A licence to be a barber? Ridiculous red tape holds Canada back

Matthew D. Mitchell is an economist at the Fraser Institute.

Should a refrigerator repairman in Alberta or an auto salesperson in British Columbia need a licence to do their jobs? How about bricklayers in New Brunswick and Nova Scotia?

Across Canada, for many jobs – many more than you might think – it’s illegal for workers to work without first obtaining a licence from government. To gain this licence, workers must pay fees, complete exams and finish hundreds or even thousands of hours of course material. But the case for occupational licensing is weak. And the costs, for workers and consumers, can be steep.

Fortunately, there’s a solution. By eliminating unnecessary licensure requirements, provincial governments can help create more opportunity for workers and greater prosperity for Canada.

First, let’s understand the problem.

A new index published by the Fraser Institute, the first of its kind for Canada, reveals the numbers. Researchers analyzed licensing statutes for 158 job categories across all 10 provinces and found that Alberta, despite its reputation for less government and more freedom, requires a licence for more jobs (73) than any other province, including appliance repairmen, barbers and motorcycle mechanics. Quebec (67) and Ontario (62) are close behind. At the other end of the spectrum, Prince Edward Island requires a licence for only 41 jobs, slightly fewer than Newfoundland and Labrador (43) and Manitoba (48).

To become a barber in Alberta, for example, you must finish 1,450 hours in an apprenticeship, spend 10 weeks in a classroom (which costs about $2,000), complete an exam (in both theory and practice) and pay about $300 in fees. If you can’t get a barber to let you apprentice with them, you must pay about $10,000 to obtain your apprentice hours at a beauty school. Barbers are licensed in four provinces – Alberta, Manitoba, Ontario and Nova Scotia. In the other six, people get their hair cut by unlicensed barbers every day, with no evidence they are worse off for it.

Licensing purportedly protects the public from incompetent or bad providers, but evidence refutes that claim. In reality, rather than protect consumers, licensure requirements protect incumbent businesses from competition.

According to an analysis of 45 studies assembled by yours truly, about half of the studies found no effects, mixed effects or unclear effects of licensure on the quality of goods and services. Only four studies (less than one in 10) found that licensing improves service quality, while 20 studies found that licensure leads to lower quality. This is probably because licensure tends to reduce employment in licensed fields and limit competition – and competition tends to promote quality.

Most of the studies are from the United States and Europe, but the findings are relevant for any developed economy, such as Canada’s. In the U.S., among the states, more stringent mortgage-broker licensing has been associated with more foreclosures and higher-interest-rate loans. This is most likely because licensing restricts the supply of mortgage brokers and limits competition in the industry, which makes it harder for homebuyers to obtain quality services. Also in the U.S., stricter nurse-practitioner licensing, which can reduce the number of available nurse practitioners, has been associated with less access to mental-health care and higher suicide rates. In the United Kingdom, tighter driver-instructor licensing has been correlated with worse student performance. And in Poland, relaxed licensure requirements for lawyers have been associated with fewer complaints from people who hire lawyers.

Moreover, a comprehensive U.S. study tracked 21 million transactions on a major online home-services platform and found that a professional’s licence made no difference to consumer satisfaction after accounting for reviews and prices. Instead, it found that (once again) stricter licensing rules are associated with less competition and higher prices.

For those seeking work in licensed professions, not all groups of workers are equally harmed. Certain ethnic minorities, non-native speakers, those with less education, and those who frequently move (such as military spouses) are more likely to be stymied by licensure. Licensure can also limit opportunities for self-employment and increase income inequality.

If licensure were really about protecting consumers, every jurisdiction would license certain high-risk services and low-risk services would be universally unlicensed. But that’s not the case. The new data published by the Fraser Institute identify 26 jobs that are licensed in only one province. This includes tile setters in Quebec, social workers in Ontario and estheticians – the folks who wax and exfoliate for a living – in Manitoba. Meanwhile, air-conditioner mechanics – hardly purveyors of a dangerous service – are licensed in six provinces. These patterns are consistent with research that finds licensing has more to do with the political organization of a profession’s insiders than any threat to public safety posed by unlicensed workers.

Which brings us back to the solution: Every province should eliminate unnecessary licensure requirements that make it more difficult for Canadians to make a living. Although, that’s easier said than done.

The costs of licensure are well-documented, but licensing regimes are notoriously difficult to eliminate. That’s because incumbent businesses that benefit from these barriers to competition are often well-organized and able to apply more pressure on politicians than consumers and aspiring workers harmed by licensure. In Alberta, there’s a Mechanical Contractors Association, which exists in part to lobby politicians, but no Customers of Mechanical Contractors Association.

Nevertheless, provincial governments have enacted some reforms. For example, the New West Partnership (between B.C., Alberta, Saskatchewan and Manitoba) allows licensed professionals in any one of these provinces to move to another and start work without having to obtain a local licence. Other provinces have achieved similar results through comparable agreements.

These are welcome steps, but they are workarounds, not fixes. A patchwork of side agreements still leaves it up to each pair of provinces to negotiate mutual recognition one deal at a time. And a licence holder who moves to a province that has not made an agreement with his or her old province is still out of luck. With everything seeming to cost more, and policy makers – including the Prime Minister and many premiers – emphasizing the need for Canada to become more productive, prosperous and connected, the last thing governments should do is make it more expensive for Canadians to work and make money.

Every province should eliminate licensure requirements for jobs that clearly don’t need them. They should start with the two dozen occupations that only one province thinks are dangerous enough to require a licence. This common-sense reform could help greatly improve the living standards of many Canadians, without costing governments a cent.

Prosperity’s Path