Thursday, 29 November 2018
Select Committee on Red Tape; Government Response to Report
I rise to take note of the government response to the Select Committee on Red Tape's seventh interim report, Effect of red tape on occupational licensing. I chair the Select Committee on Red Tape, which was established to inquire into and report on the effect of red tape on the economy and the community. In August, the committee issued an interim report on occupational licensing. This month the government issued its response to the report. The response said just two things: (1) that occupational licensing is a matter for state and territory governments and (2) that it had no role in the Council for the Australian Federation. Frankly, both are disingenuous. If there was a motivation for the government to do something about the ridiculous state of occupational licensing in this country, it has ample opportunity. What the response shows is a lack of commitment to red tape reduction, something that is abundantly clear in the committee's final report to be presented next week.
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's also a source of frustration for those who work across state boundaries or 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. The IPA said:
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 questioned whether occupational licensing confers any benefits to the community. They referenced a report from America which concluded 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.
Some have argued that occupational licensing is there to protect the safety of consumers and the public and to ensure a sufficient and reliable level of service quality. Some also say it signals that a person has the requisite training and skills to function competently and safely in an occupation. There are plenty of examples of occupational licensing in which it is difficult to find benefits, though. Tattooists are a case in point. The Australian Tatooists Guild says that licensing has had substantial adverse impacts on the previously self-regulated tattoo industry. It said that, when the tattoo industry was self-regulated, the general public was protected from backyard amateurs 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 have undermined the working existing structure of the profession and, by licensing amateurs, have created a public health risk.
And there is a legitimate question as to whether the rationale for occupational licensing promoting consistency of quality and public safety is relevant and necessary in the modern age. Consumers these days can inform themselves of the quality and safety of a provider or service in ways that were not previously available. They no longer have to rely on centrally mandated licensing in order to check up on a provider, a shop, cafe or even a specialist or tradesman. They can revert to crowdsourced websites like Yelp or Google reviews and the like. Online reputational platforms such as those used by Uber and Airbnb are examples of how quality and safety can work without licensing. Instead of occupational licensing, policymakers should focus on enabling consumers to make more informed decision-making through the technological provision of more and better information.
Australian governments have at times sought to increase consistency between the states and territories with respect to occupational licensing. However, that ceased in 2013. So, what are we to make of the government's response to the red tape committee report? Is it really a case of 'not my problem' from a Commonwealth perspective? Well, no, it's not. If the government is serious about red tape, it can hardly ignore the mountain of red tape associated with occupational licensing. It can't ignore the fact that it administers the Mutual Recognition Act. At a minimum, it has influence. While it's true that it's not involved in the Council for the Australian Federation, it is involved in the extensive COAG process, through which it has ample opportunity to pursue a deregulatory agenda on occupational licensing. It can challenge the states and territories to adopt the policy on occupational licensing with a presumption against licensing. It can challenge the states and territories to ensure that occupational licensing is based on specific measurable outcomes and consistent with best-practice models for occupations. It can foster and promote the expansion of automatic mutual recognition based on the objective of increasing labour force mobility, and it can stop pretending red tape on occupational licensing is not its problem and get serious about removing or reducing it.