Richard Moorhead, perceptive as usual, has noticed a recent study conducted in the UK of the impact of regulations of occupations, done for the UK Commission on Employment and Skills, and titled A review of occupational regulation and its impact. The authors are John Forth, NIESR; Alex Bryson, NIESR; Amy Humphris, LSE; Maria Koumenta, Oxford Brookes University; Morris Kleiner, University of Minnesota. Richard Moorhead has pulled this quote — highly apposite to those of us in the US:
“The overall conclusions from the US studies on the impact of licensing are that, in general, occupational licensing increases the wage of licensed workers, reduces employment growth and raises the price of goods or services but without overall improvements in the quality of service or product offered. The magnitude of the effects vary by occupation and location.”
Here is the para on US studies of the impact of licensing upon price.
Price effects of occupational licensing in the US
Most studies of the influence of occupational licensing policies, on the price of the occupation‘s service in the US, find a positive relationship (see Cox and Foster, 1990; Kleiner 2006), albeit sometimes with no improvement in quality. These include recent studies by Kleiner and Todd for mortgage brokers, which indicate higher prices for mortgages with no influence on quality (Kleiner and Todd, 2009). The existing studies cover policies ranging from restrictions on interstate mobility, such as by limiting reciprocity, to restrictions on advertising and other commercial practices (Shepard, 1978; Bond et al., 1980; Kleiner et al., 1982). A review of empirical research on licensing found that licensing is associated with consumer prices that are four to 35 per cent higher, depending on the type of commercial practice and location (Kleiner, 2006). Kleiner and Kudrle (2000), for example, found that tougher state level restrictions and more rigorous pass rates for dentists were associated with hourly wage rates. These were 15 per cent higher than in states with fewer restrictions, with no measurable increase in observable quality. Similarly, Barker (2007) found that higher state educational standards for real estate brokers raise broker income without improving the quality of service. (Footnote omitted.)
I’d go with more than 35% for legal pricing myself. Obviously this data does not conclude the debate about legal licensing by any means, but it is useful to have general confirmation of some areas of its impact.
I also find fascinating this table on percentages of workers at different educational levels are subject to licensing requirements. It suggests, in support of licensing, that higher skill and knowledge occupations are much more subject to licensing, and that the bar is far from alone among the more highly educated occupations in requiring licensing.
Presumably, if such regulation has these impacts, then the “strong” monopoly of the bar in the US, and the high barriers to entry, should be combining to result in very significant increases in costs. The question is whether a more nuanced regulatory system would provide the needed consumer protection without imposing such high consumer downsides, and such burdens on access.