Counterpoint: California Best for New Business?

Beacon Economics just published a report concluding that California is the best place for new business in America, despite high taxes, burdensome regulations, and high living costs.

“Next 10,” founded and funded by F. Noel Perry, retained Beacon Economics to take a comprehensive review of the California’s business climate to determine if the state’s reputation as anti-business is well founded.

Beacon found that according to U.S. Census Bureau’s Business Dynamic Statistics across a comprehensive range of economic indicators, California is near the top of many key state-by-state rankings for both new-business expansion and small-business growth, which explains why the state is creating jobs faster than the national average.

Based on 2013 data, “California ranked:

  • 4th in job creation stemming from new business creation, with a growth rate of 5.5 percent;
  • 5th in creation of new businesses;
  • 10th in highest entry rate of small businesses of one to four employees, with small firms representing 19.1 percent of new enterprises; and
  • 4th in total net job creation”

Christopher Thornberg, co-author of the report and founding partner of Beacon Economics, said, “California consistently outpaces the country in business creation, including small-business startups. It also excels in job creation, both in terms of net new jobs and jobs at new firms.” He added that overall, California is a “solidly pro-business environment.”

Next 10 also launched Compare 50 as a graphing tools and major data sets on national employment, population, and the economy. It features a “Create Your Own Business Climate Index” tool, which allows users to generate a comparative business index measures by selecting from 145 economic and demographic indicators.

On a comparative basis:

  • “California is still attracting new residents. From 2007 to 2014, the state was a net domestic migration importer of nearly 49,000 people with bachelor’s degrees or higher.
  • In 2014, venture capital investment totaled $28.9 billion in California, outpacing its nearest competing state by over $24 billion.
  • Per capita, California, Massachusetts, and Washington are waging a three-way race as the most ingenious state in the country. Since 2007, the three states have traded places for the lead in the number of new patents granted each year.
  • California has seen a net positive domestic migration of individuals who earn over $50,000 annually. Most residents leaving California, on the other hand, earn less than $50,000.”

Thornberg was especially complimentary of the vitality of Silicon Valley and the surrounding region: “Ultimately, people are coming to the Bay Area and California because of the great lifestyle.” He added, “California has great climate, arts, entertainment, sun, skiing, beaches, mountains, it goes on and on. The Bay Area has the same advantages, but even more so than California.”

Beacon found that over the last twelve months, the California’s 2.9 percent job market growth was faster than the 1.7 percent expansion for Texas and the U.S. in general.

Thornberg added, “Austin is not taking over Silicon Valley in any way.


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