Reasons Why California's Economy Is In A Bad State

The state of the economy in California is some of the worst out there, according to many experts. In fact, it’s one of the most expensive and poor economies in the world.

This isn’t always reflected in the headlines but that doesn’t mean people aren’t paying close attention.

Instead, we are often distracted by the very few wealthy individuals or businesses that have seen large profits. These stories get all the media coverage while the rest of us know someone who has lost their job and not even known what to do next.

It can be hard to believe just how bad things really are for most people when those with more money are talking about investing and growing rich off the market.

But if you look outside your own community, then it becomes much clearer.

Here we will talk about why the economy in California is so poorly run and what you as an individual can do to help fix it.

Reasons why the state of the economy is bad

how bad is california economy

The main reason the state of the economy is poor in America’s most populous state is due to the fact that the economy here has too much reliance on the health care industry, just like any other major metropolitan area.

California has some of the highest taxes in the nation, which discourages investment and entrepreneurship. Because of this, the availability of good quality healthcare is a privilege for the wealthy only, as they can afford it.

In addition to this, many jobs are no longer needed due to automation and technology, making it even more difficult to improve the state’s economic standing. All three of these things contribute to the downfall of the California economy.

High housing costs

how bad is california economy

While it is true that house prices have been rising rapidly in some areas of the state, this does not apply to most parts of the country including our own city.

In fact, according to data from Zillow, average home prices in San Francisco are actually lower than they were two years ago! This includes both sold homes as well as houses for sale. It also excludes taxes, which can easily add several thousand dollars to your monthly payment every year.

The cost of living has become excessive in many locations due to skyrocketing real estate prices, especially in the expensive coastal cities such as San Francisco.

Homeowners who want to sell their properties will find very little interest since people cannot afford to purchase these houses. As more and more homeowners decide to stay put, supply decreases and demand stays strong, making owning a house even harder than before.

Overall, the affordability of a house is one of the main factors in determining if someone wants to buy or rent. Due to higher costs, most people do not feel comfortable buying a house unless they make a large income, which isn’t always the case.

This situation can be quite stressful for those looking to start a family soon while also paying high rents or mortgages. Fortunately, there are alternatives to owning a home, including staying in town, investing in the stock market, and renting online.

High utility bills

how bad is california economy

According to the most recent data available, average monthly electricity costs in California are consistently more than $100 per month, which is extremely high for what people are paying for their power.

This doesn’t take into account any additional fees like surcharges or convenience charges that energy companies can impose on customers. These extra expenses are very common because the utilities in your area are not competing with one another so fiercely. As such, you end up being charged higher prices due to market forces instead of company decisions.

Utility companies also often refuse to agree to reductions in usage unless you are willing to pay significantly more for power, leaving you no choice but to bear expensive rates forever. This situation has caused many struggling households to give up on saving money through the use of electricity.

Solutions? There aren’t any easy solutions to this problem. But there are things you can do to help reduce your electric bill!

Start by looking around for cheap electricity providers in your area. You could choose an alternative energy source like solar or wind power, for example. Or, if online shopping is more your style, you could pick a smart device provider that does not need big electricity supplies. Find out more about them here.

And don’t forget to look at ways to save money through other parts of the economy. For instance, you could try buying foods that work well for you and find new ways to improve upon that.

Low interest rates haven’t helped

how bad is california economy

Recent events have shown that even though low interest rates help consumers by lowering monthly payments, they can also do more harm than good for an economy.

With lower mortgage rates now, people are spending their money to make large purchases or invest in things like business loans or mortgages.

But they're not doing it because they don't feel confident about the state of the economy and whether or not they'll be able to pay off their debt. They're staying away from big investments and buying things that require a lot of cash up front with no expectation of return.

That's what caused the first part of the Great Recession back in 2008-2009. People were afraid to spend money because they didn't know how much income they'd have next month. The same thing is happening again today.

So we may see some more hiccups along the way as the economy recovers, but this won't change until people out there start feeling comfortable about the health of our economy and their own financial situation.

Government spending cuts

how bad is california economy

As of this writing, there is no end in sight to the government shutdown that was caused by Congress being unable to agree on how much money it will have for the upcoming fiscal year.

This has major ramifications not just for those who work for the federal government but also for all state governments across America as well as cities and local governments.

Federal funding makes up about one-third of total governmental revenue in most states. Without that income, many state governments are struggling to maintain operations.

Many state departments are closed due to lack of funds, and workers have been told they do not need to show up for work because their jobs can be done from home. This includes things like public safety agencies, such as police and fire, as well as health related facilities.

Agencies may even be forced to furlough some employees completely or use part time staff so that services can be maintained. However, these reductions in service cannot happen if individuals with low paid positions can’t get out of bed every day without pay, which is what happens during a shutdown.

Bad government regulation

how bad is california economy

The other major cause of the state’s economic woes is excessive regulatory burdens imposed by various agencies, including the federal government.

California has some of the most convoluted regulations in the country, making it difficult to do business here. Add this to its already high cost of living, and you have a recipe for very low investment, job creation and overall GDP growth.

Some examples include:

Businesses must comply with separate rules that vary from city to city

Local governments can add new fees or requirements at any time without notice

Regulations are constantly changing — which makes doing business more challenging

Many businesses choose not to expand due to the costs involved in complying with ever-changing regulations

These factors work together to create an environment where investing in companies, creating jobs and growing the economy is simply not profitable, especially for small businesses who cannot afford expensive compliance measures nor recruit additional employees during times of budget cuts.

The situation becomes even worse when large corporations move their headquarters out of the state because of these regulations.

Bad government policy

how bad is california economy

The state of California has done very little to help its economy in recent years, instead passing more regulations and spending money in policies that hurt the state. These include higher income tax rates, increased license fees, and investing in programs that are not necessarily effective.

California’s politicians tend to focus their attention on trying to get votes for another term by promising jobs and growth through business investment, but they fail to acknowledge that most businesses don’t create many new positions beyond what is already there.

Businesses come into an area because of existing infrastructure or good market conditions, not due to promises from elected officials. In fact, studies have shown that local governments frequently hold up economic development projects, preventing companies from coming into the area.

Bad government policy is one of the main reasons the California economy is struggling, and it can’t be stressed enough how much influence each individual voter now has over whether the state will remain impoverished.

The state of the economy will get worse before it gets better

how bad is california economy

With every passing day, we are finding new things to be stressed about in regards to the health of our economy. It seems like everything is going wrong!

The number one cause of worry for most people right now is job loss. Millions of Americans have lost their jobs due to an unprecedented downturn in the U.S. economy, and they can’t afford to pay their bills anymore.

Many more have had their wages reduced or benefits cut back because businesses are spending less money than ever before. This is true whether you work in retail, manufacturing, finance, technology, or any other field.

Another source of stress comes from diminished savings. Many workers spend their hard-earned income paying off debt that was accumulated during times when employment was stable.

And finally, there are those who remain part of the workforce but cannot find adequate, full time work. They may suffer through months or even years of unemployment while they look for a position that fits their qualifications and budget.

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