The Milken Institute recently released a report based on its annual California Summit conference dealing with a myriad of state issues. One chapter took the name of a conference panel: Perception vs. Reality: Is California Business Friendly?
The chapter on the business climate began this way: Despite its many strengths, California suffers from a perception of being unfriendly to new and small businesses. This perception stems from what many see as an overly bureaucratic permitting system, a high cost of doing business, and a complex regulatory environment. California continues to work to replace jobs lost during the Great Recession, particularly those in the manufacturing and aerospace industries. A comprehensive, forward-thinking strategy is required to combat the negative perception of California’s business climate and bring the state into the modern era of economic development and job creation.
Excuse me, but reading that introductory paragraph, how could one not reach the conclusion that the widespread perception is indeed the reality?
Because of difficult regulatory requirements and lose of important, good wage jobs, businesses do have trouble coping in the Golden State. The Milken report even suggested remedies for some of the difficulties businesses face in the state proposing a streamlined business permit and application process and re-thinking California’s complicated tax code.
Yes, the report highlighted positives about California business opportunities. The report noted increased technology jobs and the attraction of the state to both foreign tourists and investors.
However, the panel was conducted at the end of last year prior to the passing of the state’s new minimum wage and parental leave measures, which add a burden to small businesses. San Francisco has taken the parental leave benefit even further, which may be a harbinger for other jurisdictions. As the San Francisco Chronicle reported in covering the new law, while major businesses can often comfortably deal with new government mandates, small businesses struggle.
Small business is the backbone for the state’s economy and job creation. According to 2010 Census figures, among all private sector employers in California, small businesses (1-99 employees) consist of 673,211 firms (97.5%) of all firms in the state.
If business must deal with regulatory headaches and mandates that increase costs and put in jeopardy needed jobs, it is clear that the perception offered about California’s business climate is the reality.
While the legislature and the governor slap each other on the back for passing new employee benefits they should begin understanding the consequences to business that their actions create and work toward easing the ability to do business in the state.