Thursday, 23 August 2018
Select Committee on Red Tape; Consideration
That the Senate take note of the document.
I chair the Select Committee on Red Tape, which was established in 2016 to inquiry into and report on the effect of red tape on the economy and community. It has previously presented interim reports on the sale, supply and taxation of alcohol, tobacco retailing, environmental assessment and approvals, pharmacy rules, health care and child care, and I now speak to the seventh interim report on the effect of red tape on occupational licensing in Australia.
In Australia, there are a large number of licensed occupations, from doctors to bartenders. Occupational licensing is a growth industry, despite the fact that almost everyone can find problems with it. With sometimes quite different approaches taken in the states and territories, it is also a source of frustration to those who work across state boundaries or those who move interstate. The Institute of Public Affairs described occupational licensing as a government-enabled cartel that inflates the wages and market share of licensed workers at the expense of non-licensed workers. I quote from their submission:
Occupational licensing creates a barrier to market entry. This reduces the number of people in licensed professions and increases the number of people in non-licensed professions. This drives up labour supply in the licensed professions, which pushes up wages, while it floods labour supply in unlicensed professions, which pushes down wages in those professions.
The IPA also questioned whether occupational licensing confers any benefits to the community. They referenced a report from the United States, which concluded that there is no evidence base for licensing improving the quality of public health or safety. They said:
Occupational licensing can actually reduce health and safety and quality outcomes by restricting competition. Less competitive markets contain businesses which are less responsive to the needs and preferences of consumers, and so they are less likely to deliver high-quality, low-cost products and services. Moreover, by raising prices occupational licensing reduces real income. This means that people economise on the use of licensed products and services, which can cause negative health outcomes.
The ACTU and Unions NSW said that occupational licensing is not red tape. In fact, they described it as a pejorative term but a crucial element in ensuring the quality of work undertaken in licensed industries and the safety of Australian workers and consumers. The Australian Chamber of Commerce and Industry said that there are two main reasons for occupational licensing: to protect the safety of consumer and the public, and to ensure a sufficient and reliable level of service quality. A third reason is to signal that a person has the requisite training and skills to function competently and safely in an occupation.
Some argued for even greater regulation. For example, the Hair & Beauty Industry Association insisted that hairdressing and beauty is not a low-risk industry and claimed that the industry is crying out for regulation. The Construction, Forestry, Maritime, Mining and Energy Union submitted that individual workers who perform work for licensed builders should also be licensed, including carpenters, brick layers and stonemasons. United Voice called for licensing of workers in the aged-care sector, which they claimed would protect elderly people from elder abuse. But, equally, some referred to situations where occupational licensing achieves nothing. The Shopping Centre Council of Australia, for example, argued that this was the case with licensing of commercial real estate agents. They cited the example of Scentre Group, which owns Westfield shopping centres, which is required to have certain of its staff licensed as real estate agents. This is supposedly to protect that company, yet it's a $20 billion company listed on the Australian Stock Exchange with the sole purpose of the ownership and management of commercial property. They also noted that the compliance costs of this licensing are about $1.6 million and that 13,800 hours of staff productivity just in Western Australia alone.
The Australian Tattooists Guild argued that licensing has had substantial adverse effects on the previously self-regulated tattoo industry. It said that, when the tattoo industry was self-regulated, the general public was protected from backyard operators due to their inability to gain any form of legitimacy within the trade. The state licensing regimes have added to bureaucracy and red tape, but they've also undermined the working existing structure of the profession. The guild said that, by licensing amateurs, the regimes have created a public health risk.
The IPA expressed the view that the historical rationale for occupational licensing—consistency of equality and public safety—is less relevant and less necessary in the modern age. It noted that there are a range of options by which consumers can inform themselves of the quality and safety of a provider of service that mitigate the information asymmetry—that is, the difference in the knowledge of the provider and the knowledge of the lay consumer—in providing a good or service. Consumers in this day and age don't have to rely on centrally mandated licensing in order to check up on a provider, a shop, a cafe, or even a specialist or tradesman; they can revert to crowdsourced websites like Yelp, or Google reviews and the like. The IPA argued that, as an alternative to occupational licensing, policymakers should focus on enabling consumers to make more informed decision-making through the technological provision of 'more and better information'. A similar submission specifically suggested the online reputational platforms such as those used by Uber and Airbnb.
Australian governments have, at times, sought to increase consistency between the states and territories with respect to occupational licensing; however, the committee notes that this ceased in 2013, with the abandonment of the National Occupational Licensing Scheme, because the states and territories were unable to agree on nationally uniform requirements. The IPA submission notes that the end result was 'complex, expansive and duplicative'. The National Electrical and Communications Association noted the difficulties encountered by businesses operating in more than one jurisdiction that were caused by licensing schemes. Small- to medium-sized businesses bear a disproportionate share of the compliance costs.
The committee notes that, notwithstanding some progress in that direction, the full benefits of mutual recognition are a long way from being obtained. The committee recommends the expansion of automatic mutual recognition to achieve greater labour-force mobility. This will facilitate further GDP growth, which means more services, more jobs and higher wages. Four specific recommendations were made by the committee. First, it recommends that the Council for the Australian Federation, in close consultation with relevant stakeholders, renews its efforts toward occupational licensing reform, with a starting presumption against licensing. Subject to the licensing being retained, the committee recommends that occupational licensing be based on specific, measurable outcomes and the identification of best practice models for occupations throughout Australia. It recommends the expansion of automatic mutual recognition based on the objective of increasing labour-force mobility. And it recommends that the Council for the Australian Federation commission a study into the health and safety benefits of occupational licensing to strengthen efforts towards reform. I commend the report to the Senate and seek leave to continue my remarks.
Leave granted; debate adjourned.