Residents of California witnessed the lowest personal income growth in the nation last year as the state recovered from aggressive lockdowns and an exodus of citizens and businesses.
California saw net earnings, defined as income from a place of work minus welfare, increase 5.0% between 2021 and 2022 compared to the national average of 8.0%, according to data released last week by the Bureau of Economic Analysis. Other states that severely trailed the national average included Maryland, which saw a 5.5% increase, and New Hampshire, which saw a 6.0% increase.
Net earnings meanwhile saw a 12.5% increase in Idaho, an 11.5% increase in Texas, a 10.8% increase in Nevada, and a 10.7% increase in both Florida and Arkansas.
The earnings data from the Bureau of Economic Analysis largely corresponds with patterns established over the past three years related to the lockdown regimes enacted by state and local officials: while states in the northeastern and western United States continued to shutter businesses well after COVID started to spread through the nation, states in the southern and midwestern United States reversed their mandates far more quickly.
Texas, Arizona, Idaho, and Utah, all of which boasted some of the strongest net earnings increases in the nation last year, were also among the first to see full labor market recovery following COVID and the lockdown-induced recession. Statewide increases in gross domestic product, which were highest in Idaho at 4.9%, followed a similar pattern as western and northeastern states fell behind their counterparts.
The Hoover Institution, a conservative think tank at Stanford University, found in a report that businesses departed from California twice as fast in 2021 compared to the rate in 2020 and 2019, as well as three times as fast as the rate in 2018. Texas is the most popular state for relocations, while prominent California employers such as Apple, Wells Fargo, and Disney opted to build new office spaces in Texas and Florida.
“California state and local economic policies have raised business costs to levels that are so high businesses are choosing to leave behind the many economic benefits of being in California and move to states with better business climates featuring much less regulation, much lower taxes, and lower living costs,” the Hoover Institution noted. “Our head count of headquarters departures is almost certainly far too low, since most business relocations are not reported by the media, and relatively few relocations require filing state compliance reports that would trigger documentation of the exit.”
With an effective tax rate of 13.5%, California is among the most heavily taxed states in the country, according to an analysis from the Tax Foundation. The state has more severe business tax burdens than all but two other states, according to another analysis from the organization.
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Population trends correspond with the economic climates of lockdown states. California lost more residents than any other state last year, marking the third consecutive year in which the state’s population decreased. Counties in California, Illinois, and New York, especially those with major cities, also saw the largest numeric population declines.
California Democratic Governor Gavin Newsom only reversed the state of emergency established amid the spread of COVID two months ago. Beyond their effects on businesses, critics of the aggressive lockdowns in California noted their impact on churches, schools, and other institutions.