Regulation of the professions in Canada

Backgrounder

December 11, 2007

---

The Professions in Canada

The professions in Canada account for a significant portion of the service economy, and the service sector accounts for as much as 70 per cent of the overall economy.

A report by the Organization for Economic Co-operation and Development (OECD) identified the lessening of regulation of the professions as one of five key ways to improve the future prosperity of Canada. According to the OECD, we are one of the countries with the heaviest regulatory regimes for the professions, which can affect the level of innovation and productivity.

Given the significance of the professions in Canada, it is worrisome that recent evidence shows that they comprise one of the economy’s least productive sectors.

A recent study by the Conference Board of Canada found that professional services are in the bottom 20 per cent for relative labour productivity. In addition, labour productivity in the professions in Canada is approximately half that of the professions in the United States.

The Study

The Bureau initiated this study to determine whether and to what extent selected professions have restrictions that limit competition in their own, or related markets.

The Bureau focussed on accountants, lawyers, optometrists, pharmacists and real estate agents since these are highly relevant services to the Canadian public, and because it has developed an expertise in these professions throughout the years. The study is based on an analysis of legislation, regulations, codes of practice and responses to a voluntary questionnaire the Bureau sent to professional associations, colleges and boards. After completing a draft of the study, the Bureau conducted a fact-checking exercise with the professions involved and provided them with the opportunity to provide a rationale for their various regulations.

The study includes extensive economic analysis of the interface between regulation and competition in the professions. It sets out principles for effective regulation and guidance on evaluating existing and proposed regulations of any regulated profession.

The Findings

The Bureau found numerous instances of regulation that may restrict competition more than necessary. Competition concerns arise when regulation exceeds legitimate public policy goals and limits competition, depriving consumers of the benefits of a free and open marketplace. Following are some examples:

• Rules about advertising often go beyond what is necessary to protect consumers from false or misleading information. Lawyers are restricted from producing comparative advertising on verifiable factors, such as price, and are also restricted on the size, style and content of ads. Unless law societies can satisfy themselves with compelling evidence that these restrictions prevent serious harm to the public and consumer interest, they should be removed.
• Consumers generally pay less for services when professionals compete on price. In real estate, Ontario legislation limits price competition. The Bureau recommends clients be able to choose the real estate services they want from a menu of offerings. Specifically, Ontario legislation dictates consumers pay either a flat fee or a percentage of the selling price. The Bureau recommends real estate regulators remove this restriction.
• Regulators should consider allowing some professionals to offer more services than they currently do. For example, some accountants in various parts of Canada are not allowed to provide certain services, such as independent audits. The Bureau recommends that regulators reconsider these restrictions so that all accountants qualified to provide these services may do so, to enhance competition.
• Professional education requirements can help protect consumers, but they also restrict the supply of professionals. Accreditation bodies should look at the current demand for professional services when, for example, deciding where and whether to open new educational institutions or to change education requirements. In optometry, an American council accredits all optometry programs in Canada, so it is uncertain whether the needs of the Canadian market are being considered in decision-making. The Bureau recommends regulators work together to address this.
• Consumers are well served when qualified professionals can work throughout Canada on the basis of their competencies. In most professions there are agreements in place to help professionals move across Canada, as well as national foreign accreditation programs. A notable exception is pharmacy -- there is no nationally agreed upon standard for assessing the qualifications of foreign trained pharmacists. The Bureau recommends that regulators remedy this, particularly given that all pharmacists do essentially the same work, no matter where they are in Canada.

Next Steps

The type of regulations the Bureau studied are present in most professions in Canada, and it is the Bureau's hope that regulators in many professions will subject their by-laws, rules, codes of conduct and regulations to an analysis similar to that in this study. The Bureau plans to assess in two years time how the five professions this study have done in implementing the recommendations.