California’s “poor” ranking is the result of an analysis of 34 different business related criterion. Seven factors, in particular, where highlighted as significant factors in the ranking. That list includes complex wage and hour regulations, hostility towards non-competition agreements, and the anti-discrimination laws that exceed federal levels.
Also mentioned in the report were the difficult environment for job creation, budget woes, high taxes, and complex regulatory systems.
All of the states were divided into three categories: “Good,” “Fair,” and “Poor.” Not only was California in the lowest bracket, the state accumulated more than three times the average number of “Poor” ratings of any other state.
The dismal business climate, coupled with the possibility of an extension of the temporary tax increases and the dissolution of redevelopment and enterprise zones, could mean more bad news for Californians.
The report quotes Governor Brown from saying “There are hundreds of thousands of new jobs to be created, if California regulatory authorities make sensible and bold decisions.”
The question that must be raised is how do eliminating enterprise zones or redevelopment agencies – without a well thought out and turnkey replacement – qualify as a sensible or bold decision?
The answer is it doesn’t. Sensible is reform. Bold is drastic reform. Elimination is rash and messy.
The sensible decision that the US Chamber seems to seek in its report is a review of duplicative or detrimental regulations, and the streamlining of the business/government structure.
The report states, “A perfect score does not mean complete de-regulation of labor and employment markets… It is our hope that states will use this report as a roadmap to help in job creation and provide the right incentives for growth.”
Incentive for growth IS the purpose of a redevelopment agency. In areas of blight, their tax rebates and loans help develop a market for new business, provide an engine for natural gentrification, and rejuvenate an area. Opponents of redevelopment agencies can cite the faults of the system, but no system is perfect. Most systems are far from perfect. But the goals of a system cannot be achieved by eliminating the whole to correct a part. Those programs, like the regulations affecting business, must be reformed, boldly and sensibly.
When comparing the number of jobs that could be created in California reforming business regulations (138,001) to the next closet state (New York at 58,373) the number is stunning, if not unexpected. Similarly, when the number of new businesses that could be created in California (10,087) is compared again with New York (3,996), the result is disappointingly unsurprising.
What this report from the US Chamber achieved is an empirical quantification of the intangibles that affect California’s employment environment. By creating a statistical starting place, progress can be measured and regression can be identified.
In California, that’s easy. We scored “poor” in 23 categories, “average” in four, and “fair” in five. The state only managed to obtain two “good’s.” So for the sake of this study, there are few places to go but up.
For the factors not included in this study, including issues like redevelopment agencies and enterprise zones, the state has the opportunity to reform what is broken, and the responsibility to enhance what is working.
The study twice quotes President Obama from his editorial in the Wall Street Journal:
“Sometimes those rules have gotten out of balance, placing unreasonable burdens on business – burdens that have stifled innovation and have had a chilling effect on growth and jobs.”
“We can strike the right balance. We can make our economy stronger and more competitive, while meeting our fundamental responsibilities to one another.”