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California's competitiveness improves....a little.

Posted by Jack Stewart, on Sept. 5, 2007

Last month the Milken Institute published its 2007 U.S. Manufacturing Cost Index, commissioned by the California Manufacturers & Technology Association.  Relative to the 49 other states, California became slightly more competitive -- not because the cost of manufacturing in California decreased, but because manufacturing costs in other states increased more rapidly than in California.  California still ranks abysmally low compared to the rest of the country.  More importantly, the cost differential between California and the neighboring western states is even more dramatic.  Energy rates in our State are 34 percent higher than the national average while our western neighbors are 10 percent below the national average.  In wage burden (comprising workers' compensation, healthcare, paid leave, salary, etc) California comes in at 14 percent above the 50 state average while our competitors in the west are 18 percent below.

As California’s 2007 Legislative Session comes to a blissful close, the State's highest wage producers -- manufacturers -- are left with the very real prospect of increased energy costs as a result greenhouse gas reduction mandates and the potential for expensive universal healthcare.  In addition, California is still one of only four states that "double taxes" the products we manufacture (by taxing both the purchase of machinery and equipment and the profits of the products those machines make).   These three issues loom large and, coupled with the state's growing skills gap, create possible deal breakers for manufacturers looking to site or grow their operations in the California.  See Wonder Bread .

Cost index:
Western comparison
National comparison

*2007 Index based on 2006 data
*Western competitor states = Arizona, Nevada, Utah, Oregon, Washington, Colorado, New Mexico, Texas

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