We’ve heard it again and again, declarations from California’s progressive politicians on the need to attract “favored” industries to the state. And what are those favored industries? It’s an easy guess — tech, biotech, “clean” manufacturing, environmental companies, and so on. Since attracting businesses – even progressives’ pet favorites – is far better than scaring businesses away, which is what the state’s policies are doing now, PRI decided to take a survey of these very industries to find out what it would it take for them to move or expand to California.
I was excited to do the survey because it was PRI’s chance to uncover some interesting policy reforms that perhaps we haven’t thought about. Moreover, if progressive politicians are really serious about attracting these types of businesses to the state, PRI would have the survey results to show progressives just what these industries need.
The survey results weren’t exactly what I expected.
Ironically, the “desirable” companies in our survey wanted the same things that all other companies want – lower taxes, less red tape, good schools, affordable housing, and a reasonable cost of living for their employees.
Let’s start with taxes. Based on our survey, 58 percent of the executives surveyed said that comprehensive reform of the state’s personal income taxes would have a positive impact on their decision to locate to California. This is an interesting fact, because while it’s in the interest of companies to keep corporate tax rates low, California businesses are also concerned about the tax burden of their own employees. Tim Anaya made this point in his blog when he was surprised to see that quality of life issues for employees was a big concern for the companies surveyed. And why wouldn’t they be? Unaffordable housing, poor performing schools, traffic jams, and so on make California a tough sell to the employees of companies who are considering moving to the state.
As for the state’s regulatory environment – here what the California Business Roundtable has to say: “California’s Regulatory Environment is the most costly, complex, and uncertain in the nation. No other state comes close to California on these dimensions.” PRI’s survey of executives confirms this. When we asked them about California’s labor laws and regulations – including minimum wage, over-time rules, the workers comp system, and other issues, more than 62 percent of business executives surveyed said it would affect their decision to move or expand in the state.
So why should all this matter when today’s headlines show that these are boom times for the economy? For starters, Governor Brown is worried. When presenting his final budget to legislators earlier this year, he said: “What’s out there is darkness, uncertainty, decline and recession.” The fact that California is losing businesses when times are good doesn’t bode well for the state when the economy starts to lose steam or takes a turn for the worse. The only way for California to stay resilient and prosper is to welcome all companies, whether they are old, new, clean, sharing, mom & pop, or millennial – and the PRI survey shows that the basic conditions they need have been time-tested in the states that these businesses are flocking to.
Rowena Itchon is senior vice president of the Pacific Research Institute.