California consistently ranks as the most regulated state in the country—getting so bad, in fact, that comedian Bill Maher recently told Gov. Gavin Newsom that he needs to “take a chainsaw” to California’s overgrown regulatory code. And while many Californians might worry about environmental, social, or safety consequences of deregulation, there is at least one category of state regulations that, with a few easily identifiable exceptions, serve only to protect special interests at the expense of the low- and middle-class wage-earners: occupational licensing regulations.
Not long ago, only a small fraction of American workers needed a license to do their jobs. Today, nearly a quarter of the workforce is subject to legally mandated licensing—everything from hair stylists to plumbers to travel guides. That explosion of regulations hasn’t just inconvenienced would-be professionals; our new research published in Humanities and Social Sciences Communications shows it’s impeding employment, especially for low- and middle-wage earners.
In a new study, we collected and analyzed data from every state to measure how occupational licensing restrictions have changed over the last few years. We used machine learning to track the exact language of state regulations—terms like “shall,” “must,” and “required”—to see where and how they apply to specific occupations. We found that occupational restrictions have nearly tripled since 2019, especially in more Democrat states, and disproportionately target lower-wage fields. In other words, the occupations that already offer relatively modest pay have seen the largest increase in barriers to entry.
To be fair, these restrictions do raise wages for those who manage to get the license—a result consistent with prior work. At first glance, that might sound like a boon to workers. But it’s also clear that when licensing rules pile up, there are fewer jobs to go around. In our study, a 10% rise in these regulatory barriers caused a 2% increase in hourly wages but a 4% drop in employment in those occupations. That’s not just a theoretical loss. It translates into fewer options for workers—particularly those hoping to enter a new field or move to another state in search of higher pay.
Because most occupational regulation comes from state and local governments, federal attempts at reform face an uphill battle. The Obama White House highlighted the risk licensing requirements pose to mobility and competition, and the Trump administration famously enacted a “1-in, 2-out” (and more recently, a “1-in, 10-out”) rule for federal regulations. But although the Trump Administration could use the bully pulpit, most of the power to reduce occupational licensing burden resides in state capitals.
Yet there’s a silver lining: Our analysis shows that even partial reforms, such as have been enacted in Idaho and Virginia, can boost hiring. If policymakers are unable to remove licensing outright—sometimes for political concerns, sometimes because of valid quality or safety concerns—they can still streamline burdensome procedures that are only tangentially related to actual skill or public safety. Lowering license fees, removing residency requirements, or granting reciprocity for out-of-state licenses are all examples of steps that reduce red tape without sacrificing meaningful standards.
Why does this matter so much for the middle class? Because rigid regulations punish those who can least afford the time and money to fulfill extra mandates. Licensing can mean months or years of courses, registration fees, and exams. For middle-income earners—or entry-level workers looking to climb the ladder—this extra friction can be insurmountable. That’s especially problematic when so many Americans need to adapt to shifts in technology and the economy.
Consider a plumber’s apprentice in Illinois or a young cosmetologist in California. With regulations layered on top of an already challenging training process, people who don’t have the cushion of savings might easily be forced to drop out of the pipeline. And if they do persevere, they’re often locked into the state where they obtained that license—relocating means requalifying, possibly at enormous personal cost. That dampens labor mobility, one of the key drivers of regional economic growth.
This is why state legislatures, especially in the heavily regulated state of California, should prioritize thorough licensing reviews. They can convene regular sunset committees to weed out outdated provisions, encourage reciprocity across state lines, and ensure that the rules are transparently linked to safety or competency concerns—not simply designed to protect entrenched interests. Such reforms would open new job opportunities and, in the long run, reduce a hidden tax on families trying to pursue better-paying work.
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Christos A. Makridis is an associate research professor at Arizona State University, digital fellow at Stanford University, and a visiting faculty at University of Nicosia. Patrick A. McLaughlin is a Research Fellow at the Hoover Institution at Stanford University and a Visiting Research Fellow at the Pacific Legal Foundation. Follow him on X: @econpatrick.
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