Recently, I attended a webinar hosted by the Legatum Institute, a UK-based think tank, where they discussed the results of their latest “Prosperity Index”.
According to the Index’s executive summary, Legatum hopes that “nations around the world (will) assess their strengths and weaknesses (in the rankings) to determine the economic and strategic choices that need to be made to further build inclusive societies, open economies, and empowered people to drive greater levels of prosperity.”
The Index looks at whole nations, and in the case of the United States, all 50 states including California (with rankings available down to the county level for the Golden State). Overall, the 2019 rankings found that California has risen to 24th among the 50th states for overall prosperity – up from 32nd overall a decade ago.
But a closer look at the study’s rankings shows some big warning signs for California’s prosperity, especially for working class and minority communities.
California ranked last (51st) for “domestic market contestability” – which includes the number of low-income residents in licensed occupations, occupational licensing training costs and time, and age regulations, among other factors. The state ranked near the bottom or last in every one of these categories.
Not surprisingly, the state also faired poorly for “labor market flexibility”, ranking 49th. This measurement includes things like workers compensation premiums and the state minimum wage.
The state also ranked 43rd for labor force engagement, rating 49th for underemployment and 39th for labor force participation – rankings which have likely grown worse due to our current economic downturn.
Our poor rankings on these key economic measurements reinforces the findings of PRI’s “Breaking Down Barriers to Opportunity” series, which documents how overregulation is making it very difficult and very expensive for Californians to get a good-paying job at an innovative startup or for people to start their own business and hire those who are out of work.
As Gov. Newsom and the legislature “double down” on enforcement of the controversial Assembly Bill 5 in the recently-enacted 2020-21 state budget (a law which Kerry Jackson calls “anti-worker, anti-job, anti-entrepreneur, and anti-freedom,” California is doing the opposite of what should be done to help our economy recover and let people provide for their families. Charting a different course of economic opportunity is all the most critical at a time when the state faces a 16.3 percent unemployment rate and shed 2.4 million jobs in the month of April alone.
If Sacramento is serious about wanting to reduce economic inequality and help boost incomes in minority communities, then it must make it a priority to improve California’s abysmal standing on the domestic market contestability rankings. Reforming unnecessarily-restrictive occupational licensing laws, improving vocational training, and easing costly mandates like the minimum wage law will make it possible for more of California’s poor to become entrepreneurs.
As PRI’s Dr. Wayne Winegarden correctly notes, “Entrepreneurship is key to helping our nation’s poor and immigrants from around the world work their way into the middle class and achieve the American dream. There is no better way to help people chart a more prosperous future for themselves and their families than by empowering low-income entrepreneurs to thrive.”
Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.