Occupational entry regulations (OER) are legal requirements people need to meet to enter certain professions. They are intended to protect consumers by ensuring providers are of sufficient quality, but can also create costs by making it harder for new workers to enter a profession or for new firms to open and grow. 

This paper constructs a database of OER stringency across three states and a number of occupations to better understand these potential costs.

Key findings

• For services provided to consumers, OER tend to be more stringent in Australia compared with the average Organisation for Economic Co-operation and Development (OECD) country. For services provided to businesses, OER tend to be slightly less stringent. In most of the occupations considered, OER are significantly more restrictive in Australia compared with the least stringent OECD country.
• There are some differences in the stringency of OER across Australian states, with New South Wales tending to have the most stringent OER in a number of service industries.
• More stringent OER create barriers to entry and materially reduce business entry and exit rates.
• More stringent OER mean the most productive businesses in an industry grow more slowly, compared with less productive firms, which weighs on aggregate productivity growth.
• Stringent OER appear to contribute to skill shortages (though there could be other factors at play).