Texas: Among the Worst States for Occupational Licensing

Estimated Time to Read: 5 minutes

Occupational licensing, initially intended to protect public health and safety, has grown into one of the most significant barriers to employment in the United States. Despite its reputation for economic freedom and business-friendly policies, Texas finds itself among the five worst states in the country for occupational licensing, according to the Archbridge Institute’s 2024 State Occupational Licensing Index.

The Scope of Occupational Licensing in Texas

Occupational licensing requires workers in certain professions to obtain permission from the government before they can practice their trade. This permission often involves completing specific educational requirements, passing exams, and paying fees. While licensing was initially limited to professions where public safety is directly at risk, such as physicians and engineers, its reach has expanded significantly.

In Texas, licensing is now required for a wide array of professions, including barbers, interior designers, and even animal control officers. According to a report by the Archbridge Institute, Texas ranks poorly in national comparisons due to the sheer number and burden of its licensing requirements.

2024 State Occupational Licensing Index, Archbridge Institute

Texas licenses 38 (37.25%) of the 102 low-to-moderate-income occupations studied by the Institute for Justice, with many of these licenses requiring costly and time-consuming processes that act as barriers to entry. Moreover, according to the Cato Institute’s 2023 Personal and Economic Freedom Index, Texas ranks last for occupational freedom.

Economic Impact of Licensing

The economic consequences of occupational licensing are profound. Research consistently shows that licensing raises the wages of licensed workers by limiting competition. For example, in Texas, barber licensing inflates wages by up to 22%, but this increase in wages comes at a cost to consumers, who pay higher prices for services, and to potential workers, who are deterred from entering the profession due to the barriers created by licensing requirements.

Moreover, the restrictions imposed by occupational licensing result in significant job losses. A study by Kleiner and Vorotnikov estimates that licensing in the United States has resulted in the loss of nearly 2 million jobs nationally. In Texas alone, stringent licensing laws are estimated to have cost the state more than 140,000 jobs and reduced economic output by $431.5 million annually.

The Burden on Lower-Income Workers

Occupational licensing disproportionately affects lower-income workers, who often lack the resources to meet the educational and financial requirements of these licenses. This leads to a reduction in economic mobility and increases income inequality. While licensing may increase wages for higher earners, the benefits are much smaller for lower-income workers. The requirements also prevent many from pursuing careers in licensed professions, forcing them into lower-paying jobs that do not require a license.

Recent Reforms and Ongoing Challenges

Texas has made some progress in recent years toward reforming its occupational licensing regime. The Texas Legislature and the Texas Department of Licensing and Regulation (TDLR) have reduced the number of required licenses and lowered educational requirements for others. Notably, the 85th Texas Legislature eliminated more than 15,000 licensing requirements, and in 2021, the state removed the need for licenses in several professions, including polygraph examiners and event coordinators.

Despite these reforms, Texas continues to struggle with the overreach of occupational licensing. The state’s licensing requirements remain among the most burdensome in the nation, limiting competition and hindering economic growth. According to the Reason Foundation, Texas’s licensing regime is one of the most restrictive, with high barriers to entry and little evidence that these regulations effectively improve service quality.

The Case for Further Reform

Given the significant economic and social costs of occupational licensing, further reform is necessary. Texas should continue to review and eliminate unnecessary licenses, particularly those that do not demonstrably protect public health and safety. Policymakers should consider adopting a “Right to Earn a Living Act,” as seen in other states, which mandates the least restrictive form of regulation necessary to achieve public protection goals.

Moreover, Texas should explore reciprocity agreements and universal recognition of out-of-state licenses. This would ease the burden on professionals moving to Texas, allowing them to begin working without undergoing redundant and costly re-licensing processes. Such reforms would not only enhance economic mobility but also increase the availability and competitiveness of services in the state.

The 89th Legislative Session commences January 2025.

Conclusion

Occupational licensing in Texas represents a significant barrier to employment and economic growth. While recent reforms have made some progress, much work remains to be done to reduce the burden of these regulations. By continuing to streamline licensing requirements and adopting less restrictive forms of regulation, Texas can improve its ranking and, more importantly, provide greater opportunities for its residents to thrive in their chosen professions.

This issue is crucial not only for the state’s economy but also for the principle of economic freedom that Texas has long championed. As the state moves forward, it must balance the need for public protection with the equally important need to remove unnecessary barriers that stifle innovation, entrepreneurship, and economic opportunity.

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