Keeping the riff-raff’s snouts out of the ‘higher’ professions’ trough

Herewith, a few days late, is my column in Ross Gittins’ place from last weekend. There are a couple of things I would have liked to have covered in the column but didn’t for lack of time.  The first is that I suspect the biggest payoff in the area of law is not liberalisation of the profession, though there’s a strong case for that, but more sensible legal procedure – which is so stupendously wasteful it’s hard to even begin. I decided mentioning that was really introducing another topic (which doesn’t have a clear counterpart in other professions and so would have also confused the reader). The other thing that should be acknowledged – but which ended up not getting space to go in – is that in the scheme of things – relative to other similar organisations and given its budget – VCEC seems in my relatively limited experience to be a good organisation. As readers will know, I have lots of problems with the limitations of our current way of doing regulation review, and I have those same concerns with VCEC, but judged amongst its peers (and that includes around the world), it seems to me to do as good a job as anyone. Anyway, on with the column:

Late last year I attended lengthy meetings with economic agencies that were looking at the broad sweep of economic reform – the Victorian Competition and Efficiency Commission (VCEC) and a visiting OECD delegation.

We’ve come a long way, with few sectors remaining untouched by reform. But somehow I was struck by what reformers left out of their vision as much as what they left in.

Both bodies were exercised about labour market flexibility. That’s as it should be. It’s a major issue. If we want to improve our lives by maximising our productivity, we should sweep away arbitrary restrictions on the way we work. And collective bargaining industry by industry – or ”pattern bargaining” – imposes the kind of economic rigidities that helped produce three crippling recessions in a decade-and-a-half from the mid-’70s on.

But neither the Organisation for Economic Co-operation and Development nor VCEC had anything to say about other crucial rigidities and absurdities of our labour market. You see, gentle reader, unions of blue collar and clerical workers aren’t the only ones seeking to prey upon consumers and the community by monopolising their labour and imposing arbitrary restrictions on what people can and cannot be asked to do. Ask the Royal College of Surgeons or the Law Society.

Imagine the Maritime Union of Australia – the wharfies union – deciding who was ”qualified” to work on the docks. Yet that has been the model by which we have regulated professional labour in the highest status professions – particularly medicine and law – since they first ”professionalised” in the 19th century. After a generation of reform, a little has changed, but it is precious little.

Lawyers used to enjoy a monopoly over property conveyancing. This entitled them to impose their own (hefty) profit margins on the cost of the clerical assistants doing the work. Today, despite the past objections and dire predictions of law societies, you can choose between a lawyer and a specialist conveyancing firm charging about half the price.

That is pretty much where liberalisation stopped with the law. Yet the formula we followed with conveyancers could be adopted much more widely. Why shouldn’t an experienced social worker be able to qualify as a family lawyer by completing a special family law diploma and articles in a family law practice? Or, to take an example Lindsay Tanner suggested to me, why not let a retired policeman with the inclination undergo a similar transition and then defend and mentor juveniles accused of wrongdoing?

There’s more than a whiff of class snobbery in this. The kind of career path I have suggested is essentially how economic reform has restructured training for tradespeople and some less well paid, lower status professions. Thus Certificates I, II, III and IV break down the ”competencies” required to become a fully qualified tradesperson and so let people work their way up towards full, generalised qualifications – for instance a carpenter or electrician – by learning and demonstrating their mastery of the various competencies and practising them on the job.

And in the caring professions such as nursing and early childcare a similar structure lets people qualify to assist in activities such as cancer, wound care, palliative care, etc. as one works one’s way to higher, more general qualifications. We’re making some – though limited – progress in teaching with Teach for Australia reconfiguring teacher training to encourage the best and brightest university graduates to spend a few years teaching.

But while we anathematise arbitrary demarcation of jobs on the shop floor and waterfront and put huge effort into making training more flexible and competency-based, we leave those at the top of the most prestigious professions to largely regulate themselves and determine who is qualified to compete with them. After all, they’re sound chaps.

And the result? Exactly what you would expect. There is next to no innovation. They just cannot see the urgency. The training they had never did them any harm. And so, just as women complain about the glass ceiling, so there is a platinum ceiling keeping out the riff raff, and preventing flexible career transitions to the top of the high-status professions. A palliative care nurse will not get much credit for their learning and experience if they want to become a palliative care doctor.

Of course an economist like me is supposed to be attracted to the way more felicitous training paths can cut costs and increase efficiency. Avoiding the need to teach advanced company law to a family lawyer would ”free up resources for more highly valued uses” (as we say in the trade). But that’s not really what excites me about these proposals. A policeman with a policing perspective and desire to help young offenders, or a social worker keen to practise family law would be more use to their clients than a lawyer wondering if corporate law might net them another grand or two a day. Those practitioners would be happier people as well if the new pathway let them follow their passion.

Once economic reform involved simply sweeping away the detritus of a century’s economic populism and ad hoc political favouritism. So we removed restrictions on shopping hours and entry into industries and we tore down our tariff walls, doing our economy the world of good. But apart from some smaller fry – such as taxis and pharmacies where we still restrict entry for no sensible reason – that kind of stroke of the pen reform is largely behind us.

If we are to keep up the momentum on reform it will be by extending our gaze towards those parts of our economy and society we have imagined to be given – and above it all. And beyond stroke of the pen reform, successful policy will not just lower costs. It will improve the quality of our lives by making our social and economic institutions more fit for their purpose. More and more economic reform will not just be about making us richer, but also about directly improving our lives.

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Patrick
Patrick
9 years ago

Agree extremely strongly. Hear hear!

Paul Frijters
Paul Frijters
9 years ago

yes, hear hear.
This kind of reform you aim for here has been advocated many times. The question has always been which political party will dare to take on the professions. Not just here, but elsewhere (think of Italy right now), the political costs are high. The best way to go is probably to institutionalise the opening up of the crucial parts (granting of government monopolies for lucrative services)

JB Cairns
JB Cairns
9 years ago

Yes true labour market reform

john
john
9 years ago

hear hear.

Professional accreditation/standards groups are usually structurally ‘pier review academies’. These entities have marked a anti-innovation effect , after all they exist to maintain standards and are dominated by the well established , older and cluby.
The post 1970s decline in major new science, relative to the pre ww2 period is well known and there has been a similar decline in the arts .

From
Fleeting Youth, Fading Creativity. Wall Street Journal FEBRUARY 19, 2010

Another possible factor in the decline of successful young scientists is the institutions and funding mechanisms that discourage the sort of risky research that produces major innovations. Tyler Cowen, an economist at George Mason University who has studied the funding bodies that support the arts, such as the National Endowment for the Arts, notes that these institutions frequently become more risk-averse over time. “They become more beholden to special interests and fall under greater political scrutiny,” he says. The end result is an increasing unwillingness to support projects that might fail. Mr. Cowen notes, for instance, that the NEA has gone from directly funding “whomever they wanted, with very little scrutiny”—this led to many success and scandals, such as the furor over Robert Mapplethorpe—to a recent focus on Shakespeare, classic jazz and the teaching of poetry in high school. While such programs are laudable, they’re also unlikely to produce major cultural innovations.

conrad
conrad
9 years ago

“A palliative care nurse will not get much credit for their learning and experience if they want to become a palliative care doctor”

Actually, they will gain some — that was the idea of graduate entry medicine. If you did a degree before hand and you knew a lot of the basic stuff (which presumably palliative care nurses would), you could do a course that goes for around 4 years instead of 6. That’s not a perfect fit, but it’s not terrible. It would also be interesting to know whether this sort of experience counts when they end up specializing in something — i.e., whether they are more likely to get the rather limited number of positions. Essentially the same thing happens now with graduate entry courses also (e.g., optemetry at most places), where you can do a cut-down course if you have an initial degree.

Apart from that example, most universities now allow various subject trading across degrees/institutes, and there are in fact various conversion courses in some areas for people in one type of profession that want to move into another very related one. So I think it’s getting better slowly.

Pedro
Pedro
9 years ago

I agree about the barriers to entry and licensing problems. Though the legal profession is large enough to have plenty of competition. Conveyancing fees fell in Qld when the conveyancing scales were abolished. We still don’t have licensed conveyancers, but a few floors below me is a bunch of clerks in a conveyancing factory that will cheaply pay almost no attention to your conveyance.

I’m not so sure that litigation procedure can be much changed without problems, but I’m not a court lawyer. There are low cost tribunals for consumers and small matters, but they can be pretty ordinary and impose a different, but still significant, cost.

Within a short time after you open up medical licensing somebody will appear on the tele at 6.30 with a picture of their dead child and a story about how the relaxation of the rules was the problem.

Tom N.
Tom N.
9 years ago

Actually, various economic agencies have argued for addressing barriers in the professions,when given the chance. Check out the National Competition Council’s 1997-98 Annual Report, for instance.

Chris Plummer
Chris Plummer
9 years ago

Bashing lawyers is always a winner but it is disappointing when someone of the Dr Gruen’s education & experience is prepared to perpetuate the myth of the cosy legal club. While there may still be a club it is far from cosy.The club’s membership is now also very different. Women could not be lawyers in all Australian states until 1923 & only 2% of practising lawyers were female in 1947. Now more than half of the law students are female & shortly 50% of practising lawyers will be women.

The facts are that we are now more overlawyered than most of the USA. We have more than 30 law schools ,40000 lawyers(around 1 for every 350 adults) & almost 30000 law students. With just about anyone who can fill out an application form able to find a law course in which to enroll why on earth would we want to draft a ‘retired policeman’ or a ‘social worker’ to further swell the ranks of criminal & family lawyers.As the doctor would also know today the average lawyer’s income is nothing to get excited about.

He is also mistaken about conveyancing.When lawyers had a monopoly the government set the fees.Now clients who are driven by price alone gravitate to the cheapest price which may be offered by a lawyer or a conveyancer.Sometimes, if things go wrong,they discover that buying legal services is not like buying a pair of shoes & that ,as with most things ,you get what you pay for.

Of course its all a question of degree but if ever I’m in need of a brain surgeon I won’t be shopping around for quotes & I doubt that I’d be interested in consulting a retired vet who decided to take up neurosurgery.

Patrick
Patrick
9 years ago

Though the legal profession is large enough to have plenty of competition.

No it isn’t – couldn’t a software program auto-generate contracts 80% of the time? Or couldn’t an Indian do it? If you pay a big law firm squillions to do it chances are that an Indian will have first crack at it anyway – why shouldn’t you be able to do without the law firm’s comforting ‘review’ and reception?

The big issue is technology. Technology will compete viciously with both of these coddled and partly-addled professions, if we let it.

Both professions are in desperate need of substantive deregulation which doesn’t stymie technology and outsourcing based competition.

PSC
PSC
9 years ago

Hear hear! I absolutely agree with the career path comment. Our universities are still in the 1900’s when it comes to the award of “Batchelor’s Degrees” etc. A “Cert. I/II/III/IV” structure, representing 4 years education would be much more appropriate, with the understanding that it’s reasonably expected that students may take a couple of years off after Cert I/II and then come back for the last couple of years. Or not!

And if the student is happier working – give them credit where it’s due, call them a “Year 2 graduate”, rather than a “dropout”!

Paul Frijters
Paul Frijters
9 years ago

nick,

the crucial question is whether a hard media slog by the NCC or PC would have enough weight to overcome the considerable momentum on the side of the professions. In this regard, I completely agree with Pedro’s assessment that “Within a short time after you open up medical licensing somebody will appear on the tele at 6.30 with a picture of their dead child and a story about how the relaxation of the rules was the problem”.

Tom N.
Tom N.
9 years ago

Fair questions Nick but alas I don’t have the time at present for a comprehensive response. I can say that the NCC, as I recall, included comments on “doctored salaries” in a number of speeches by its then president, Graeme Samuel, back in the late 90s – in addition to its Annual Reporting.

I can not comment on the PC’s or OPBR’s activities in these areas, but I do also recall the old BRRU and ORR having a few cracks – though not the serious public campaign you are advocating.

One problem may be that reviews of the legal profession tend to get sent to legal bodies; not economic bodies. Likewise, medical specialist workforce issues were for some time handled by dedicated bodies in the health portfolio, IIRC. In addition, our federal parliament traditionally contains many doctors and lawyers, and one senses that this may also diminish the appetite for reform to these ‘noble’ professions.

paul walter
paul walter
9 years ago

No, Nicholas. Not really. We are not cattle.

Paul Frijters
Paul Frijters
9 years ago

nick,

you paint an optimistic picture of a ‘political litmus test’ of seriousness that outsiders can strive to mould the debate into. I certainly would want to see it happen with the professions.
I guess the issue is whether it would be enough to have one institution gunning for it and whether you need to be lucky with the economic and political cycle. Given the precarious majority, an argument could be made that vested interests need only convince 1 MP to scupper a reform no matter what. Also, given the generous budget conditions, the pressure to find efficiencies is rather low.

I am not being negative here, rather I am openly wondering what it would take. There is little doubt that in terms of underlying wishes, the PC, the NCC and several other ‘economic’ organisations would love to see the professions being taken on. Coordination and a belief that the time is indeed ripe would seem to be needed.

Pedro
Pedro
9 years ago

NG, yes, the more info for clients the better. And I agree that the shroud-waving can be overcome, but you need good pollies to do it. Dead kids are harder publicity to counter than sacked Ford employees. I think it is a slow thing starting with more power to RNs to do simple procedures. Shove that thin edge where it only hurts a little bit.

Patrick, my anecdotal gut feeling is that, with some exceptions, most of the high fees are for documents and advice that are not so simple. In simple areas of contract preparation fees are already quite low for the amount of time it takes to do things. I think conveyancing could be made pretty much painless with a bit of regulatory effort. IME there are two ways that firms get to gouge:

1 advice to institutions from big firms about big matters, and then in part the client is paying for the high level of insurance and capital backing behind the advice;

2 where there is a third party payer, so where you are reimbursing the bank for their legal fees you really need the bank to lean on their lawyers or you will get stung.

Sole practitioners, which is a lot of the consumer front end, tend to make a relatively low income, I think I last heard that they average $80k here in Qld.

Most of the work I do is pretty novel and requires a large increment of business experience in my area of practice. I’m pretty sure that neither a computer nor a call centre equivalent could do it.

The technology makes me a lot more efficient than I was 20 years ago. Agree on deregulation as I don’t think it is a threat because I already think there is a high level of competition.

Tom N.
Tom N.
9 years ago

Paul Walter, you claim “not to be cattle” so presumably you are a member of one of the “noble” professions mentioned in Nick’s post.

Would you like to expand on the way in which you and your colleagues are less like cattle than dock hands, factory workers or farmers, and indicate how these uncattle-like characteristics diminish the case for competition reform w.r.t your occupation, which presumably is the point of your comment.

Sean
Sean
9 years ago

They are called Gentrified trade unions in the UK. Restrict access and maintain privilege.

When the NHS was formed that majority of GPs didn’t want to join, thus as Lord George said ‘we’ll buy them all if we have to’, thus in order to get support a cartel type situation was set up such that the medical profession can restrict supply as to maintain a centrally agreed wage.

Similar happens in the legal profession. I can only imagine how much better a case a bunch of Maths/Physics PhDs may have been able to put against exotic homeloan options traders who used their own Maths/Physics wizs to create trading strategies. Yet to meet a lawyer proficient enough in calculus to discuss general theory let alone criticise the work of those at the cutting edge of the field seems highly unlikely.

Patrick
Patrick
9 years ago

I wouldn’t doubt it for a second. Professional services could be far more innovative if they felt the existential fear of genuine competition. At the moment innovation for the most part is driven by inherent competitiveness and of course self-interest (to make more money!). It is almost never driven by actually trying to survive or by new entrants with radical ideas.
And the combination of innovation and lower costs could only help their clients prosper.