Occupational Licensing Testimony: Occupational licensing is a cost shift from employers to potential workers creating an expensive, state-sanctioned barrier to employment.

Occupational Licensing Testimony: Occupational licensing is a cost shift from employers to potential workers creating an expensive, state-sanctioned barrier to employment.

On August 23, 2016 TCCRI submitted written testimony before the House Licensing & Administrative Procedures Committee regarding occupational licenses.

Regarding the following interim charge:

Identify all occupations licensed by the state to determine if they are necessary for public safety and health. Determine if any criminal penalties associated with licensure are unnecessarily punitive, recommend methods to improve reciprocity with other states, and determine if a mandatory certification program could be used in lieu of mandatory licensure.

Introduction

An occupational license is a government-issued license required to pursue a particular occupation or engage in certain economic activity. Under occupational licensure, individuals are restricted from working in those occupations or engaging in those activities without permission from the state. Licensure typically requires numerous hours of training, experience, fees, and a state-administered examination. While licensure may be justified in professions affecting the health and safety of its customers (e.g. doctors), it is also frequently imposed on many professions where such concerns are absent (e.g. hair braiders and auctioneers). Violating licensing regulations or operating without a license often carries criminal and civil penalties.

Texas regulates or licenses more than one-third of its workforce, a rate higher than the national average.  More than 500 professional activities require a state-issued license before they may be legally performed in Texas.  According to a 2012 study conducted by the Institute for Justice, Texas licensure requirements for many low-income professions are the 17th most burdensome in the nation, typically requiring an average of $304 in fees, more than 300 days of training, and multiple examinations. In 2009, an interim report by the House Committee on Government Reform argued that occupational licensing programs create a monopoly for current licensed practitioners.  The Committee’s report recommended alternatives to state licensing and regulation (such as private accreditation), and also suggested that existing regulatory programs submit to Sunset Review.

The practice of state licensure is receiving legislative attention because a growing body of evidence and research reveals that occupational licensing schemes can have broad and negative effects on the job market. One study of national trends found that occupational licensing programs reduce the rate of job growth by 20 percent.  The same study estimated that the total economic cost of licensing regulations from reduced job growth, decreased competition, higher prices, and discouraged innovation and investment falls between $34.8 billion and $41.7 billion per year.

Furthermore, licensing is oftentimes a cost shift from employers to potential workers creating an expensive, state-sanctioned barrier to employment. For example, simply becoming a hair shampooer requires a license fee and two examinations. Texas is one of only five states to require a shampoo license. Moreover, the requirements for many licenses are not based on legitimate, demonstrable public safety concerns that are used to justify them in the first place.

The barriers to entry created by licensure should be paid particular attention by the Legislature, as it does barriers to entry in other contexts, such as people attempting to find employment upon workforce reentry post-incarceration. In the last several years, the legislature has passed numerous bills creating costly programs to assist with re-entry. For example, in the 2016-17 budget, the cities of Dallas and Houston each received $1,000,000 for reentry services pilot programs, in addition to permanent funding throughout the state. These are individuals who have committed a crime and less likely to be employed. In any case, many licensing schemes prevent people with criminal backgrounds from being employed in certain professions. The “ban the box” movement, which proposes to remove the requirement that applicants disclose past criminal history during the job application process, is an outward recognition of the problem created by these schemes, though policy-makers still need to work through whether banning the box actually might create a genuine public safety risk whereas licenses passed under the guise of public health and safety are nothing more than a burden imposed on those willing to seek gainful employment.

 

Click here to see the full testimony.