California Goes From Top To Bottom In Job Growth Thanks to AB-5
The formerly “Golden State” of California lost 3,400 jobs and unemployment rate jumped to the highest in the nation at 5.3% in February.
California employment peaked at 17.7 million nonfarm jobs in February 2020, then was hammered by a national high 15.5% pandemic crash. US and California employment bounced back to pre-pandemic levels by June 2022, but California has since been growing a half the national rate.
Since August 2022, the number of unemployed Californians has increased by over 300,000 to a new recovery high of over 1 million. Pre-pandemic growth of the California labor force was almost 100,000 per month, but that number has shriveled to about 10,000 per month.
California’s worst sectors for job losses since August 2020 has been the usually high-paying entrepreneurial sectors for information services that slashed about 93,000 jobs, a 15% decline, and administrative services, which lopped off 68,000 jobs, 6% decline.
The only California sectors since mid-2022 that saw significant job gains were the mostly public sector jobs where health care leaped by 230,000 jobs, a 9% gain, and government added 112,000 jobs, about a 5% gain.
The responsibility for this dismal California experience began in when the California Supreme Court ruled in 1919 ruled that Dynamex Operations West, a nationwide same-day courier and delivery service for large companies, was still unfair to its drivers for not treating them as hourly employees even if divers wanted to be independent contractors because they made more money and were more satisfied as “gig” workers.
The California Legislature in 2021 tightened the treatment by passing AB-5 as the nation’s most restrictive regulation against voluntarily gig workers.
Mercatus Center at George Mason University studied the effects of AB-5 according to the US Census Bureau’s Current Population Survey (CPS) for California from January 2011 to September 2023 that found:
Self-employment decreased after AB-5 by 10.5 percent on average for affected occupations;
Overall employment decreased after AB-5 by 4.4 percent on average for affected occupations
The study appears to confirm that the California Supreme Court and the California Legislature’s misguided efforts to increase the growth in traditional so-called W-2 employment was the direct cause of California employment growth going from first to last.