Because of its size, the largest population-wise, with 12% of the U.S. population, California should rank first in the number of new businesses created and indeed has enjoyed that status for the better part of this century, but in recent years that’s begun to change:
From 2001 to 2009, California ranked either first or second in the nation in creating businesses. But last year, the state plummeted to 50th as it lost 4,600 businesses, according to a study by Economic Modeling Specialists Inc.
California was among 29 states that saw a drop in net new businesses, according to the study, which calculates net new business creation by using the quarterly employment and wage information from the Bureau of Labor Statistics. . . .
But last year, amid continuing high unemployment, California lost 4,632 businesses from the prior year, the study found. Only Michigan, among the states and the District of Columbia, ranked worse.
This is not something we can blame on the weather or other forces beyond human control. Indeed, the solution to the problem lies very much in the hands of our election officials since it is the regulatory behemoth in Sacramento which discourages entrepreneurs from setting up shop in the (once-)Golden State:
Entrepreneurs often complain about stringent environmental regulations and government red tape in California as obstacles to doing business. Those things become more of a burden during bad economic times, said Hank Robison, chief economist at EMSI.
“If the economy is doing well, it seems like those things that might otherwise inhibit new business formation can be overcome,” he said. “When the tough times hit, those things become binding.”
If Governor Brown wants to make the Golden State shine once more, then instead of doubling down on the state’s draconian environmental laws, he would work to weaken them while reducing the various fees and regulations the state imposes on businesses. Not only would such regulatory relief prevent businesses from fleeing the state, it might also prompt them to innovate and expand, creating new jobs in a jurisdiction with the nation’s second highest unemployment rate.
(H/t Reader ILoveCapitalism)