Excessive occupational licensing laws holding Mississippi back

The growth of occupational licensing laws in Mississippi makes it difficult for entrepreneurs and everyday people trying to find work. In a new policy report for Empower Mississippi, I share some commonsense reforms that can remove unnecessary roadblocks, helping ensure economic opportunity for everyone in Mississippi.

While properly designed occupational licensing laws protect the public from harm, poorly designed or unnecessary licensing laws present significant costs. Recognizing this, the Mississippi legislature has successfully implemented reforms which will help everyday Mississippians. But more is needed.

Occupational licensing has grown considerably over the past several decades. What was once a requirement for just 5 percent of workers in 1950, is now required for 20 percent of workers. The list of professions that require a license in order to work has grown dramatically. On average, states added occupational licensing requirements for 31 professions that do not require a traditional, four-year degree from 1993 through 2012. Mississippi added 49—one of the highest in the nation. Today, Mississippi is the 15th more widely licensed state, and one of the highest in the south.

It is important to protect consumers from harm and ensure the services they purchase are high quality. Licensing laws attempt to do this by requiring professionals to undergo training and demonstrate their competence before being allowed to practice. In theory, this should raise the quality of services for consumers.

Unfortunately, it does not seem to work this way in practice. I compiled a list of studies published since 1980. Nearly all of them failed to find any evidence that licensing laws had an effect on quality. Recently, some research has found that consumers care more about reviews, a more direct measure of quality, than whether a service provider had a license.

That doesn’t mean that occupational licensing has no effect. Because occupational licensing laws create barriers to entry that make it more difficult to begin working in a licensed profession, it reduces the number of professionals by up to 27 percent. Licensing also makes entrepreneurship, which offers a path out of poverty for many, more difficult. Because occupational licensing laws often contain good moral character provisions that bar ex-offenders from obtaining a license, it prevents them from finding work. Finding stable employment is essential to prevent recidivism.

It harms consumers as well. By reducing the number of professionals, consumers find it more difficult to find service providers. It also makes the price of services more expensive. So consumers are forced to pay more for less convenient services that are no better than an unlicensed professional’s.

Because Mississippi is one of the most widely licensed states, the costs hit Mississippians particularly hard. Mississippi licenses 66 of the 102 professions that do not require a traditional four-year degree. The upfront cost of these licensing requirements hit low-income residents the hardest. They often lack the time and savings to take time off of work for training. It’s just one more roadblock for those trying to move out of poverty. Mississippi has the second lowest labor force participation rates in the country, so removing unnecessary barriers to work is essential to improving the state’s labor market.

This isn’t to say that Mississippi has done nothing. In 2017, the state created the Occupational Licensing Review Commission to supervise licensing boards and review new and existing licensing regulations. The OLRC is designed to prevent unnecessary and burdensome regulations to ensure economic opportunity while still protecting consumers. Last year, the state adopted universal recognition of out of state licenses. Now professionals licensed in other states can move to Mississippi and begin working without long delays associated with reapplying for a license. Mississippi is one of just 12 states and the first in the south to adopt universal recognition.

But Mississippi has more opportunity for needed reforms. In my report, I detail ten professions where Mississippi is an outlier and policymakers should consider reform. They were chosen because Mississippi’s regulations are much more stringent than other states or numerous states do not require licensing at all.

Although licensing is often considered the default form of consumer protection, it is not the only option. Policymakers have a range of alternatives that are less intrusive and costly. These other forms of regulation can decrease its costs and be more targeted to the specific risks facing consumers. These range from state certification, to facility inspection, to voluntary certification.

Licensing has been holding back Mississippi, reducing economic opportunity with limited benefit for consumers. But this doesn’t have to continue. The legislature should build on their momentum and reform unnecessary licensing laws, replacing them with more appropriate regulation where necessary.

This column appeared in the Daily Journal.