Cosmetology has escaped the transitional gains trap on the intensive margin

My new research confirms that trimming cosmetology regulation helps everyone

Jun 18, 2025

Source: Bae, Kihwan and Timmons, Edward, The Impact of Occupational Licensing on For-Profit Education: Evidence from Cosmetology in the United States (June 04, 2025). Available at SSRN: https://ssrn.com/abstract=5282678

We are rapidly approaching the 50-year anniversary of Gordon Tullock’s classic article. Regulation for cosmetologists would certainly seem to fit the story of a traditional transitional gains trap. Cosmetology licensing originated in the 1930s in the US and spread nationally by the late 1950s.1 There has always been mixed evidence as to whether or not these regulations benefitted cosmetologists. But certainly, incumbent cosmetologists and especially beauty school owners fight hard to maintain the status quo. Here is a picture of a protest of Utah’s SB87 that exempted blowdry bars from cosmetology licenses in the state.

Source: https://kslnewsradio.com/all-news/cosmetologists-protest-bill-eliminating-certain-licensing-requirements/1942105/

At blowdry bars, clients receive styling— no coloring or hair cutting takes place. Nevertheless, cosmetology licensing boards would have you believe that they must have a state license to perform these services. Despite the protest and backlash, SB87 became law in 2021. But this is not typical. Cosmetology reforms are always a political fight and because of the transitional gains trap we might expect there to be little change in cosmetology licensing requirements over time.

Does it always have to be this way? Maybe not.

My outstanding coauthor Kihwan Bae and I recently released a new working paper that carefully examines the effects of recent reforms to cosmetology licensing requirements across the United States. Between 2012 and 2023, 18 states implemented reductions in cosmetology licensing requirements. This picture from the paper tells the story:

This was not a red- or blue-state policy. Texas and California are very different states. Yet both states implemented significant cuts to cosmetology licensing requirements. In the paper we analyze the effects of this reduction in regulation. Here are some of the highlights:

Minimum hours requirements for cosmetology schools are a binding constraint
Source: Bae, Kihwan and Timmons, Edward, The Impact of Occupational Licensing on For-Profit Education: Evidence from Cosmetology in the United States (June 04, 2025). Available at SSRN: https://ssrn.com/abstract=5282678
Taking stock of the above event study, we see that mandated minimum hours (open dots in the diagram) and average program length (closed dots in the diagram) moved in lockstep prior to reductions in requirements. Then, when program length was reduced, we quickly see actual program length converge with minimum requirements. This suggests that regulations are not serving any purpose for society besides the potential benefit of cosmetologists and cosmetology schools (more to come on this).
Schools cut program price, but raise price per program clock hour

Program price (closed dots above) for cosmetology programs declines by a little over 9%. This reduction in time and money results in approximately a $4,000 savings per cosmetology student. Annually, the reform reduces deadweight losses by nearly $170 million per year. Cosmetology schools, however, respond by raising prices per clock hour (open dots above). So how are school profits affected?

If anything, profits at cosmetologist schools increase after reform

Estimates are a bit noisy, but we can say for certain that cosmetology schools were not hurt by the reform. If anything, cosmetologist schools overall (closed dots above) experienced an increase in profits. Evidence is stronger if we focus on larger chain schools (open dots above). Point estimates for chain schools suggest a more than 60% increase in profit amounting to more than a $200,000 increase.

Peer cosmetologists also have little to fear from the reform

Cosmetologists should not be protesting these reforms at the intensive margin. In other words, reducing the minimum requirements to obtain a cosmetology license. Incumbent cosmetologist wages who graduated more than 3 months ago (open dots) experience no measurable change. For new cosmetologists graduating within the last 3 months (closed dots), if anything, wages increase. Why do wages not change that much? Cosmetology services are highly price elastic. Given changes and innovation in the industry, for example blowdry bars, consumers have more choice in the market. Consumers are already highly price sensitive, so it doesn’t seem like the regulations were improving cosmetologist wages.

In summary, recent reforms to cosmetologist licensing requirements benefit everyone. It looks like a free lunch. Consumers have more choice in the marketplace. Cosmetologist schools, if anything, make more money. And likewise for other cosmetologists. Thus, there is no excuse to maintain above-average cosmetology licensing requirements. Nebraska and West Virginia currently require aspiring cosmetologists to complete 1,800 hours of education to obtain a license. This is just wasting time and money for aspiring cosmetologists and cosmetology schools are actually leaving possible profit on the table with these absurd requirements.

What is the threshold for when the transitional gains trap bites? It certainly seems to be at or below 1,000 hours. Maybe it is even lower than that. 600 hours might be the floor— this is the minimum program length so that applicants to institutions will be eligible for federal student aid. Here is hoping that recent trends in cosmetology licensing reform continue so we can learn how low we can go and keep enjoying the free lunch.

Although cosmetology licensing exists in all 50 states it is not ubiquitous internationally. Many European countries and some Canadian provinces do not license the profession.

Edward’s Substack

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