Mississippi’s 29 By 29 Occupational Licensing Review Is Good First Step
Nearly 25% of U.S. workers are directly impacted by occupational regulation, up from 5% in the 1950s. These regulations, especially licensing that requires workers to get government approval before they can earn a living, restrict opportunity, raise costs for consumers, and provide negligible safety benefits. Mississippi is the latest state to recognize that occupational licensing often does more harm than good, and it plans to review all 29 of its licensing boards and commissions by 2029 in order to remove unnecessary restrictions that prevent people from working.
Common occupations that require government-approved licenses include barbers, cosmetologists, architects, athletic trainers, and real estate appraisers. While supposedly designed to keep consumers safe from careless or unskilled practitioners, many licenses have little effect on consumer safety. Instead, they raise barriers to entry through onerous training requirements and high fees that keep many people from pursuing their preferred career.
These barriers have sizeable negative effects. Research shows that licensing increases costs to American consumers by over $200 billion annually by reducing the supply of workers. More licensing is also associated with a 2% to 7% decline in economic mobility. In other words, people have a harder time climbing the income ladder in areas with more licensing that reduces job opportunities.
Mississippi’s Secretary of State, Michael Watson, recognizes the harmful effects of occupational licensing and wants to streamline his state’s licensing regulations. His plan is to review all 29 of the state’s licensing boards and commissions by 2029 in order to modify or eliminate unnecessary regulations that do more harm than good.
This is a great first step for Mississippi since it needs an economic boost. Mississippi has the lowest per capita income in the country at $39,368, nearly $3,000 lower than West Virginia. It also has the nation’s lowest labor force participation rate at 55.4%. As a comparison, South Dakota, Colorado, and Nebraska have participation rates over 68%.
Fewer people working creates several problems. First, unemployment is robustly associated with despair. As the Harvard Business Review put it, “A large stream of research has shown that the non-monetary aspects of employment are also key drivers of people’s wellbeing. Social status, social relations, daily structure, and goals all exert a strong influence on people’s happiness.” Research also shows that areas with more unemployment have more opioid and other drug-related deaths and hospitalizations.
Unemployment also puts stress on the state’s safety net and federal government. People without jobs often need government assistance, but since they are not working, they do not pay much in taxes to support the safety net. So, in areas of high unemployment there are more people getting government aid and fewer people contributing to these benefits. A labor force participation rate of only 55%, as in Mississippi, is unsustainable in the long run without outside help from the federal government, which means federal taxpayers.
Mississippi’s plan to review its occupational licensing regulations is a great first step, but simply reviewing them will not be enough to improve the state’s labor market. Real reform needs to follow review, such as streamlining or eliminating requirements for many jobs like Florida did in 2020. Doing so will enable more people to find fulfilling work.
Occupational licensing may be well intended, but its negative effects on opportunity, economic mobility, and consumer costs cannot be ignored. Mississippi has a real chance to improve its labor market and broader economy. Hopefully it takes full advantage of it.