If California Unfriendly To Businesses, Why Does It Lead In Job Growth?

What is all the nonsense about California being a business unfriendly state? Economy-wise California is smoking hot. In fact, the state has gained 40,300 jobs in June and 461,000 over the year. The 2.9% gain is the best 12-month record of a state second only to Florida’s gain of 3%. According to the congressional Joint Economic Committee the gross domestic product (GDP) of California grew by 4.2% in 2015 which is more than twice that of the national rate.

However, according to CNBC that ranks states based on 60 measures of competitiveness, California is way down at 32nd position in the 2016 rankings for the week. Arthur Laffer of ALEC or American Legislative Exchange Council placed California at a dismal 46th in terms of its economic outlook for 2016. Why is California being considered as in a bad state of business when it leads job growth and GDP rating?

The most obvious answer is the rankings did not consider what makes a state successful; California was judged according to its adherence to right wing economic orthodoxy. Laffer based his rankings on the 15 policy variables based on marginal income and corporate tax rates and whether the state levies estate tax or if they have anti-union right-to-work laws and a relatively low minimum wage rate. There are factors have been ignored like business owner’s decision to enter or expand in a state.

Interestingly, the states that gained third and fourth best ranking on Laffer’s curve were North Dakota and Wyoming, respectively. In 2015, both states performed badly in terms of GDP. North Dakota’s economy shrank by 6.7% with Wyoming at second worst at negative 2.9%. The state that got the second best ranking according to Laffer was North Carolina which is guilty of a self-inflicted wound by discriminating the LGTB community. This measure could cost North Carolina about $5 billion in federal funds and investment from various businesses.

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