The high cost of doing business in California is causing companies to leave the state, according to a survey from Claremont McKenna College.
The 2022 Kosmont-Rose Institute Cost of Doing Business Survey found that 64-percent of businesses have left California over the past 30 years and relocated to lower-cost states, namely Nevada, Arizona, Texas and Oregon.
Las Vegas was the top destination.
Between 1990 and 2019, 2,832 California businesses relocated to Sin City, the survey found.
Researchers analyzed 158 cities in the western U.S. based on their sales tax, utility tax, business license fees, average office rent, FBI crime index, median home values and minimum wage.
So, what makes doing business in California so expensive? Researchers say it is a variety of factors. Among them, labor costs.
The Golden State’s minimum wage will increase to $15.50 per hour on Jan. 1, 2023 – more than double that of Texas, Idaho and Utah.
The study also found that Los Angeles County is the most expensive place to run a company in Southern California, beating out Orange, San Bernardino and Riverside counties.
“Doing business in Southern California has many benefits, but the costs make it increasingly hard to pull off,” Ken Miller, director of the Rose Institute of State and Local Government and an author of the survey report, said in a statement. “Rising home values, office rents, labor costs, and burdensome new state and local laws were variables to watch this year as these costs continue to escalate.”
Some smaller California cities, conversely, were ranked among the cheapest places for businesses. Those cities included Yucaipa, Yucca Valley and Hesperia.
People still want to do business in California despite the high cost.
“California remains an attractive place to do business despite the out-migration of businesses to other western states,” Larry Kosmont, chairman and CEO of Kosmont Companies, said in a statement.
“Businesses that want to stay in California should ask themselves if they have a strategic or operational reason for being in California; otherwise, the state’s higher prices pose a real challenge to running a profitable enterprise.”