Attacking AB32 Won’t Lower Unemployment

David Crane
Lecturer and Research Scholar at Stanford University and President of Govern for California

Recently a State Assemblyman proposed suspending AB 32 until
California’s unemployment rate reaches 5.5%.

Putting aside for the moment that AB 32 is not yet in effect and
therefore not responsible for our current unemployment and that
there’s no support for the view that an AB 32 implemented
intelligently would constrain job growth (indeed, there’s evidence
that many of AB 32’s efficiency measures in particular would likely
boost rather than retard profits and jobs), let’s first ask a
fundamental question:

Why has California’s unemployment rate exceeded the national
unemployment rate since 1991?

From 1976 to 1991, California’s unemployment rate largely tracked the
national rate. In 1991, as a result of the end of the Cold War and
subsequent reductions in defense spending that disproportionately
benefited California, that state’s unemployment rate rose sharply,
reaching more than 140% of the national rate in 1994. With the
exception of a brief moment in 2006 when the spread narrowed almost to
zero, California’s unemployment rate has stayed above the national
rate, in both good and bad times, most recently sitting at slightly
more than 120% of the national rate.

Some observers suggest that that spread is due to California’s higher
tax rates. Others suggest it’s due to burdensome environmental
regulations such as the California Environmental Quality Act enacted
under Governor Reagan. Still others suggest that California will
always have a higher unemployment rate than the national average
because unemployed job-seekers stay here knowing they stand a better
chance of landing a job in our huge and rapidly changing market.

I believe that one factor has been the diversion of funding away from
one of our principal job engines, higher education. UC, CSU and our
community colleges provide the skilled labor and innovations that
drive many of our companies yet for some reason our legislators have
chosen to reduce their resources, largely in favor of allocating more
to government employment. Recently an executive of a signature
California technology company said that his company’s number one
concern is state support for higher education, and that if the state
continues on the current path it will likely move employment elsewhere.

If we’re going to address our structural unemployment rate problem, we
must be sure to attack real causes, not illusory ones such as AB 32.

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