Thus, if the California economy suffers a cold, it is not only the rest of the US that is subject to contagion, but also the world economy. Whether this contagion will occur or not is still unclear, since the magnitude of the costs is still unknown. However, it does demonstrate why government officials are working hard to find a panacea for California. In their most recent report, California is ranked as the 9th most expensive state. The ranking considers a number of cost elements, including labor costs, energy prices, tax burdens, and office rents.
New Jersey is ranked at the top of the list, and South Dakota ranks at the bottom.
However, economists have found that business costs do play an important role in long-term economic growth, since they figure into the relocation and expansion decisions of firms. Thus, if California electricity costs, which are already high relative to many other states, rise on a permanent basis, it could have a dampening effect on the long-term growth prospects for the state. All is not bleak. California has several factors in its favor. Home to a highly skilled workforce, the state is one of the wealthiest regions in the world, and its economy has grown by 32 percent since 1995.