News & Press

The Future of California's Small Business and Trade

As Vice Chairman of the Assembly Committee on Jobs, Economic Development and the Economy, I look forward to exploring innovative ways to improve the business climate in this great state. I am focused on keeping our economy strong, so hard-working Californians will have more opportunities for rewarding employment.

A strong business environment is good for all Californians, from teenagers looking for entry-level jobs, to professionals seeking career positions, to entrepreneurs who want to go into business for themselves.

That is why it is so critical for us to take steps to attract and retain businesses of all sizes, and to make sure state laws don’t discourage business activity and economic growth.

The primary jurisdiction of the Assembly Committee on Jobs, Economic Development and the Economy is over legislation impacting California jobs, import/export trade, small business development, and state and local economic growth. The committee also deals with trade relations between California and Mexico, and works to ensure fair treatment of businesses owned by women and ethnic minorities.

Here are some things to consider when discussing the economy and the availability of jobs in this state:

Economic Realities – We live in a world where consumers expect the lowest prices and employees want to earn the highest wages. When a company is mandated with financial burdens through regulations and higher taxes, prices almost always go up to cover the higher cost of doing business. The same goes for other increases in overhead – rising costs for electricity, rent, gas, insurance coverage, business taxes and government mandates all lead to higher prices for consumers.

California’s Diverse Economy – California is a massive state with a great diversity of people and jobs. We have logging companies, high-tech pioneers, oil companies, world-famous tourist destinations, and the film capitol of the world in Hollywood. The Orange County district that I represent has vibrant industries including agriculture, tourism, manufacturing, high-tech and a wide variety of professional services.

The vast differences in industry in different parts of the state mean that one-size-fits-all solutions are impractical. For example, the state minimum wage – which was increased this year to $7.50 an hour – doesn’t account for differences in the cost of living in different areas of the state. The cost of living in Orange County has been skyrocketing in recent years, and is much higher than the cost of living in Eureka, for example.

Some people believe that businesses in high-cost areas like Orange County should be required to pay a higher minimum wage – often called a “living wage” – to account for such differences. While this is a noble idea, the reality is that in Southern California, “living wage” proposals call for a mandate of more than $10 an hour, and many businesses simply cannot afford to pay that much to entry-level workers. Faced with such a high mandatory wage, many business owners would move to less expensive areas, and others would reduce their work force or scale back plans to hire new employees. Some would close their doors for good, laying off the very workers whom the wage mandates were supposed to help. The businesses that stayed and paid the higher wages would pass along the cost to consumers, so the cost of living would continue to increase.

Trade Issues – California’s top international trading partners are Mexico, Japan, Canada, China and South Korea. The U.S. Department of Commerce reports that in 2005 (the most recent year for which complete statistics are available), California exports totaled more than $116 billion. More than one in every 12 jobs in California is dependent on exports to other countries.

However, we have a major imbalance with many of our trading partners, and there is a legitimate concern about losing too much business to countries like Mexico and China – countries where manufacturers don’t pay workers much, and where they do not have to deal with the kind of government mandates that limit the ability of California businesses to compete. I aim to look for ways to expand our exports and to keep more purchases within our state’s borders.

Why Limited Government Is Needed? –A certain level of government regulation is necessary to protect consumers from fraud, and to protect business owners from being crushed by monopolies or unscrupulous competitors. But too often, government bureaucrats try to micromanage businesses, with no benefit for the consumer or the business owner. The Legislature’s majority party is particularly fond of piling layers of bureaucracy on business owners – in the previous legislative session, a Democrat even introduced legislation to regulate the way your local grocery store stocks its shelves (SB 582) – and these unneeded restrictions create new expenses for entrepreneurs, as well as new exposure to frivolous lawsuits.

I believe that government officials should be extremely cautious when considering new business regulations, and should always consider the potential harmful impacts on small business owners and their hard-working employees. We should look for ways to reduce taxes, fees and government paperwork, so business owners and employees can spend more time serving the public and growing their companies.

What Can We Do Together? – Education, education, education. I spent 28 years as a public high school teacher, instructing students on economics. I know that education is vitally important to our state. State officials, parents and business leaders must commit themselves to preparing students for the challenges ahead, whether the students are studying to be doctors, lawyers, restaurant managers or auto mechanics. Education has a tremendous impact on the business community, and it behooves all of us to ensure that our public schools are making good use of the more than $11,000 per student provided by the taxpayers each year.

Business owners also should consider investing in their employees. Many employers in India send their workers to the United States to obtain an education, and these workers then return home to work. American businesses should take advantage of the many educational opportunities that exist in this country, and should promote leadership training, service training certificates and other opportunities. Businesses will be rewarded with better employees, and some will be able to offset the cost, thanks to tax benefits that encourage education.

The Good News – When discussing the economy and jobs, many people fall into the trap of stressing only the negative factors. We shouldn’t ignore the positive news, like the January 19, 2007 announcement by the California Employment Development Department that 17,200 new jobs were created in California during November. The employment rate has grown from 94.9 percent in December 2005 to a very impressive 95.2 percent in December 2006.

Our economic growth in recent years was stimulated in large part by reform of the workers’ compensation insurance mess in California (premiums had risen to unaffordable heights for many employers – even those with no workplace safety problems), and by across-the-board cuts in income taxes enacted by the federal government. By continuing to hold the line on taxes, and by looking for more ways to remove burdens for job-creators, we will continue to enjoy an expanding economy.