California’s outcome rankings for jobs and businesses

Unemployment in San Jacinto Valley more than 3x national rate

Prosperity Now Scorecard 2017
The Prosperity Now Scorecard ranks 56 outcome measures from best to worst: a score of 1 is the most desirable; a score of 51 is least desirable. Grades are given on a curve: states that rank 1-10 get As; 11-20 get Bs; 21-36 get Cs; 37-47 get Ds; and those that ranked 48-51 get Fs. California earned a rank of 15, which equates to a “B” grade for the Businesses & Jobs category.

■ Mary Ann Morris / Editor

[Editor’s Note: Last week we ran an article about how families are financially unprepared for emergencies, based upon a report from Prosperity Scorecard, an organization that ranks each state and Washington, D.C. for its policies and metrics in five areas: Financial Assets & Income, Businesses & Jobs, Homeownership & Housing, Health Care, and Education. This article focuses on the category of Businesses & Jobs .]

Back in the ‘60s and ‘70s, the surest way to get ahead and become part of the coveted middle class was to secure a job with a decent wage, upward mobility and a nice benefits package. When job opportunities are limited, people tend to take the entrepreneurial route and create their own businesses to support themselves, create job opportunities for others, and hopefully have a tangible business to pass down to their heirs.

Unemployment rates stymie efforts to get ahead
These days, however, “middle class” seems to be out of reach for many families, according to the 2017 Prosperity Now Scorecard, which reveals that while there is growth in employment and business ownership, employment opportunities remain elusive in the San Jacinto Valley, which experiences an unemployment rate more than three times the national average of 4.9 percent.
Hemet’s unemployment rate is 19.5 percent (almost four times higher than the national average); San Jacinto has a slightly lower rate of 16.7 percent. For people of color, the statistics are even more depressing: the unemployment rate is 1.2 times higher for Black, Asian or Hispanic Hemet residents, and 1.5 times higher for those in San Jacinto at 25.05 percent.
Underemployment scores are higher in this area as well, and the statewide rate is 11.3 percent. Considering that the unemployment rates for Hemet and San Jacinto are much higher than the state and national average, it would make sense that the underemployment rates are also much higher, although city data were not available for that statistic. The median household income for Hemet in 2016 was $33,989, compared to $46,725 for San Jacinto. The average annual income nationwide was $52,942, according to the report.

Employer-offered insurance decreases; micro-businesses increase
Fewer than half of all California employers (45.7 percent) offer health insurance to their workers. Why so few? Because companies with fewer than 25 employees aren’t required to offer this benefit to their employees. Statistics indicate that micro-businesses (those with fewer than five employees) are on the increase while larger companies that can afford health insurance are experiencing a decline.
Micro-businesses comprise more than 90 percent of all business enterprises and are responsible for 31 percent of all private-sector employment in the U.S., according to the Association of Enterprise Opportunity.
However, despite the rhetoric at the national and state level about economic growth, the micro-businesses that power our national economy are under-resourced and undercapitalized, according to the Scorecard. Most people turn to self-employment and micro-businesses when there are not adequate employment opportunities nearby.
While the growth of micro-businesses increased slightly from last year, the growth occurred mainly among businesses without paid employees, which means that business development growth is having a very slight effect, if any, on reducing unemployment.
The average valuation of a business without employees is $46,914, less than the national average income of almost $53,000. Considering that the median household income in Hemet is substantially less than that, it would be plausible that the average micro-business in Hemet would be worth less as well.

Medical Expenditure Panel Survey for Prosperity Scorecard Now
The number of companies that offered health insurance to its workers has experienced a 10.7 percent decrease from 2008 through 2015.

Woman-owned businesses worth much less
California ranks No. 15 in the area of Businesses & Jobs, giving it an above-average grade of B. See the table for data and rankings on specific areas measured for Hemet and San Jacinto and how they compare to California and the rest of the nation as a whole.
While at the state and national level, business value ranked by race is comparable to the data for Hemet. However, the disparity of business valuation by gender is dramatic. The same business in Hemet, owned by a man, is worth 4.7 times more than a woman-owned business – and the rate is 8.2 times higher in San Jacinto. Whereas in California as a whole, the difference isn’t quite as wide, at just 2.7 times higher for male-owned businesses, and three times higher nationally.

Scorecard policy rankings
As of 2016, California has adopted 6 of 10 policies designed to assist businesses and jobs. In all areas of the study, California has adopted 27 out of 53 policies, giving it room to improve its overall ranking.
California uses federal Community Development Block Grant (CDBG) funding to provide annual grants on a formula basis to cities and counties to support low-income entrepreneurs and micro-business development. These funds are awarded to each city and the City Council determines how to spend the money, typically through an application process. Usually, these funds are awarded to nonprofit organizations or areas of city government that benefit low-income residents. According to the Scorecard, when CDBG funds are invested in micro-businesses, 183 jobs are generated for every $1 million invested, which demonstrates a true return on investment through economic growth and job creation.
However, the state does not use federal TANF (Temporary Assistance for Needy Families) or the Workforce Innovation and Opportunity Act (WIOA) funding to support micro-businesses, and perhaps this is where the funding is needed the most and policies should be created.
According to WIOA, 52 percent of adults aged 16-65 lack the literacy skills to identify, interpret or evaluate one or more pieces of information, which is a critical requirement for success in postsecondary education and work. Programs support access to real-world education and workforce development through on-the-job, incumbent worker and customized training, aligning workforce development programs with economic development and education initiatives and improve outreach to disconnected youth.
Regarding wages, California is also on track to pay a minimum wage of least $15 per hour by 2022 or will be indexed for inflation, including agricultural, domestic and tipped workers, according to the report.
California has adopted policies for businesses to offer paid medical, family or sick leave, and has expanded some of these policies to include FMLA to cover more workers than in years previously. And while the state has expanded eligibility for unemployment benefits, California’s weekly unemployment benefit remains less than 50 percent of the state’s average weekly wage, and does not have an assistance program for people who are self-employed.

About the Scorecard
The Prosperity Now Scorecard measures data on family financial health and makes policy recommendations to help put all U.S. households on a path to prosperity. The Scorecard equips advocates, policymakers and practitioners with national, state, county and city data to jump-start a conversation about solutions and policies that put households on stronger financial footing across five issue areas: Financial Assets & Income; Businesses & Jobs; Homeownership & Housing; Health Care; and Education.

Next week: the rankings and policies for the Homeownership & Housing section.

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