As 2023 nears its end, employers continue to have a hard time finding workers nationwide. And unfortunately, there appears to be no end in sight.
Recent work from the Manufacturing Institute notes that the United States could have as many as 2.1 million unfilled jobs in 2030. And without having access to the workers they need, the U.S. economy will suffer. The same report projects a loss of $1 trillion resulting from unfilled jobs.
Although there is no silver bullet to address this important problem, one thing is abundantly clear: Burdensome and outdated occupational licensing requirements are not helping the situation.
Occupational licensing requirements — which more than one in five workers must meet — take aspiring workers and entrepreneurs and turn them into criminals. It becomes a crime to pursue your life’s passion or a new business opportunity before you meet minimum entry requirements that are set and determined by your competitors that sit on a state’s licensing board.
Many occupational licensing requirements include college degrees or other forms of traditional classroom education. But fewer students are attending college. From 2019 to 2022, enrollment in undergraduate education dropped by 8 percent.
Employers are going to need more flexibility in adapting to changes in the workforce. Just because workers don’t have college degrees doesn’t mean they aren’t qualified to contribute.
In fact, recent research indicates that there are 11 million U.S. workers without college degrees that are underemployed. These workers have the skills to perform higher wage work, but they face barriers like occupational licensing that prevent them from reaching their full potential.
Thankfully, common sense is beginning to prevail, and several U.S. states are implementing meaningful reforms. Utah stands out as a national leader in many respects; the state’s new Office of Professional Licensure Review is fully staffed and carefully reviewing its licensing requirements.
Utah is also one of 21 states that have passed some form of universal recognition. What this means is that if you are a licensed worker and you move to Utah, you can continue working without the typical bureaucratic delays associated with occupational licensing.
My research with Kihwan Bae shows that universal recognition can help ease a state’s workforce woes. We find that universal recognition increases employment in a state by nearly 1 percentage point. The reform attracts new workers, but also brings back workers from the sideline that are currently underemployed or out of the labor force entirely since their license and years of work experience suddenly become irrelevant when they move to a new state.
Utah took this reform even further in 2023, permitting nine licensing boards to recognize licenses from foreign trained workers. This helps with highly skilled immigrants who also find themselves underemployed due to bureaucratic red tape.
And Utah is not alone in enacting meaningful reform in recent years. Idaho passed meaningful reform that recognized out-of-state licenses and also prevented boards from imposing additional arbitrary hoops like additional fees and jurisprudence exams. Florida eliminated several licenses that were no longer necessary or overly burdensome. Ohio also passed universal recognition and scaled back some licenses.
The U.S. labor force has gone through some significant changes in the last few decades and regulation has not adapted to recognize this important fact. To ease the national workforce shortage crisis, states should carefully consider meaningful licensing reform.
It simply doesn’t make sense to keep skilled and experienced workers on the sideline, or not give employers the flexibility to find and train workers to maintain America’s prosperity.
Edward Timmons is director of the Knee Regulatory Research Center at West Virginia University. He is also a senior research fellow with the Archbridge Institute.