NCPA - National Center for Policy Analysis

California Weakening

March 16, 2004

California has always ranked high in worker productivity, concentration of science and technology workers and venture capital money. Yet in spite of these attributes, California may not even make it on the list when a company is looking to expand or relocate its operations, says the California Business Roundtable.

The report surveyed more than 95 percent of the state's industry sectors and included both small and large businesses. It found the business climate to be atrocious. For example:

  • Nearly 40 percent of the California decision-makers participating in the project plan to relocate jobs from California (mostly to other Western states, with Texas the preferred location).
  • Furthermore, half of the companies interviewed have explicit policies to halt employment growth in California while less than 5 percent of companies have retention policies in place to keep jobs in California.
  • The cost of doing business in California is 30 percent above the Western state average; 6 percentage points of this gap stems from state regulations alone, with regulatory costs 105 percent higher than other Western states.
  • The state's regulatory environment is the most costly, complex and uncertain in the nation; for example, in the area of labor law, California enacted 15 statutory changes per year between 1992 and 2002, which is four times the average for state legislatures nationwide over that same period.

The report argues that California would be doing much worse, but the dot-com boom of the late 1990s masked over these fundamental weaknesses. The report concludes that California must now implement significant reforms or suffer increasing losses to other states.

Source: "California Competitiveness Survey," California Business Roundtable, Bain & Company, February 2004.


Browse more articles on Economic Issues