If California is such a horrible place to do business, why do bosses keep their operations here?
My trusty spreadsheet found a key reason when reviewing 2025 labor productivity data from the Bureau of Labor Statistics for 50 states and the District of Columbia. This math estimates changes in the classic business struggle: the value of output compared with what it takes to make the product.
Turns out, California’s labor productivity took the third-biggest jump among the states last year. The 4.2% jump was more than twice the national average of 1.8%.
Thank you, California workers!
Now, the report points out that changes in any state’s productivity are not only about employee efforts. The bureau explained that results “reflect the joint effects of many influences,” such as technology, investment, resource use and management skills.
With widespread credit for being lean and mean noted, consider that California’s workplace productivity increase was bested in 2025 by only the District of Columbia, up 5.2%, and Arizona, up 4.4%.
Conversely, productivity dropped in eight states: Idaho was down 2.5%, Alaska, off 2.3%, Mississippi, off 1.3%, Wyoming, off 0.7%, Oklahoma and West Virginia off 0.4%, and Nebraska and Nevada, off 0.3%.
And what about California’s economic arch-rivals?
Texas only managed 0.6% productivity growth, landing at No. 37. Meanwhile, Florida’s 1.1% increase put it at 29th.
Two-part play
This measure of business efficiency comes at the intersection of two factors driving business success.
First, you’ve got the private sector’s growth: basically, how many more goods and services were made, not counting government or farming.
Then, how many more hours did it take workers to make all that happen?
Start with California’s economic output. It grew 2.9% last year, the ninth-fastest growth among the states and beating the national average of 2.4%.
The fastest-growing outputs were found in Alaska (up 3.8%), Florida (3.7%) and South Carolina (3.6%). Texas, at 2.6%, ranked No. 17.
The laggards included West Virginia and Nebraska, up only 0.5%, and North Dakota and Maine, up 0.8%.
Now the Golden State’s secret sauce for productivity — perhaps a benefit more for bosses than workers — was a 1.2% drop in workers’ hours. Think efficiency.
This was the seventh-largest decrease in hours among all states. In contrast, workers in the rest of the country worked 0.6% more.
There were 17 declines in hours, topped by Oregon, off 2.4%, Arizona, off 1.8%, and D.C. and Louisiana, off 1.7%.
Hours jumped the most in Alaska (up 6.2%), Idaho (up 5.4%), Mississippi (up 3.3%) and Florida (up 2.6%). The 2% increase in Texas was the ninth largest.
Historically speaking
California’s workers have been cranking out high productivity for years.
With business costs so high here, being efficient isn’t just a nice touch. It’s a must.
Between 2007 and 2025, California’s labor productivity grew at the third-swiftest pace among the states. The 2.4% annual rate easily topped the nation’s 1.6%. Only workforces in Washington state (3%) and North Dakota (2.9%) have been more efficient.
Over the long haul, the least productive workplaces were in Wyoming, with just 0.1% annual growth, and Connecticut and Louisiana, at 0.5%.
Texas’ 1.7% annual productivity growth since 2007 ranked No. 15, while Florida’s 1.4% ranked No. 27.
Sore spot
There’s a catch hiding in California’s shiny productivity numbers.
California labor costs per unit of production were up 3.5% last year, the fifth-biggest jump among the states and well above the nation’s 2.4% increase.
Bigger hikes than California were found only in Idaho at 5.9%, Mississippi at 4.6% and Nevada at 3.8%. One state had production costs fall, Montana, off 0.3%. D.C. was flat.
Texas costs, up 2%, ranked No. 27, while Florida’s 3.2% ranked No. 12.
Historically speaking, California has been a relatively inexpensive place to do business by this spending metric. So this is a noteworthy reversal.
Since 2007, the Golden State’s 1.5% average annual per-unit cost growth tied for sixth lowest with Texas. Nationally, the expense metric rose 1.7%.
The smallest gains were in New Mexico and North Dakota, up 0.9%, and Nebraska, up 1%. The largest increases included Wyoming and South Dakota, up 2.7%. Florida’s 2.2% increase was the ninth worst.
California critics will say the state is antibusiness. Well, the economy survives its pro-worker stance with a workforce that’s top-of-the-charts efficient.
Keeping productivity sky high is just another headache for Golden State bosses.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
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