Texas was right to flush plumbing licensing laws

By Trace Mitchell & Adam Thierer of Mercatus.

"What do you do when your toilet, sink or pipes aren’t working, and you can’t do the job yourself? You call a licensed plumber.

But what if there were no license for your plumber to obtain?

This is the exact scenario Texans may soon be facing. But it doesn’t mean the pipes won’t get fixed.

The Texas Legislature recently decided not to renew the section of its state code regulating plumbers and did not even vote to extend the life of the agency that’s currently in charge of it. Since the Legislature will not reconvene until 2021, it doesn’t look like that vote will come down the pipes anytime soon.

Because of sunset laws, the Texas State Board of Plumbing Examiners must shut down by September 2020. Soon, Texans might engage in the business of plumbing without much standing in their way.

How will everyone get along without licensed plumbers? The answer lies in the six states that currently do not require plumbing licenses: Kansas, Missouri, Nebraska, New York, Pennsylvania and Wyoming. (Some municipalities, like New York City, still require them.)

Are toilets in these states exploding? Are pipes bursting and sinks overflowing into the streets? No, they are not. People are simply going with the flow.

That’s because occupational licenses — which are meant to protect consumers from unqualified people performing subpar work — may help in some circumstances, but they are by no means the best solution. After all, the majority of Americans work in unlicensed professions.

Like anyone else, people in these states overwhelmingly check workers’ reputations. They ask friends and neighbors for recommendations. They search online or check out Yelp or Better Business Bureau reviews. They look at private certifications. Few people pick the first name they find and go with it.

Beyond being frequently unnecessary, licensing can be surprisingly harmful. It drives up prices and may even drive down quality.

Our Mercatus Center colleagues analyzed 19 studies on the impact of occupational licensing on quality and price. Most had unclear results. Three found that licensing improved the quality of the work done, and four found that it negatively affected quality. And in 2015, the Obama administration issued a major report on the costs of occupational licensing, stating “most research does not find that licensing improves quality or public health and safety.”

The reason, in a word, is competition. Obtaining a license is expensive and can sometimes require years of training that not everyone can afford, keeping some would-be plumbers out of the market. This protects established plumbers and allows them to charge higher prices. Texas faces a plumber shortage at least partially because of the length of time it takes workers to acquire a license.

Less competition also means less innovation. Licensed taxi operators provided the same low-quality, high-cost service for decades until unlicensed ride-sharing services came along. Customers flocked to Uber and Lyft. Prices fell and quality improved. Most people loved it; cab companies hated it.

That may be why existing plumbers are pushing Gov. Greg Abbott to call an emergency legislative session to renew the plumbing license. That’s understandable, but any quality plumber charging fair prices has little to fear.

The problem is bigger than one profession. There exists widespread, nonpartisan agreement that occupational licenses backfire far too often. The Obama administration study found that licensing creates a hidden tax on consumers of between 3 and 16 percent, while also “creating barriers to workers moving across state lines and inefficiencies for businesses and the economy as a whole.”

Research from Morris Kleiner and other economists reveals that “restrictions from occupational licensing can result in up to 2.85 million fewer jobs nationwide, with an annual cost to consumers of $203 billion.”

Some states are finally moving to address this situation. Texas appears to be taking on one profession at a time. Arizona, West Virginia, and Nebraska are exploring reforms that would sunset licensing for a wider variety of professions, or at least allow workers to use a licenses obtained in other states.

Texas was right to flush their plumbing licensing laws. Consumers and most workers gain when markets are de-clogged. Freely flowing labor and commerce is good for the economy, as well as the pipes."