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Varieties of (Regulatory) Capitalism: Occupational Licensing in the UK

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Varieties of (Regulatory) Capitalism: Occupational Licensing in the UK Varieties of (regulatory) capitalism: Occupational licensing in the UK, Israel, Germany and Sweden *Draft – please do not circulate without author's permission **All feedback is welcome Yair Osheroff1, David Levi-Faur 4th ICPP, panel: Public policy and the policy state, June, 2019 Abstract Since the introduction of the concept of Varieties of Capitalism (henceforth: VoC) (Sosckie and Hall, 2001), theoretical and empirical work had discussed it in different contexts and with regard to specific issues in political economy. This study examines Occupational Licensing (OL) by using the framework VoC suggests. While explanations of OL sought mainly in the microeconomic aspects of the phenomenon, its macroeconomic aspects and institutional settings were left underexplored. This study addresses this caveat, and aim to understand OL in light of VoC. For that aim we conduct a comparative research of UK, Israel, Germany and Sweden – four countries that differ in the number of OL regimes under their jurisdiction and in their restrictiveness. By comparing institutions of political economy of the states, this work examines what factors in the level of the state explain the differences in the degree of OL between UK, Israel, Germany and Sweden. According to the framework of VoC, we focus on three key factors that complement and correlate with OL: vocational education, labor unions, and privatization. The study is expected to advance the understanding of the broader context of the political economy of OL. Moreover, it would contribute to the scope and comprehension of the concept of VoC. In particular it would shed light on the place of OL as an institution within the broad institutional settings of political economy. Introduction The Concept of Varieties of Capitalism (henceforth: VoC) is an important and central concept in the institutional study of political economy. The framework it lays allow understanding social phenomenon in their broader political economy contexts, pertain them with other institutions in their system, and compare between them and counterparts in other systems. Since its introduction, 1 The department of political science, The Hebrew University of Jerusalem, [email protected] 1 theoretical and empirical works had discussed VoC in different contexts and with regard to specific issues in political economy. Nevertheless, the place of regulatory governance in the framework of VoC is yet underexplored. Scholars of VoC have given only little attention to regulation as part of the institutional infrastructure in the political economy environment (for example see: Phillips, 2008). Studies that follows VoC mainly refer to specific subjects of regulation as regulations of antitrust (Tate, 2001) and trade unions (Thelen, 2001), consider them as given in the institutional settings, while not discerning their varying place within it. Similarly, scholars of regulatory governance have given only little attention to the concept of VoC in their efforts to understand regulation; while some studies had applied the main idea of VoC that economies vary in their settings to regulatory governance (Levi-faur, 2006; Thatcher, 2002)), and only few studies addressed the framework in explaining specific regulatory regimes (Aguilera et al., 2013). This study address this underexplored intersection of VoC and regulatory governance. It focuses on occupational licensing (OL), a state regulation that restricts the practice of occupation by a demand for license which its obtainment is contingent on meeting licensing requirements (Kleiner, 2015). OL reflects pertinently the mentioned caveat. Literature of VoC overlooks OL, despite it being an important and extensive regulation in the labor market which plausibly interact with other institutions VoC highlights, and varying between economies. Likewise, the research of OL seeks explanations to the phenomenon almost exclusively in its microeconomic aspects, while disregarding broader context of political economy, let alone the context of VoC. To examine OL in light of VoC, this study conducts a comparative research between the degree of OL in the health sectors of UK, Israel, Germany and Sweden. The degree of OL is highest for the UK, then Israel, lower for Germany, and Sweden is with lowest degree. By comparing institutions of political economy of the states, this work examine what institutional factors explain the differences in the degree of OL in the health sectors between UK, Israel, Germany and Sweden. Understanding the place of OL in the institutional setting of the political economy of the state, may contribute to the scope and comprehension of the concept of VoC. It may shed light on further aspects to the varieties of economies, in particular regulatory aspects. Evidently, it may also advance our understanding of the evolvement of OL in broader state and sector contexts. 2 The paper begins with presenting the measurement to compare OL between the states, and the results it yields. It follows with presenting the framework VoC suggest, and modifying it to OL while illuminating the relevant aspects of the institutional context. It further compares and analyzes selected occupations in the health sector to examine the analytical framework. Variance in OL between the states How to measure OL To compare between the OL of the states, we first need to determine how to measure OL for this purpose. In this work we highlight the evolvement of OL as part of a state's institutional settings, thus its measurement should reflect its broad institutional context. The most common method to measure OL in the current research of OL is to survey the share of the workforce that holds a license to engage in their jobs (Kleiner & Krueger, 2013; Koumenta & Pagliero, 2016). It is mostly common in researchers of economic perspective that examine its effect on market functionality as reflected in prices and productivity. This dimension of OL is determined significantly by the market size of the licensed occupations, and it sheds light on the impact of the institutions of OL, rather on their evolvement of institutions, and therefore it is less relevant for this work. Another method to measure OL is to survey what OL is applied for (US Office of Economic Policy, et al. 2015; Friedman, 1965; Zhou, 1993). Often, for this purpose the research of OL uses the number of licensed occupations as an indication, so a higher number of licensed occupations, reflect a higher degree of OL. However, such indication might come insufficient, or even misleading. In the context of licensing, licensed occupations are composed of tasks, that engaging with them is restricted (Abbott, 1988; Osheroff and Kleiner, 2018). Therefore, the degree of OL is more accurately evaluated by the tasks it restricts, rather than the number of occupations. Moreover, a more nuanced observation of the degree of OL, would also include an examination of the type of tasks, that way it would tell more than its mere magnitude. OL in the health sector s Even though this study aims to understand OL in the broad state level, it focuses on a specific sector. It draws on the understanding that there are significant differences between sectors within states (Levi-faur, 2006), yet they are still nested in the broad state system of political economy. In addition, narrowing the comparison to a sector, provides more control for the comparison. Focusing on the health sector reinforces the control – relative to other sectors, health sectors in 3 developed economies are similar in terms of the scope and size of their industry, in their development, and in the occupations they include. The health sector is also a proper case study of OL because it is a central sector, abundant with licensed occupations. To measure the degree of OL in the states' health sector, we include all health occupations that are licensed in the states, according to the broad International Standard Classification of Occupations of 2008 (ISCO-08). As mentioned, counting occupations might not be sufficient to understand the scope of OL. However, for the most part and for the main tasks, health occupations2 in different states share similar tasks. An evident for this similarity between occupations, can be found in that tasks that are restricted by licensing in one state but not in another, are practiced by a similar occupation in both of them. A survey of the licensed occupations shows a remarkable variance (see a list of the occupations and their licensing in the appendix). Of 31 occupations that are licensed in at least one of the state, UK is the state with the most licensed occupations with 24, Israel follows with 20, Germany with 12, and the state with least licensed occupations is Sweden with 9. Interestingly, a similar variance is shown also in OL in general in the states – in the UK there are around3 150 licensed, in Israel 135, in Germany 90, and in Sweden 50 (Humphris & Koumenta, 2015) (see table 1). Table 1 – number of licensed occupations Licensed occupations Licensed occupations in the health sector in general UK 24 ~150 Israel 20 ~135 Germany 12 ~90 Sweden 9 ~50 Total licensed 30 occupations 2 Some occupations are entitled differently between states, but if their tasks are similar I regard them as similar. 3 There are no accurate surveys of the licensed occupations in these states. 4 To characterize the variance in licensed occupations more in detail, we divide occupations to four groups that differ in the type of tasks and their centrality in the health industry: core occupations, assistance, paramedical, and technical. The division shows that in the core occupations, there is a general similarity between the states, with a gap of only 3 out of 11 occupations from the state with the most licensed occupations, the UK with 10, to the state with the least, Germany with 7. In the assistance occupations there is more salient gap, with only 1 and 0 licensed occupations out of 5 occupations in Germany and Sweden as oppose to 3 in the UK and Israel.
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