California v. Texas: Jobs Leave High-Cost Locations

Writing at RealClearMarkets, Steven Malanga of the Manhattan Institute examines the consequences of government regulations and policies in California that have made the state a high-cost place to do business. Malanga pegs the column to a recent visit to Texas by California state legislators and Lt. Gov. Gavin Newsom to investigate how the Lone Star State has done so much better in job creation than the Golden State.

One theme is obvious and persistent when you peruse dozens of stories on California companies that have pulled up stakes in the past few years: Many are going somewhere else to lower costs, whether it’s a shipping company moving HQ jobs from Oakland to Phoenix, or a software maker leaving North Hollywood for Austin, or a visual effects studio leaving Venice, Ca., for Port St. Lucie and Vancouver.

Some firms also say they are leaving because California’s state and local budget crunch has made government voracious. LegalZoom, the online company, is leaving Los Angeles for Austin because of a lengthy dispute with city government over taxes. One thing that sealed the move: When the firm’s 400 employees heard the company was contemplating leaving, some began asking to relocate. Meanwhile, Creators Syndicate, the media syndication company, has also contemplated leaving because of a dispute over taxes with the city of Los Angeles that prompted an official of the company to accuse the city of operating like a “banana republic” and its bureaucrats of acting like “Stalin’s apparatchiks.”

And for all the state’s emphasis on “green jobs,” companies that manufacture environmentally oriented products are escaping California, as well.

Malanga accurately analyzes the problem, and Jack Stewart, president of the California Manufacturers and Technology Association, offers a solution. In a new column, “Texas Trip Confirms: California Needs a Plan to Create Jobs,” Jack argues:

The Texas economic development strategy was born out of the 2003 recession when state revenues dropped, creating a massive budget deficit. To address the 2003 crisis, [Gov. Rick] Perry made two decisive moves: 1. to aggressively promote Texas’ affordable business climate to grow revenues to the state through economic expansion; 2. move the state to a zero-base budget process to control the growth in government spending. …


California hasn’t had an economic development strategy for more than a decade. We’ve been resting on our laurels while other states and nations aggressively recruit our brightest and best entrepreneurs and innovators. It doesn’t have to be this way. California can become competitive for investors if we put our economic house and business climate in order.

For the past ten years, our Governors and Legislatures have focused on spending cuts and tax increases as the solution to our state’s economic woes. There is a third leg to that stool, an aggressive plan for economic growth. If job creation is truly our highest priority, then let’s create a plan to grow jobs. Look to the future as Governor Perry did in 2003, set job creation goals for the next 15 years and develop a strategy to achieve those goals. It’s simple, but it won’t be easy.

Coverage …

Leave a Reply