This commentary originally appeared in the Austin-American Statesman on February 8, 2016.
Texas’ low cost of living helps lift hundreds of thousands of working class Texans out of poverty.
The U.S. Census Bureau now reports two gauges of poverty: Official and Supplemental.
The nation’s official poverty rate has two severe shortcomings: it doesn’t account for regional cost of living differences and it doesn’t consider any non-cash benefits the less fortunate receive, such as rental and food assistance. Because of these omissions in the official poverty calculation, the poverty rate is undercounted in high cost states such as California while the rate is inflated in the Midwest and South where the cost of living is lower.
The Census Bureau’s Supplemental Poverty Measure corrects these shortcomings. This more comprehensive measure of poverty shows California with proportionately 47 percent more people in poverty than Texas which, with asupplemental poverty rate of 15.9 percent, is at the national average.
Why is it, that that California, with the Silicon Valley’s booming economy, Hollywood and green energy, also features the nation’s highest supplemental poverty rate? California’s sky high poverty is due to its high cost of living, about 34 percent above the national average, driven mainly by government-induced artificial scarcity in the housing market and burdensome labor market and business regulations that inflate the cost of services.
This is where occupational licensing, zoning, and Uber come in.
According to the Institute for Justice, California regulates 61 percent of 102 low-income occupations, requiring an average of $300 in fees, complicated exams, and educational requirements averaging 549 days of training, few to none of which actually benefit public health and welfare. By comparison, Texas requires licensing for 33 percent of these occupations, but charges slightly more in average fees, $304, and quite a bit less in mandatory training, 326 days.
In both cases, and around the nation, occupational licensing red tape acts as a barrier to entry for Americans seeking to improve their lives while artificially restricting the supply of services, jacking up the cost of those services to consumers.
The City of Austin provides an example of this locally. A little more than a year ago, the lame duck city council approved a “Hauler for Hire” ordinance that required a $100 fee, a special vehicle inspection by city bureaucrats, and at least $1 million in combined liability auto insurance — more than 10 times Texas’ minimum requirement — before an enterprising entrepreneur could legally offer to clean up and haul off debris from a backyard. Violation of the ordinance risks a $100 fine scaling to $2,000 for additional offenses with court fees extra. Not paying could lead to jail time. Arif Panju, with the Institute for Justice, notes, “Barriers like these make it harder for people to build new businesses, particularly minorities, getting a start on the American Dream.”
Regarding innovating ride-sharing services, Uber just announced it is ceasing operations in Midland and Galveston because of regulatory constraints. This calls to mind Gov. Greg Abbott’s warning a year ago when he said, “The truth is Texas is being California-ized and you may not even be noticing it. It’s being done at the city level with bag bans, fracking bans, tree-cutting bans. We’re forming a patchwork quilt of bans and rules and regulations that is eroding the Texas model.”
One area where Texas does well, relative to other states, is in respecting property rights, though restrictive zoning is a growing problem here.
Extreme property rights restrictions in states such as California, New Jersey and Maryland contribute greatly to these states’ high cost of living, artificially squeezing supply and driving up the cost of rent for the working poor.
Housing developers in Texas, on the other hand, can more readily meet demand without excessive government interference, though cities such as Austin are increasingly erecting restrictions on development, ironically leading to urgent calls for taxpayer subsidized housing that can never meet more than a tiny fraction of demand for affordable housing.
Texas lawmakers at both the state and local level need to resist calls to use government power to regulate property and labor, understanding that regulations can increase the cost of living, hurting the working poor while shrinking the sphere of freedom.
DeVore is vice president of national initiatives for the Texas Public Policy Foundation and served in the California State Assembly for six years.