California is home to just 39.5 million people. The UK has a population of about 65.6 million. With about 12% of the US population living and working in the state, California has contributed approximately 16% of the nation’s job growth from 2012 to 2017.
The majority of the economic buzz that has brought the state to the fifth position is centered around major metropolitan areas. Cities along the coast, including San Francisco, Los Angeles, San Diego and San Jose, have helped spur the growth of California’s gross domestic product, which went up by about $127 billion in just about one year from 2016 to 2017.
California held the fifth spot in the worldwide economy once before, in 2002, before dropping back a decade ago when the Great Recession caused the economy to take a massive dive. Since falling as low as 10th place back in 2012, the state has added over 2 million jobs and increased its Gross Domestic Product by $700 billion.
Attracting strong talent, innovation and entrepreneurship, the state continues to thrive despite, or perhaps because of, a large government presence. Featuring a progressive tax system, strict environmental protections and an impressive minimum wage of $10.50 per hour, California embraces ethnic and linguistic diversity, immigrant workers, and, of course, technology.
What’s Responsible for California’s Economic Success?
The success of California’s massive economy can be attributed to an abundance of factors. With a 3% growth just last year, every sector has contributed to the economic growth in the state- except agriculture. According to The New York Times, real estate and financial services led the way, adding about $26 billion to the GDP. But even industries like manufacturing showed significant growth- contributing about $10 billion to the recent surge.
The wave of people traffic traveling by way of California’s airports was another contributing factor. Regional airports like those in Long Beach, San Jose, San Luis Obispo and Sonoma saw double-digit percentage surges in traffic in 2017.
It’s not surprising that Silicon Valley played an enormous role in the success of California’s economy. Apple, a technology giant in the state, brought in a whopping $229 billion. That equates to about five times more than the output by the entire state of Wyoming.
The information sector, including an abundance of technology companies, was up $20 billion. While the tech and entertainment industries push the economy up even further, the wealth effect that these industries cause is not limited to those who work directly in the fields. Workers throughout the state enjoy higher salaries, boosting what they can spend.
The median pay for workers at Facebook, for example, is more than $240,000. The fire chief in San Ramon pulled in an impressive $516,344 in 2016, and many police officers statewide make over $300,000 per year, including overtime and benefits. With workers in the public sector enjoying high rates of pay, and those in technology and entertainment socking away large sums as well, the economy continues to soar.
“We have the entrepreneurial spirit in the state, and that attracts a lot of talent and money,” said Sung Won Sohn, an economics professor at California State University Channel Islands. “And that’s why, despite high taxes and cumbersome government regulations, more people are coming into the state to join the parade.”
Other Top-Ranking States
California isn’t the only state that is doing well enough to make the list, however. Texas, for example, ranks 11th worldwide with a $1.7 trillion economy. And the state of New York comes in at number 13 with an economy of about $1.5 trillion.
While a map produced by The federal Bureau of Economic Analysis revealed that western states thrived last year, some states didn’t do as well. Kansas and Louisiana, for instance, both experienced slight drops in their economies. Nevada, with a growth of 3.5 percent, Washington with 4.4 percent, and Arizona with a 3.2 percent increase, continued to prosper.