Can we save California? Economists say we’ll have to wait and see. 

On Thursday Peter Rupert, executive director of the Economic Forecast Project at UCSB, and Lee Ohanian, UCLA economics professor, shared with local politicians and business owners data on California’s economy, the role of policy, how the state is struggling and how it can – in time – get better.

The evening began with Rupert telling the crowd that in 2023 California did better than the U.S. but worse in 2022, and that the labor market in California has been struggling for the past six months but overall the labor market has been strong.

“Today, there are more job openings than unemployed persons,” Rupert said. “It’s actually very easy to get a job.”

Rupert shared that according to the U.S. Bureau of Labor Statistics, there are more job openings than unemployed people.

“Things aren’t being filled,” Rupert said. “Some are about job mismatch. Some are about the fact that during the pandemic, people left jobs they didn’t like, they got good unemployment insurance – sometimes more than they were making in the job. And maybe they were looking for new jobs.” 

He went on to say that job mismatch is a big reason why there are so many job openings right now, meaning that for many unemployed people, their skills or career goals don’t always match up with the kind of jobs available. 

Rupert later shared how public policy can often have negative impacts on the economy. He started by using an example about a current push to ban lap babies on planes, which he said would increase the cost of people traveling by plane and pushing more people to drive, where accidents are even more likely.

“Driving is way more dangerous,” Rupert said. “Lots of kids died in car accidents. This is a bad, bad policy. If you care about this child’s safety, you don’t want to do this.”

Rupert used this example to begin talking about the recent minimum wage increase in California. 

At the start of the year the state minimum wage jumped to $16 an hour, and later this year fast food workers in California will be making $20 an hour. 

“You got to be careful what you’re asking for,” Rupert said. “All those people are gonna be unemployed. Yes, the people who get the minimum wage, super happy, they won the lottery, but they’re gonna hire a lot fewer people.”

Ohanian began his presentation by discussing why so many businesses are leaving California and suggested that it’s often due to the cost of living and the quality of life.

In California, the median price of a home is $820,000 while the median home price in the rest of the U.S. is $350,000. According to the California Association of Realtors, only 15% of Californians can afford a home, and that’s assuming they have a 20% down payment and enough for closing costs.

“The number of people in this state who are not yet homeowners who have that amount of liquid assets is almost no one,” Ohanian said.

With regard to the quality of life, Ohanian spoke about the quality of education and the high cost of utilities. Many students are struggling to reach grade-level standards in math and reading despite a $127 billion education budget.

As for utility costs, California has one of the highest average energy bills in the country and the No. 1 highest average water bill in the county, according to Forbes.

“Our roads and highways in the state are among the worst in the United States, despite the fact that we have the highest gasoline tax in the country,” Ohanian said. “These are just challenges that are fundamentally confronting a lot of Californians. When we think about why we lost over half a million people? I don’t think it’s all that surprising.”

So what does California need? Ohanian said better governance and budget responsibility. Ohanian said he’s seeing policy makers failing to prioritize what people want such as a reliable water supply or a high speed rail and are instead prioritizing personal interest, or politically important lobbyists.

“I see all of these issues both on the household side, people struggle with the cost of living, poorly functioning schools, high energy costs, and roads that have a lot of potholes, and businesses, they’re struggling to make it – I see these as all policy deficiencies.”

Ohanian said improving governance begins with picking politicians who can manage a budget and will prioritize their constituents’ needs. 

“To do that you got to create and set up some accountability within the government to reward high performance and innovations that create value,” Ohanian said before using the private sector as an example of a workforce that doesn’t get rewarded for continued failure.

It might still be awhile before Californians can improve governance, according to Ohanian.

“Not enough voters are connecting the dots between California politicians and the problems that we face,” Ohanian said.

Going forward, Ohanian anticipates that California will lose more residents and businesses, unless things change. 

“We’re really mortgaging our future,” Ohanian said. “There’s every reason to believe that if the will is there, we can make these changes and we can go back to the state that used to be the golden dream.”