A trend toward increased occupational licensing in Canada drives up costs for consumers and inhibits competition, says a new report from the C.D. Howe Institute.
In Licence to Capture: The Cost Consequences to Consumers of Occupational Regulation in Canada
, authors Robert Mysicka, Lucas Cutler and Tingting Zhang explore how a growing number of occupations in Canada require members to be licensed or otherwise regulated and how, in many cases, the added costs consumers pay for regulated services outweigh the benefits.
The power and knowledge imbalance between traditional professionals and consumers is often large enough to warrant governments and self-regulatory organizations to set standards to protect the health, safety or financial integrity of consumers. As the risk of harmful health or significant financial loss increases, the case for regulation is strengthened.
However, in many cases, the need to protect the public interest is not as clear cut. The authors argue consumers are likely experienced in, and capable of, judging quality without specialized knowledge or training for services such as cosmetics, hairstyling and other offerings where information and verification as to quality and value can be self-assessed. In these situations, the case for regulating such occupations is weaker.
"Our objection is to regulations that have the primary effect of limiting competition or reducing market entry with no demonstrable benefit to consumers," the report reads. "The objective for policymakers is to balance the interests of consumer protection with the virtues of a dynamic, competitive marketplace."
Using Labour Force Survey data, the authors note a trend towards more rather than less occupational regulation. In the past two decades, they find an increase in the share of workers in occupations with a restricted title, and a decrease in the percentage of workers in occupations that have never been regulated by federal or provincial acts.
In addition to the potential harm increased occupational regulation has on new entrants, regulation often translates into a higher cost to consumers due to the cost of accreditation being passed on and the likelihood of decreased competition as a result of professions maintaining pricing.
To decrease barriers to competition, the report calls on provincial governments to eliminate market conduct regulations that have little or no connection to consumer protection. In many provinces, professionals have domains of exclusivity that serve the interest of the regulated and should be examined, including:
- Realtor use of intellectual property in MLS;
- Pharmacist exclusive right of dispensing;
- Physician or nurse practitioner exclusive right of prescribing; and
- Solicitor exclusive right to effect transfer of land.
The report also recommends the Competition Act be amended to better define the scope of what has become a complicated judicial history that, in the authors' view, provides excessive immunity to provincially regulated activities.
is a commercial litigation and business lawyer at the law firm McIntyre Mysicka LLP. He has written extensively on regulation and regulatory issues in Canada.
is a lawyer at Grant & Dawn Lawyers Professional Corporation in Ottawa.
is Assistant Professor of Organizational Studies and Analytics, Girard School of Business, Merrimack College, MA.