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Busted California? Analyzing the Census Numbers

California or Bust
California or Bust | Photo: thewoodenshoes /Flickr/Creative Commons License

Dan Walters, the Sacramento Bee's political columnist, thinks the Manhattan Institute (a rightward pointing think thank) has misinterpreted the math of California's decline. Walters accepts that Census numbers document the out-migration of millions of California residents over the past two decades. But he's not convinced that the Census data can only be read as a downward projection:

 

 

The Manhattan Institute, while not ignoring the shift in Pentagon spending, insists that taxes, regulations, and an amorphous "anti-business climate" have driven businesses from the state and kept out new industries that, speculatively, should have produced the thousands of jobs that Northrop, Douglas, and North American (among others) once did.

Except those numbers don't seem to add up to that ideologically pure conclusion.

According to the Public Policy Institute, less than two percent of the jobs lost in California between 1999 and 2006 resulted from business relocation. In fact, very few businesses move into or out of California. The employment change due to relocation -- a loss of about 9,000 jobs between 1999 and 2006 -- represented only 0.05 percent of California's 18 million jobs (based on the Public Policy Institute's tracking surveys).

Nearly all of the state's job losses came from businesses that failed -- in one way or another -- to prosper here.

Taxes, even according to friendly observers, represent a fraction of business overhead in California, given the business deductions allowed under the state's tax code. And as Allen Prohofsky, of the California Franchise Tax Board, tartly notes, profitable companies tend to stay where they're profitable and unprofitable companies -- those likely to fail -- don't. He might have added that successful companies have profits on which to pay taxes. Unsuccessful companies don't.

But what about crumbling infrastructure, traffic congestion, and poorly performing schools as impediments to business growth and job creation? Taxes have to pay to reverse those trends, preferably with a semblance of balance between what individuals pay and what businesses contribute.

Finally, an argument has been made that the kind of jobs that have left California since 1999 are those that required only modest skills and an equally sketchy education. The companies that used to hire high-school graduates to stand in front of a machine for eight hours a day have been swept away by globalization and their employees dispersed.

It's hard to imagine Californians accepting an economic régime that could impose the wage and working conditions of Mexico, India, Malaysia, or China. The risk, of course, is a bi-polar economy with some good-paying jobs at the top and some poorly paying jobs at the very bottom and nothing in between for the mass of men and women who are not MBAs but who cannot raise a family on Burger King wages.

Misunderstanding how and why the state's economy is changing won't solve that conundrum.

And we don't know how many former Californians left because they didn't like the life they led here. Or how many left out of homesickness and returned to the relative certainties of their childhood community. Or how many reaped the equity from their working-class tract house to buy what they hoped would be a final home somewhere else.

We don't know if nostalgia -- or taxes -- sent them on their way, despite claims that only economic reasons move people. We know that isn't true, since so many present and former Californians came here for reasons of the heart and not of the tax code.

D. J. Waldie, author and historian, writes about Los Angeles twice each week at KCET's SoCal Focus blog.