on comparable basis. So bar managers tend to be licenced in US and NZ, but the barrier to entry is pretty low - or at least much lower than the barrier to being a hair braider in some US states.

  5. Odd that you'd feel the need to apologise there, David. S'all good.

    I doubt that regs on snow board instructors are what are keeping the ski hills from being able to find decent ones, or needing to import them, even where unemployment's high. I'd expect rather that weak incentives for the unemployed to move to jobs combined with skills mismatch, coupled with the seasonal nature of the occupation, mean that it likely makes more sense for an itinerant class of ski/board instructors to migrate from the Rockies to the Southern Alps as the seasons change than for the government to try training unemployed folks in Northland to become snowboard instructors.

  6. a bar managers course of 'few days is required. not sure of the size of the fee.

    you have a good point on rules that are minor irritants versus that that a erect high walls.

  7. The extent and severity of regulatory barriers to entry into different jobs, in comprehensive total, seems something well worth knowing, but not currently known.

  8. re kids dentist stuff, it's free for school aged (attending school and under 18). In my day schools had there own practice nurse/dentist. Where-as now it's outsourced. I'd expect it's not a KPI (ok maybe it is) but very much driven by making sure there is coverage... but if it's outsourced may it is a KPI.

  9. We still have to pay for them at our dentist.

  10. It sounds like I am more of an optimist on that one (or perhaps I know more about how incompetent the welfare system is at catching people who are working. Sometimes cheap talk makes little difference....)
    In the main, welfare is a way to have a misspent youth or fund early retirement (Look at StatsNZ figures for male workforce participation). Both sides of politics use places like Northland as poster children for welfare dependency people, but these are very much a minority of those long term on welfare. The real damage from the system is done by putting barriers up against those who would work if the insiders and their friends in government would give them a chance to enter the workforce.

  11. Oh, big agreement. Just doubt that snowboarding is a big one :->

  12. Ok, it seem the age has moved to under 12, was under 18 a while back (18 years ago for me)

  13. Yeah, we choose to use our dentist instead. Doesn't cost that much, leaves space for those who need it more, and fewer hassles. Except for the haranguing phone calls about the free service.

  14. And yet. If you talk to a optometrist here in New Zealand, you could be getting your LASIK + a week or so of museum tours in the UK for the price you'd pay for just the LASIK in New Zealand. Or you could go to Thailand, get the LASIK, a few blowies, then go to Cambodia and blow up a few cows with an RPG. Frankly, the lack of demand is bad enough, it only compounds with the lack of realistic licensing criteria to make the price Too Damn High.

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