For many years California has been criticized for its business climate. From the Tax Foundation ranking California 48 out of 50 states for its unfriendly business taxes, to the Wall Street Journal publishing op-eds describing how California drives away jobs and businesses, an outside (and often inside) observer might think the current state of business in California is rather grim. In reality, California is not anywhere near the bottom of the pack in terms of the state's ability to foster new business formation. While it is true the rate of new business creation has slowed over the past several decades, so too has the rate of business destruction. This report details the data on:
- Where California ranks among other states in terms of new business growth and small business growth
- Whether the secular decline in new business creation is unique to California, or whether it is happening nationwide
- How California business creation has compared to select states and the nation as a whole over the last twenty years
Main findings include:
- Both job creation and job destruction have been falling in California over the years. As a result, the long term pace of net job creation has remained relatively constant.
- California job creation and destruction has mirrored that of the broader economy. Not only has a similar trend occurred in the United States, but every other state has experienced a similar trend -- without exception.
- Despite a high correlation with national trends, since 1976 establishment birth rates have actually been higher in California than in the United States overall in absolute terms.
- Overall, California is creating jobs at a rate that often exceeds the national average. However California, like other states, is also a experiencing a secular decline in labor and business turnover.