October 31, 2018
Oakland, CACalifornia ranks 47th out of all 50 states in this year’s Economic Freedom of North America report, released today by the Independent Institute in conjunction with Canada’s Fraser Institute.
Last year, California ranked 49th.
“California’s ranking improved two places” said Dr. Lawrence J. McQuillan, Senior Fellow at the Independent Institute. “But it went from second from the bottom to fourth from the bottom, not worth celebrating. Sacramento politicians still impose barriers to economic freedom and entrepreneurship that hurt job creation, housing construction, and prosperity.”
This year, Florida has surpassed New Hampshire as having the highest level of economic freedom among all U.S. states. It scored 7.87 out of 10 in this year’s report, which measures government spending, taxation, and labor market restrictions using data from 2016, the most recent year of available comparable data.
“The freest economies operate with comparatively less government interference, relying more on personal choice and markets to decide what’s produced, how it’s produced, and how much is produced. As government imposes restrictions on these choices, there’s less economic freedom and less opportunity for prosperity,” said Fred McMahon, the Dr. Michael A. Walker Research Chair in Economic Freedom at the Fraser Institute and report co-author.
Rounding out the top five freest states are New Hampshire (2nd), Texas (3rd), Tennessee (4th), and South Dakota (5th). For the fourth year in a row, New York was ranked least free (50th), followed by Kentucky (49th), West Virginia (48th), California (47th), and Alaska (46th).
The report also includes an additional all-government ranking, which adds federal government policy to the index and includes the 50 U.S. states, 32 Mexican states, and 10 Canadian provinces.
From 2004 to 2013, the average score for U.S. states in the all-government index fell from 8.24 to 7.66, but increased slightly to 7.9 out of 10 this year, driven largely by changes at the federal level.
In the most-free states, the average per capita income in 2016 was 7.3 per cent above the national average compared to roughly 10.5 per cent below the national average in the least-free states.
“The evidence is clearlower levels of economic freedom lead to less prosperity, slower economic growth, less investment, and fewer jobs and opportunities,” said Dean Stansel, economics professor at Southern Methodist University and co-author of the report.
The Economic Freedom of North America report, also co-authored by José Torra, the head of research at the Mexico City-based Caminos de la Libertad, is an offshoot of the Fraser Institute’s Economic Freedom of the World index, the result of more than a quarter century of work by more than 60 scholars including three Nobel laureates.
See the full report at www.fraserinstitute.org/economic-freedom.
California’s scores in key components of economic freedom (from 1 to 10 where a higher value indicates a higher level of economic freedom):
- Government spending: changed to 4.30 from 4.18 in the last year’s report
- Taxes: changed to 4.44 from 4.37
- Labor Market Freedom: changed to 5.39 from 5.83
“This low, stagnant level of economic freedom is causing people to vote with their feet and leave California in droves, even from Silicon Valley,” McQuillan said. “California’s ranking needs to go from 47th to 1st, but without public pressure, Sacramento politicians are unlikely to act anytime soon. Hopefully this report will jump-start pressure for change.”
About the Economic Freedom Index
Economic Freedom of North America measures the degree to which the policies and institutions of countries support economic freedom. This year’s publication ranks 92 provincial/state governments in Canada, the United States and Mexico. The report also updates data in earlier reports in instances where data has been revised.
For more information on the Economic Freedom Network, datasets and previous Economic Freedom of North America reports, visit www.fraserinstitute.org. And you can ‘Like’ the Economic Freedom Network on Facebook at www.facebook.com/EconomicFreedomNetwork.
The Independent Institute is a non-profit, research, and educational organization that promotes the power of independent thinking to boldly advance peaceful, prosperous, and free societies grounded in a commitment to human worth and dignity. For more information, visit www.independent.org. For media inquiries, contact Communications Manager Rob Ade: [email protected]; (510) 632-1366, ext. 114.