California has become a manufacturing “job killer” bastion because of its shackling regulations, high taxes and excessive permitting requirements. Its quagmire of government-mandate programs is accelerating an industrial exodus.
In 2009, the Milken Institute reported California lost 79,000 manufacturing jobs in just six years (2003-2007) prior to the “Great Recession.” In contrast, seven other competing states gained 62,000 workers. The report blames the state’s onerous regulations and high taxes for pushing business elsewhere.
In 2014, a key Los Angeles Economic Development Corporation study showed while manufacturing productivity accelerated, factory employment has declined faster than any other state. This trend continues.
Kiplinger reported California tops its “least-friendly list,” thanks to a combination of high income taxes, the nation’s highest state sales tax (7.5 percent) and a hefty gasoline tax.
The Golden State has the nation’s third-worst business tax climate, according to the Tax Foundation. Its tax policy does not encourage manufacturing investments.
Unlike Washington, California imposes a sales tax on the purchase of new machinery and equipment. To tax both the “input” and the final manufactured product amounts to “double taxation” and is poor tax policy, the California Manufacturers &Technology Association (CMTA), declares.
In 2015, California had the lowest rate for manufacturing investments for expansions, modernization and new sites. CMTA found the state hasn’t received more than 2 percent of total US investments since the year 2000.
The cost of the state’s excessive climate change regulations is most troublesome.
Even though the state is on target reducing greenhouse gas emissions as prescribed by a sweeping 2006 law, Gov. Jerry Brown (D) just signed far-reaching new standards aimed at cutting carbon pollution by 40 percent (below 1990 levels) by 2030.
In addition, Brown signed separate measures mandating more renewable energy (solar and wind) to produce electricity and cutting petroleum use in cars and trucks by as much as 50 percent over the next 15 years. The goal is to put an additional 1.5 million zero emission vehicles on California streets and freeways.
Brown’s administration believes the new requirement would “make it possible” for the state to cut emissions 80 percent (below 1990 levels) by 2050 even though California’s population will grow to 60 million. It is now 40 million.
The most problematic for employers is this bill gives California’s Air Resources Board sweeping unchecked authority to increase costs on manufacturers.
The new law puts “very severe caps on the emissions of greenhouse gases in California without requiring the regulatory agencies to give any consideration to how it will affect the economy or residents,” the California Chamber of Commerce states.
The growing cumulative impact of the state’s higher regulatory costs and taxes and fees continues to take its toll on manufacturers, workers and the economy.
On Aug. 29, Ashley, the world’s largest furniture manufacturer, announced it will close two plants in Colton and lay off about 840 workers. The company is transferring its production to its facilities in Wisconsin and North Carolina, citing the need to “create more efficiency.”
“California is essentially eliminating its blue-collar sectors,” said John Husing, chief economist for the state’s Inland Empire Economic Partnership. He called Ashley’s move “a gigantic blow” for the region.
The bottom line is the combination of lower labor costs elsewhere and automation has already heavily impacted California’s manufacturing workforce. Between 1990 and 2012, LA’s economic development leaders noted California lost 40 percent of its manufacturing jobs. That amounted to more than 840,000 layoffs.
California’s imbalance continues to grow because its elected officials brush off economic impacts from the loss factories and processing plants.
The bottom line: What is happening in the “Golden State” needs to say there.
Don C. Brunell is a business analyst, writer and columnist. He retired as president of the Association of Washington Business, the state’s oldest and largest business organization, and now lives in Vancouver. He can be contacted at theBrunells@msn.com.
