Erica Mantelfer, the commissioner of the Bureau of Labor Statistics, was expected to be released from her position in August. Recent data shows that her departure isn’t tied to a weak labor market; rather, the latest report reveals worse-than-anticipated news.
The unemployment rate has climbed to 4.3%, but the real concern lies in the long-term trend of falling workforce participation. There are about 3 million fewer individuals seeking proactive employment compared to last year, which is reflected in both lower labor participation and employment rates.
The federal government’s policies present mixed results. While high tariffs and policy uncertainties are detrimental to the labor market, efforts to cut unnecessary regulations can be seen as a welcome change, potentially easing some burdens.
Amidst the negative news nationwide, several states are shining in terms of their labor market. South Dakota boasts an unemployment rate of just 1.9%, significantly lower than the national average. North Dakota, Vermont, Hawaii, and Montana also report rates under 3%.
Each of these five states shares a common trait: they feature less stringent occupational licensing requirements, according to a report I co-authored from the Archbridge Institute.
Occupational licenses prevent individuals from entering certain professions until they meet state-mandated criteria, such as educational qualifications, training, and examination requirements. While Americans generally support licensing for professions like medicine and dentistry, there are at least 28 occupations that remain unlicensed in just five states. For instance, breastfeeding consultants, interior designers, and dance therapists don’t require licenses in many places.
But why does a lighter licensing load correlate with a stronger labor market? Research indicates that strict occupational licensing can shrink the labor supply by as much as 27%.
This connection makes sense; if states impose barriers to entry for jobs, fewer people will take up employment. Often, individuals might find themselves in jobs that don’t utilize their full potential.
The call for reforms in occupational licensing has emerged as a nonpartisan issue. Leaders from both sides of the political spectrum, including Barack Obama, Joe Biden, and Donald Trump, have expressed the need to reform this system. In states like Pennsylvania and West Virginia, governors from both parties have already started implementing significant changes.
If states aim to revitalize their struggling job markets, removing unnecessary licensing barriers is a sensible step. For example, only the District of Columbia, Louisiana, and Nevada require a license for interior designers, raising questions about the correlation between licensing and better consumer outcomes.
States should create welcoming environments for licensed professionals to work across borders. Many jurisdictions with high unemployment rates, like Washington, DC, California, Michigan, and Oregon, have yet to lift burdensome licensing requirements.
While state policymakers may not control federal or congressional dynamics, they can enact substantive reforms in their labor markets. Thoughtful changes in career licensing could genuinely enhance job opportunities without costing taxpayers.
Dr. Edward J. Timmons, Archbridge Research Institute, has extensively examined the consequences of occupational licenses.
