Professional Licensing Requirements Cost Texas Millions of Dollars and Thousands of Jobs Each Year

Licensing requirements impose enormous costs on the Texas economy, including costing the state 140,000 jobs each year.A new report published by the Institute for Justice shows that these barriers to entry for aspiring workers restrict competition in licensed occupations, limit economic opportunity and drive up costs for consumers.That results in 140,000 fewer jobs created each year, the report shows. And since licensing laws limit the pool of people who can work in a licensed occupation, those with a license can charge more for their services than they could in a more competitive market. As a result, licensing costs the state's economy $431.5 million in reduced economic output each year.But even that figure doesn't capture all of the economic costs of licensing. For example, it doesn't include the time and money people waste completing burdensome and unnecessary licensing requirements. Nor does it account for the lost potential of people who want to work in a given field but are blocked by licensing. These misallocated resources — a broader measure of the value lost from the economy due to licensing — cost the Texas economy a staggering $12.8 billion annually, the report calculates. Nationwide, each year occupational licensing laws destroy nearly 2 million jobs and cost the U.S. economy upwards of $184 billion.Although proponents claim licenses are necessary to protect the public, most licensing schemes arise not from aggrieved consumers but from aggressive lobbying campaigns launched by those already working in an occupation and their industry associations. Those same industry insiders often end up administering the schemes they lobbied to create. Indeed, almost three-quarters of Texas' 49 state licensing boards are dominated by members of the very occupations they are supposed to regulate. Allowing market participants to control the levers of government power lets them create bottlenecks to block potential competitors. This comes at a steep cost to the Texas economy and erodes individual liberty.Consider the Texas Board of Professional Geoscientists. In 2001, Texas created a license for geologists at the behest of existing geologists. To qualify for a license, new entrants to the occupation had to pass a rigorous exam and spend five years working for licensed geologists. But existing geologists were grandfathered into the license and exempted from those onerous new requirements. As a result, nearly 80 percent of Texas' licensed geologists practice their occupation without ever having passed the licensing exam. That undermines the claim made by licensed geologists that the exam is needed to ensure competence or public safety.After an extensive study, staffers at the Texas Sunset Advisory Commission correctly concluded the geoscientist board "does not help protect the public" and should be abolished. But after intense lobbying by licensed geologists, a majority of the Commission ignored its own staff and voted to recommend continuing the licensing board. The Texas Legislature will have the final say in 2019.Given the high costs and scant public benefits of some licensing, lawmakers can and should repeal needless licenses, replacing them, if necessary, with less restrictive regulations. Legislators should also scrutinize proposed licenses to see if they are truly necessary and retire licensing boards like the Texas Board of Professional Geoscientists that serve their private interests at the public's expense. When not ignoring its staff, the Texas Sunset Advisory Commission has saved taxpayers nearly $1 billion since it was created in 1977. By letting Texans earn a living instead of a license, legislators can create more jobs, expand economic opportunity and inject billions of dollars into the Texas economy.Arif Panju is the managing attorney of the Institute for Justice's Texas Office. He wrote this column for The Dallas Morning News. What's your view?Got an opinion about this issue? Send a letter to the editor, and you just might get published.  Continue reading...