The new Economic Freedom of North America report evaluating the 92 states and provinces in the U.S., Canada and Mexico for how many obstacles they place on businesses says only one American state — New York — has more such obstacles than California.
The report, assembled by scholars at the Fraser Institute in Toronto, examines the 50 American states, 32 Mexican provinces and 10 provinces/state governments in Canada and compares their differences in government spending, taxes, labor market freedom, legal systems/property rights, sound money, the ability to trade internationally, tax rates, credit market regulation, and business regulations.
New Hampshire, South Dakota, Texas, Florida and Tennessee get the highest marks of any American states. After New York and California, Alaska, Hawaii and New Mexico round out the bottom five.
That means all four of America’s mega-states are in the top five or bottom five, and that the Fraser report is likely to prompt familiar arguments about whether California’s business-unfriendliness is oversold, or whether the higher economic freedoms of Texas haven’t yielded more dividends because talented people value quality of life — i.e., living in California.
Business Insider has upbeat take on California
Last year, in response to CEO magazine ranking states on their hostility to business, Business Insider issued a ranking that evaluated the health of the economies of each of the 50 states. This provides a metric by which one can judge the argument that California’s regulatory climate is or isn’t too onerous.
The CEO survey last year ranked California as the most hostile in the nation for the tenth straight year.
But Business Insider, while acknowledging the CEO critique, had a different evaluation after examining “recent change in housing prices, nonfarm payroll job growth, unemployment rate, GDP per capita, average weekly wage, and state government surplus and deficit.”
It ranked California as having the fourth best economy in the nation, a ranking that might surprise even the strongest defenders of Gov. Jerry Brown’s record, given that many inland counties remain with recession levels of unemployment and underemployment, and given the size of the state’s unfunded retirement benefit liabilities.
But a closer look at the methodology suggests that California benefits greatly from the enormous wealth being generated in the Silicon Valley, a huge plus factor with few parallels in other states. GDP per capita is definitely on an uptick, even if the wages for most Californians are stagnant.
A 2014 Los Angeles Times analysis also provides context on why by one measure, the Golden State seems to be thriving, but not by others.
The fastest job creation has come in low-wage sectors, in which pay has declined. At the high end of the salary scale, a different dynamic has taken hold: rising pay and improving employment after rounds of consolidation.
Most distressing, middle-wage workers are losing out on both counts.
“People talk about it like an hourglass,” said Tracey Grose, vice president of the Bay Area Council Economic Institute. “There are fewer opportunities for people in the middle.”
Cross-posted at CalWatchDog.