Video: How Occupational Licensing Hurts the Economy

This video from the Institute for Justice shows how occupational licensing, or restrictive employment regulations, represents a form of labor protectionism that hurts the consumers, investors and job seekers, or as a whole, the economy. Yet the beneficiaries are the small number of privileged license holders and the government of course.

While the video has been focused on occupational licensing in the US, labor market interventions has universal relevance. In short, this applies to the Philippines too.

Occupational Licensing: Tokyo Eases Restrictions on Blowfish Culinary Licenses

Japan’s exotic delicacy, the Porcupine fish or commonly known as the blowfish can be fatal to people. The preparation of which requires skilled expertise.

Yet Tokyo’s city government seeks to promote competition by reducing regulations that once protected experts.

From the Reuters,

With a scoop of a net Tokyo chef Naohito Hashimoto selects a poisonous blowfish, considered a delicacy in Japan, and with a few deft strokes of his gleaming knife starts the delicate process of preparing it for a customer.

In moments, Hashimoto has separated the edible parts of the fish from organs filled with a poison more deadly than cyanide.

For more than six decades, dicing blowfish in Tokyo has been the preserve of a small band of strictly regulated and licensed chefs, usually in exclusive restaurants.

But new laws coming into effect from October are opening the lucrative trade to restaurants without a license, making chefs like Hashimoto see red.

"We have spent time and money in order to obtain and use the blowfish license, but with these new rules anybody can handle blowfish even without a license," said Hashimoto, a blowfish chef for some 30 years.

Occupational licensing is a form of protectionism which politicizes the supply of labor through permissions, licenses, restrictions, and cartelization of jobs that has been meant to raise incomes for the people in these fields.

Yet the effects of occupational licensing has done little to benefit the consumers.

In a 2008 interview, Professor Morris Kleiner, labor economics and public policy professor at the University of Minnesota’s Humphrey Institute and Carlson School of Management, said,

Occupational licensing has either no impact or even a negative impact on the quality of services provided to customers by members of the regulated occupation. Additionally, as occupations become licensed, members of regulated occupations see their earnings go up.

Well I guess Mr. Kleiner’s observation has been validated from Japan’s blowfish culinary experience.

Again from the same Reuters article,

The Tokyo Metropolitan Government says city laws covering the serving of blowfish should be changed to reflect changing times and hope that relaxing the rules will cut prices and bring Tokyo in line with the rest of the nation.

"Outside of Tokyo, the regulations for blowfish are even more relaxed and yet there are hardly any poison-related accidents," said Hironobu Kondo, an official at the city's Food Control Department.

"There is the hope that the number of restaurants with unlicensed chefs serving blowfish will rise, and that blowfish as an ingredient will be used not only for traditional Japanese foods but also others such as Chinese and Western foods."

My guess is that many of the today's social problems may partly involve job protectionism, but has been overlooked by contemporaneous analysis. [I will deal with this in the future]

Yet I hope that more of such marginal acts to liberalize the economy and induce competition will become a common practice in Japan and elsewhere around the globe.

More Signs of Decentralization: Europe Eyes Liberalization of Professions

Speaking of centralized forces giving way to decentralization, here is another very important development—parts of Europe now plans to liberalize professions

This from Bloomberg,

While Greece started lifting the legal shield for more than 150 jobs two months ago, Italy retains restrictions on who can enter professions. Prime Minister Silvio Berlusconi plans to strip away the protection as he tries to avert a debt crisis by revitalizing an economy that’s trailed the average growth rate for the euro region since its formation.

Fostering competition across the economy would boost growth by as much as 1.8 percentage points a year, according to Antonio Catricala, head of the country’s Antitrust Authority. That includes protected groups such as pharmacists, notaries, accountants and taxi drivers.

“A liberalization of professions and more in general of the whole economy may lead to additional growth,” Catricala said in a telephone interview. More competition would “have a positive impact on employment,” as joblessness among young people is about 30 percent, he said...

The parliament in Rome will vote as early as next week on a plan passed by Berlusconi’s cabinet on Aug. 12 that commits lawmakers to liberalizing the professions within a year. Some barriers, such as compulsory membership of professional groups and tests to join, would require changes to the constitution.

Important changes have been happening at the margins. Such transition would not be smooth though, as many entrenched forces will fight to preserve the status quo.