The high cost of closed professions

About 70 closed-shop professions create high prices, unemployment and low quality for Greek consumers, according to a study by the Center for Economic Planning and Research (KEPE) and Copenhagen Economics. According to the study, the deregulation of just 13 such professions in the services sector in the long-term would boost Greece’s gross domestic product (GDP) by half a percentage point, would lift real wages by 0.4 percent and increase consumption by 0.3 percent and trim the cost of services by up to 10.5 percent. The total cost of keeping these particular professions protected and foregoing the above benefits is about -4 billion, or -1,000 for each Greek household annually. This is also the estimation of the European Commission for the unnecessary cost of red tape. The KEPE report is also reassuring regarding the quality of services if the closed-shop professions are deregulated, in line with an EU draft directive. «This country is not among the member states likely to comparatively sustain the heaviest impact from such a development. This is because, compared to other EU members, neither the standard of services provided is among the highest nor the efficiency of the system for protecting public interest currently in force is the highest,» the study says. Copenhagen Economics, which produced the comparative report for EU member states, estimates that besides the other benefits, deregulation of the closed-shop professions in Greece would also boost return on capital by 0.9 percent (against 1.1 percent in the 25 EU members) and employment by 0.2 percent (0.3 percent) in the economy as a whole. In the particular services categories, employment would rise 0.5 percent and value added 1.1 percent. Austria, the UK and the Netherlands are projected to realize the highest benefits among member states. A recent report by the Foundation for Economic and Industrial Research (IOBE) estimated that haulage rates would drop by 1.5-2.5 percent annually if the industry was deregulated, while employment would rise by 2-4 percent and productivity by 1.5-2.5 percent. The Commission has intervened on numerous instances, referring member states to the European Court of Justice in cases where citizens of member states faced barriers of entry into professions in countries other than their own, whether closed-shop or otherwise.