Residents and Businesses Flee California

May 30, 2014

California is the cause of its own economic woes, writes Jared Meyer, policy analyst at Economics21.

Californians are facing a lack of jobs, high energy costs and low economic mobility. The state's low-skilled workers, including large numbers of immigrants, have especially suffered. Texas, however, also has a large immigrant population, yet it has strong economic growth, lower unemployment and plenty of jobs. California companies, including Toyota, are leaving the Golden State and heading to Texas, and more will follow.

California is inflicting these economic problems on itself. The American Legislative Exchange Council ranked California forty-seventh for business outlook this year. Texas, on the other hand, was ranked thirteenth, while California's neighbors Arizona and Nevada were ranked seventh and eighth, respectively.

Why such a low ranking? The state has continued to promulgate policies that restrict growth, raise prices and hurt job creation.

  • Over 15 billion barrels of oil are estimated to lay in the Monterey Shale oil reserves, yet the Los Angeles City Council recently moved to ban oil exploration there entirely. North Dakota residents can earn $120,000 a year working in the oil and gas sector. North Dakota also has a 2.6 percent unemployment rate, while joblessness in California sits at 8.1 percent.
  • Low-income families are forced to spend a full quarter of their incomes on natural gas, electricity and gasoline due to California's misguided energy policies. The state has continued to raise its renewable energy standards, despite its impact on costs.
  • Moreover, California's tax system does nothing to encourage business creation. The state has the highest individual tax rate in the nation -- 13.3 percent -- and a flat corporate tax rate of 8.84 percent.
  • The state's regulations also hinder economic growth. Its consumer protection statutes only invite litigation, and California's environmental regulations continue to drive companies outside of the state.

Calfornia is on a dangerous course, and it has the highest level of unfunded pension liabilities in the nation, at $650 billion. The state lost 410,000 residents to Nevada and Arizona between 2000 and 2010, taking nearly $12 billion in adjusted growth income with them. Additionally, 225,000 Californians and $4.5 billion in income fled the state and moved to Texas.

Source: Jared Meyer, "Poverty's Grip on California is Man-Made," Economics21, May 24, 2014.

 

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