Prime Minister Mark Carney at the 2026 NATO Leaders Summit on July 8 in Ankara, Turkey. (Credit: Serdar Ozsoy/Getty Images files)
Mark Carney has called Canada “the most European of non-European countries.” Is being more European good or bad? A new study suggests at least one area — occupational licensing — where Canadian politicians should learn from Europe and not require so many workers to get government permission to practice their professions. The study, published by Jonathan S. Hartley of Stanford University and Morris M. Kleiner of the University of Minnesota, shows occupational licensing is heavier in Canada than in much of Europe and that licensing is associated with a wide range of negative outcomes.
Of the 44 countries in the study, Canada has the 18th most occupational licensing, with 25.1 per cent of the labour force requiring a license. The most restrictive countries in the study are India (42.5 per cent) and South Africa (40.2 per cent), and only two European countries are in the top 10. Conversely, Denmark (14.0 per cent) and Sweden (15.3 per cent) have the least licensing, and nine of the 10 least restrictive countries are in Europe.
Comparing the rate of licensing with GDP statistics, governance indicators from the World Bank and other metrics, Hartley and Kleiner conclude that “countries with higher occupational licensing prevalence tend to exhibit lower levels of GDP per capita, larger informal sectors, and weaker governance outcomes, including lower regulatory quality, weaker rule of law, and reduced control of corruption.” Correlation is not causation, but the authors say their findings suggest occupational licensing may affect labour market and economic outcomes by reducing labour mobility, inflating prices, reducing economic dynamism and misallocating resources.
Consistent with basic economic theory, the study found licensing, by restricting supply, increases wages for the licensed workers by six to 19 per cent compared to unlicensed workers. Unfortunately, less supply and higher wages for licensed workers are equivalent to less choice and higher prices for consumers. Licensing also means less freedom of choice and lower incomes for workers, who are prohibited from practicing their chosen professions.
In fact, despite the wage premium they enjoy, even the licensed workers themselves do not necessarily benefit. Obtaining licenses takes time and is often costly. It also restricts their mobility. In Canada, licensed practical nurses, dental hygienists, and paramedics trained in one province are often forced to undergo retraining before the government will let them practice in another province. Do these professionals benefit from the heavy licensing requirements? Do taxpayers? And what about patients denied access to health care because of workforce shortages?
The harms of occupational licensing are clear: higher costs, barriers to entry that reduce competition and innovation, less freedom for workers and less choice for consumers. What are the benefits? The standard argument for licensing is that government regulation of certain professions is needed to protect consumers. But this claim that consumers need government protection does not pass the smell test.
Today in Canada, government proposes to regulate nearly out of existence the cars consumers want to buy and subsidize the cars they do not want to buy, operates a health care system with a median 48.6-week wait time for orthopaedic surgery, enforces $49.2-billion worth of artificial monopoly rights for agricultural products, and has outlawed plastic straws so that everyone is drinking out of paper straws that dissolve in their drinks. So, what is it that government actually knows about protecting consumers? Judging from its policies, nothing whatsoever.
The consumer protection argument also fails given how wide-ranging licensing is. In Nova Scotia, Ontario, Manitoba, Saskatchewan and Alberta, hairstylists are required to obtain a trade certification. In New Brunswick, anyone calling themselves a “hairstylist” or “hairdresser” must be licensed by the Cosmetology Association of New Brunswick. Do consumers really need government to protect them from incompetent hairstylists? And why on earth should government — as opposed to consumers themselves — decide who is a competent or incompetent hairstylist?
Even in other professions, the consumer protection argument fails. Milton Friedman famously argued in his 1962 book Capitalism and Freedom that occupational licensing for doctors: discouraged technological innovation in health care, encouraged organizational inefficiency, established incentives for people to get around licensing, reduced access to competent medical care, expanded practice by unlicensed suppliers who had no qualifications whatsoever, restricted competition and protected bad licensed doctors from being expelled from the profession. He concluded that “licensure has both reduced the quantity and quality of medical practice” and “forced the public to pay more for less satisfactory medical service.”
Occupational licensing hurts workers and consumers in a wide range of industries. For better health care, better hairstyles and higher GDP, Carney and other Canadian politicians should learn from Europe and Milton Friedman. We would all benefit from less government and less licensing.
Financial Post