Every one of the senior executives polled for the California Competiveness Project study said it was just too darned hard – and expensive – to do business in the state while nearly 40% of firms based in California are headed elsewhere to hang their corporate hats, SmartPros reported.
Fully half of the companies interviewed have explicit policies to halt employment growth in the state. According to the study, these growing companies plan to simply do their expanding – new factories, new design centers – someplace else.
The higher cost of doing business in California hits smaller, low-margin employers particularly hard, according to the study. For example, a typical small California manufacturer with $20 million in revenue and operating income of $200,000 would be earning more than a $1 million, if it were located in a lower-cost state like Nevada, Georgia or South Carolina.
By a large margin, respondents declared that California’s regulatory environment is the most costly, complex and uncertain in the nation. For example, California enacted 15 statutory changes to labor laws per year between 1992 and 2002 – four times the average for all states over that same period and three times the average for New York.
“California is in a league of it’s own in terms of complex and unpredictable regulation,” said Dick Kovacevich, chairman of the California Business Roundtable, a non-partisan organization of California business CEOs, which sponsored the study. “Our research reveals that ‘business as usual’ is not working in California and that there are distinct areas the state must address to improve the competitiveness and keep high-value jobs in the state.”
The Golden State may be particularly vulnerable to a job drain because 27% of California jobs are in “mobile sectors,” including manufacturing, software programming, and insurance underwriting. Companies in those areas can more easily move operations from California to other locations. Consequently, these 4 million “mobile” jobs are most at risk for being moved elsewhere.
That’s not an inconsequential matter, according to the analysis. Jobs in “mobile sectors” tend to be 35% more valuable to the California economy than jobs in non-mobile sectors. As a result, California’s future economic potential will be heavily influenced by California’s ability to retain and attract these high-value jobs..
Companies interviewed included small businesses with as little as $1.5 million in revenue to large corporations with as much as $90 billion in revenue, and represent more than 95% of the state’s industry sectors