A study shows California companies have moved out by the thousands since 2008. Here are five simple explanations.
In January, Spectrum Location Solutions released a study [in PDF] that shows that “about 10,000 companies left California in the last eight years to reduce costs and improve prospects of growing their businesses.”
California, which has always been cited as one of the worst states to do business came in dead last in 2016, according to a poll of chief executives, particularly for its taxes and regulation.
Here are some of the other factors that have helped contribute to California’s business exodus.
1. Purchasing Power
If an individual has $100 in his (or her) pocket, generally speaking, the individual wants to get “the biggest bang for his buck.” The same can be said of business.
In California, according to the Tax Foundation, $100 is only worth $88.97.
In this area, the only two places in the U.S. where it is worse are New York, New Jersey and Washington, DC.
2. High Taxes
There is no other state in the nation with as high income tax as California.
3. High Cost of Labor
While most want their fellow citizens to earn enough money to have a good standard of living, like individual citizens, businesses are reluctant to pay a higher premium to workers when they can get the same talent at a lower cost elsewhere.
4. Union Power
Despite California being one of 24 states that allow workers to be fired from unionized workplaces for failure to pay union fees, the power of unions in the state legislature is unprecedented—only rivaled by states like New Jersey and New York.
5. Regulatory Cost on Housing
California’s land entitlement and regulatory environment are one of the worst in the nation which, as a result, slows news construction and drives up housing costs.
It then becomes a vicious circle, as the higher costs of housing causes a demand for higher wages, which then causes higher inflationary prices for goods and services.
Unfortunately, especially for Californians, it does not appear the politics in the state will be changing any time soon to begin to address the anti-business climate.
As a result, one could expect that California’s business exodus will continue for the foreseeable future.
Hat-Tip: Zero Hedge.
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