Tough Times in California: Unemployment Approaches 12%, The UI Fund is Broke, and Jobs are Moving out of State

July 2009Newsletters California Update - Third Quarter 2009

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Unemployment in California continues to climb, and the unemployment insurance trust fund has run out of money. The state is currently relying on federal loans to pay benefits to unemployed Californians. Legislation has been introduced (SB 222) to triple the unemployment insurance tax on employers. California already has one of the highest such tax rates in the country, and this added burden would be one more disincentive to add jobs in the state. The California Chamber of Commerce is opposed to this bill, and the governor has not indicated whether he will sign it.

Additionally, a new study of long-term employment trends in California indicates that, since 1990, California has lost 30% of its middle class manufacturing and high tech jobs to other states. The Milken Institute reports that for over two decades jobs have been migrating to other states with lower costs and a less hostile regulatory and litigation climate. Many California legislators, who are dealing with a budget shortfall of billions of dollars, still don't seem to grasp the connection between jobs and tax revenues.