Mississippi’s economy grows slowly

By Aaron Rice
February 1, 2019

Mississippi had a job growth of 1 percent last year.

According to preliminary data from the Bureau of Labor Statistics, Mississippi added about 11,000 jobs last year. But while Mississippi did experience an increase in job growth, the state lagged behind every neighboring state.

Of the four neighboring states, Alabama had the strongest job growth at 2.13. Tennessee was next at 2 percent, followed by 1.37 percent in Arkansas, and 1.1 percent in Louisiana.

Of the 11,000 jobs Mississippi added last year, about 1,400 were in government. Professional and business services had the strongest growth (5,300), followed by leisure and hospitality (3,600), and manufacturing (2,000).

Education and health services added a modest 300 jobs and construction did not any jobs. Financial activities had a loss of jobs (-100) as did trade, transportation, and utilities (-1,900).

Mississippi’s unemployment rate, which is historically among the highest in the country, sits at 4.7 percent. It’s down slightly from 4.8 percent last December, but still higher than the national average of 3.9.

What can Mississippi do better?

Mississippi has the fifth largest government share of state economic activity, and that is due to state and local spending, not federal funds. While there is a large contingent who would want to see the government spend more, it would actually be pretty difficult.

When the government grows, the state has increased ownership and the private sector shrinks. And economic freedom, which is based on free markets and voluntary exchange, individual liberty, and personal responsibility, wanes.

According to the most recent Fraser Institute Economic Freedom of North America report, which measures government spending, taxes, and labor market freedom, Mississippi was ranked 45th among the 50 states. Similarly, Cato Institute’s Freedom in the Fifty States, which measures economic and personal freedom, placed Mississippi 40th in their most recent rankings.

What is the correlation between economic freedom and prosperity? The freer states are more prosperous, have higher per capita incomes, more entrepreneurial activity, and lower poverty rates. We have the model. We need to just look at what similar states have done for economic growth. And it is important to know the difference between the reality of economic growth and the practice of economic development; those can be very different things.

Government incentives, often in the name of economic development and being ‘business-friendly,’ attempt to lure businesses to the state through financial benefits, such as site preparation, infrastructure, job training, or special tax breaks. The only reason these incentives are necessary is because of higher taxes or policies that burden businesses.

Instead of special incentives for a few, Mississippi should work to provide a favorable climate for every business. And let the market decide where a business locates or expands. An economic development officer can sell low taxes and low regulatory burdens to a company looking for a great location like Mississippi. What’s more, the data shows us that such policies allow existing businesses already in our state to expand and grow from a small employer to a large employer without getting any incentives from the taxpayers. That’s economic growth.

Being business friendly isn’t based on who can seek the most favors, it is based on how free your state is.

To their credit, state leaders have attempted to improve the economic climate of Mississippi, most notably through tax and regulatory reform. In 2017, the legislature adopted a new law that will require all new licensing regulations to be approved before they take effect, ensuring new attempts to stifle competition will be reviewed before they are finalized.

And the Taxpayer Pay Raise Act in 2016 will eliminate the 3 percent income tax bracket, allow self-employed individuals to deduct half of their federal self-employment taxes, and remove the franchise tax on property and capital when fully implemented. Even though Mississippi’s overall tax burden is still above the national average, this will move Mississippi closer to a flatter income tax and make our business climate more competitive.

These reforms weren’t easy, but showed forward thinking to align us closer with neighboring states. Making the case for spending more money on your favorite government program is not what is needed to prosper. We need to think much bigger than that. If we want to do better than the bottom ten in categories like per capita income, it starts with doing better in categories like business friendliness, regulatory practices, and tax rates.


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