California is the undisputed leader when it comes to venture capital, high tech, entertainment, and patents, according to a new study, but an outflow of businesses and residents has placed its nationwide competitiveness in question.

The Los Angeles Area Chamber of Commerce report, entitled “California’s Competitiveness: A Regional Approach”, found that the high cost of living and lack of affordable housing in cities like Los Angeles, San Jose and San Diego are fueling the outmigration along with high taxation and heavy regulation. Download report here.

“Given the acceleration in firm and population migration over the past decade, it appears that the gap between California and its closest competitor states has narrowed significantly since the Great Recession,” the study states.

Some 46% of those leaving California end up in Texas, Arizona, Nevada, Washington, and Oregon, according to the study. But, as of Nov. 2022, California is still the best state for the most nonfarm wage and salary jobs at 17.7 million compared to 13.7 million in Texas, the second runner up.

“The fact that we have such low unemployment is also a problem because it’s driving wages higher,” said attorney Steve Rosansky, President, and CEO of the Newport Beach Chamber of Commerce. “If the pool of unemployed people is small, workers or employers have to pay more money to attract workers to their business.”

The study warns that California may be unable to maintain its economic powerhouse status if taxes and regulations continue to weigh down employers.

“Elected officials either ignore the needs of business or do not understand how business works,” the study states. “Indeed, these concerns prompted some firms to explore investment and job creation opportunities both outside of Southern California and the state.”

In Newport Beach, mandates for boats on the water require transitioning from gasoline or diesel engines to electric engines, which will potentially force them out of business.

For one, the Balboa Island Ferry, a member of the Chamber, must electrify its boats by next year.

“They don’t even have the technology at this point to be able to do that, even if they had the $5 million estimated that it would cost to do so,” Rosansky told OrangeCountyLawyers.com.

Orange County is cited in the report as a leader in real estate and fintech, but Rosansky argues that the region is still subject to the same competitive disadvantages as compared to outside the state.

“Streamlining regulatory processes would certainly be helpful because businesses would save time and money,” he said. “Not being overly burdensome on businesses as far as dictating work rules or wages would help.”

Making matters worse is the fact that the minimum wage increased by 50 cents to $15.50 per hour at the start of 2023 and on Jan. 1, it became illegal for employers to refuse bereavement leave of up to five days for an employee whose family member died.

Rosansky, who was the mayor and a city councilman before becoming the Chamber’s chief 10 years ago, advises member businesses to use technology to do things more efficiently.

“You always want to look at how your business can be faster,” he added. “You can’t just do nothing and expect nothing to happen to you. You must be the master of your own destiny. Otherwise, you’re going to just fall behind and, at some point, you won’t be able to catch up.”

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