There is a fierce debate about whether or not California is business friendly. Those who believe California is bad for business usually point to our state’s high tax rates and regulations. Those who say California is good for business note that our GDP is the eighth largest in the world, and say we are established as a global center of innovation with the world’s largest tech firms.
We know these facts are not the only issues that determine economic growth. That inspired the nonpartisan think tank Next 10 to ask the independent research firm Beacon Economics to look further into the question.
Beacon looked at the U.S. Census Bureau’s business dynamic statistics to determine where California ranks compared to other states on new business growth, small business growth and net job creation.
The report provides a more comprehensive look at California’s business climate than is often presented. It finds that the state is near the top of key rankings for business growth, especially new enterprises. In addition, California is creating jobs faster than the national average. And while many of these jobs are with established businesses, many are with new firms.
In 2013, the latest year for which comprehensive data are available, California ranked fifth among the states in creation of new businesses, fourth in job creation from new businesses and fourth in total job creation.
To find out more, you can log on to Compare50.org, our user-friendly tool that charts more than 100 economic and social indicators. You can select the indicators that you believe are most important to doing business in California, then determine if a state is business-friendly or not, based on your chosen parameters.
For example, there’s strong evidence that California is a magnet for investors. Last year, businesses attracted $28.9 billion in venture capital investment, far and away the most of any state. This could be because we also lead the nation in new patents granted each year. And despite claims that skilled workers are leaving California because of high taxes, the state has actually seen a net positive domestic migration of individuals who earn more than $50,000 annually.
Like the rest of the nation, California has seen a long-term decline in business dynamism. We need to work on problems such as income inequality and the rising costs of health care and housing.
But even with these problems, when compared to other states, California is doing well. A growing and sustainable economy; a cleaner, healthier state; a better future for all Californians – those are goals worth striving for. This is not to say we don’t need to fight to make the state more responsive to business needs – we do – but only because it could be even better.
F. Noel Perry is founder of Next 10, a think tank in San Francisco, and can be contacted at firstname.lastname@example.org. Christopher Thornberg is a partner at Beacon Economics, a research firm in Los Angeles, and can be contacted at Chris@BeaconEcon.com.