Why California Jobs Are Moving to Red States

Economics is the study of supply and demand, and much of politics is about economics. At odds, in both the political and economic forum, are two ideologies: One group is labeled red and the other blue. Unfortunately, when in comes to jobs in the U.S., employment is disproportionally moving to the red side.

Red State Blue State: How the U.S. Is Color Coded

The terms “red state” and “blue state” started being widely used during the 2000 presidential campaign in reference to electoral maps.

The blue ideology believes that government should provide social programs to help the poor, thereby increasing the size and scope of government. In a time of austerity, blue states will raise taxes to help pay for federal or state programs.

The red ideology believes in limited government; politicians should only be given authority over critical needs such as national security. In a time of austerity, red states will reduce funding for social programs and look to the business community or the private sector to take up the slack.

In other words, blue states are now considered to be liberal, while red states represent a more conservative political stance. These days, employers and job opportunities in what are considered to be blue states are migrating to the red zone.

Red State, Blue State Map

Red State Map

Arizona Jobs, California’s Loss

States like California, traditionally a blue state, are considered to be less stable. On February 3, 2009, California was awarded the worst credit risk of all 50 states after Standard & Poor’s cut its rating due to a budget impasse. S&P lowered the rating to “A” from “A-plus,” citing “the state’s inability to reach an agreement on a mid-year budget revision and its rapidly eroding cash position.”

PayPal, a subsidiary of eBay, once based in California, recently opened a call center in Chandler, AZ. Chandler, AZ is also home to Intel and Honeywell. The move added 2,000 jobs to the Chandler, AZ area, and 1,000 jobs in Austin, Texas and Utah. Utah boasts a balanced budget, AAA debt rating and stable government, an economic anomaly in what is being referred to as the Great Recession.

In California’s defense, their two-year outlook has recently been upgraded to stable from negative. Standard & Poor‘s, which recently downgraded the U.S. credit rating from AAA to AA+,  cited a better balance between cash inflows and outflows as the reason for the upgrade. California was forced to get tough on budget cuts and their debt situation is improving, but the damage is already done for companies like PayPal.

The Red State Solution

The best solution is most likely a combination of the two ideologies–a red cake with blue icing–but where is this middle in practical terms? States like Florida, Texas, Arizona, Colorado, Nevada, Utah, Virginia and North Carolina are creating innovative ways to make jobs at the local level while keeping property taxes low. All of these states have unemployment rates that are lower than the national average for unemployment.

In Arizona, a recent jobs bill passed by Governor Jan Brewer attempts to create jobs through a slew of tax breaks, exemptions and corporate incentives. While the move lowers tax revenue, it adds jobs to the local economy which indirectly increases tax revenue.

It also helps to reduce the need for blue social programs like unemployment insurance and food stamps.  According to a recent report by the U.S. Department of Agriculture (USDA), food stamps are now used by a record 45.8 million people–that’s equal to 15 percent of the entire American population. Clearly there’s a need for these programs, but at what cost?

Brenda Bryant has an MBA with a concentration in finance. She has worked for JP Morgan, SunTrust Bank, and Intel. In 2007 she was invited to Harvard University as a visiting fellow to the assistant to the President. Her favorite pass times are playing with her dogs and reading. Brenda currently resides in Phoenix, AZ where she has lived since 2008.