The Regulation of Occupations

An essential task of democratic societies is to establish a proper balance between freedom and order. From this general principle of democratic governments, we examine the regulation of occupations by the state. The issue of regulation involves the role of government in reconciling the special interests of the members of the occupation with the general concerns of the public. These special interest groups compete with one another in attempting to bring public policy into conformity with their own objectives. For political leaders, a key question is how to meet the demands of organized special interests without sacrificing the ‘welfare of the people as a whole’ (Council of State Governments 1952). The issue of occupational regulation has been of academic interest from Adam Smith to Milton Friedman (Friedman 1962; Smith 1937). In Western democracies, the number of workers who are required to have a licence in order to work has grown substantially. For example, in the United States, occupational licensing has grown from approximately 4 per cent of the workforce in the early 1950s to about 29 per cent in 2006 (Kleiner and Krueger 2010, this volume). Adding in individuals whose occupation involves some kind of governmental certification or eventual licensing brings the total to 38 per cent of the US workforce (Kleiner and Krueger 2009). In the United Kingdom, the percentage of the workforce that requires a government licence in order to work has doubled in the past 12 years to more than 13 per cent (Humphris et al. 2010). Examining the reasons for the growth and its economic implications is an important issue for understanding and analysing labour market institutions. As the US Council of State Governments (1952) pointed out in their volume on occupational licensing legislation, the general rationale for the benefits of regulation of occupations can be argued as follows. First, with increasing impersonalized relationships that are more likely in urbanized modern societies, only government can adequately determine the level of knowledge and competence to be allowed into the occupation. Second, with occupational specialization, only society can determine the competent and