TITLE:
The Impact of Introducing Mandatory Occupational Licensing
AUTHORS:
Miana Plesca
KEYWORDS:
Occupation Licensing, Occupation Shortage, Deadweight Loss
JOURNAL NAME:
Modern Economy,
Vol.6 No.12,
December
29,
2015
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.