The Impact of Introducing Mandatory Occupational Licensing

DOI: 10.4236/me.2015.612124   PDF   HTML   XML   2,799 Downloads   3,220 Views  

Abstract

Licensing imposes barriers to entry in an occupation, effectively restricting the supply of licensed workers in the occupation, and driving prices up. We evaluate the effects of introducing mandatory licensing in all construction trades in a Canadian province, Ontario. Evidence based on vacancies and wage premia suggests the construction trades are in short supply in Ontario. We estimate the deadweight loss for Ontario’s construction industry resulting from higher prices and decreased construction output. Using an elasticity of labour demand of 31%, we obtain a deadweight loss ranging between $19 million and $75 million, depending on projected wage increases ranging between 10% and 20%. We ignore here potential benefits resulting from the increased human capital of construction workers.

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Plesca, M. (2015) The Impact of Introducing Mandatory Occupational Licensing. Modern Economy, 6, 1309-1326. doi: 10.4236/me.2015.612124.

Conflicts of Interest

The authors declare no conflicts of interest.

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