Occupational licensing: NZ Edition

By Eric Crampton 11/04/2014

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.