Labor Day in California: Not Much to Celebrate

Californians work hard and Labor Day will provide them with a much needed break. The festivities, however, should not overshadow a disturbing reality. Nowhere are California’s economic problems more serious than in our labor market.

The best known and perhaps most watched labor statistic is the unemployment rate. California’s unemployment rate in July was 11.9 percent. We tied with Oregon for the fifth highest unemployment rate in the country and most economists expect the rate in California to increase. The current poor performance of California’s labor market is not, however, an aberration.

Our labor market has been struggling for at least the past five years, as shown in California Prosperity: Assessing the State of the Golden State, a recent Pacific Research Institute study. For example, California’s unemployment rate over the last five years ranked eighth highest in the country. The bad labor news, unfortunately, doesn’t stop with the unemployment rate.

The length of unemployment in California tends to be longer than in most other states. Specifically, over the last five years, California’s long-term unemployment rate was higher than every other state except twelve. Put more starkly, California tends to have a larger percentage of people unemployed, and for a longer time, than most other states. Part of the explanation is that the private sector has not been creating jobs.

Over the last five years, California ranked a dismal 33rd out of 50 states for private-sector job creation. Jobs have been created, but in the public sector, and California has the ninth-largest public sector by employment when compared to the private sector. Every single public sector job, it should be noted, has to ultimately be supported by private-sector workers through taxes.

Overall, over the last five years, a host of labor market indicators reveal California with the third-worst performing labor market nationwide. The Golden State surpasses only Michigan and Mississippi. That may come as a shock, but the problems don’t end there.

There is perhaps no better indicator of the seriousness of our economic challenges than our rank on domestic migration. This is a measure of the residents who chose to leave one state and move to another. It does not include immigration – people moving here from other countries. Over the last five years, California ranked 44th out of the 50 states on domestic migration.

This means a net out-migration of more than one million residents over the last five years. This is an extraordinary measure of people choosing to leave California for other opportunities, often referred to as voting with their feet. During that time, every one of our neighboring states was attracting workers.

Many Californians use the recession and housing downturn to explain away the state’s economic woes, but this isn’t supported by the data. The indicators confirm that these problems, particularly the abysmal labor market, predate the current recession and housing downturn. The problems are grounded in poor economic policies in Sacramento, and should be unacceptable to Californians of any political predisposition.

Given our natural resources, location, and the skills and talents of our workers, California should be leading the nation—indeed, the world—in economic prosperity and enjoying all the benefits that such prosperity offers: job opportunities, increasing income, low unemployment, and a generally robust and dynamic economy.

California needs a wholesale review of our policies on regulation, taxation, and government spending, with a single aim of rejuvenating our economy through improved incentives for work, savings, investment, and entrepreneurship, and a long-term commitment to competitive economic policies.

Better policies in these vital areas will lead to a stronger economic recovery and lasting prosperity for the Golden State. Now that’s something to celebrate on Labor Day.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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