Pops Riehm has a saying about things like this and it's: a solution in search of a problem.
With one of the highest unemployment rates in the nation and a regulatory regime that has made our fair state the target of business-poaching from the likes of Texas and Arizona, surely the law enforcement agencies of California can find better things to to do than aggressively crack down on the scourge that is unlicensed contractors.
From Reason.tv the answer is apparently "no".
(video approx. 2 minutes long)
Color us guilty as charged as we have participated on numerous occasions in this gray market when it came to house-cleaning, painting and landscaping from both sides of the table and under the table as the case may be and never have we experienced anything untoward or whatever it is the regulatory state is hoping to protect us from.
Word-of-mouth, referrals, reputations and the free market all working together to provide quality work at competitive prices.
Again, to paraphrase Pops, "what's the problem?"