Is Arizona the New California?

A pleasant climate year-round, breathtaking ocean shorelines, diversity and opportunity are just a snippet of California’s attractiveness. Recently, however, increasingly more people uproot their lives to live and run businesses in the Grand Canyon State. 

With 39 million people, California is the nation’s most populous state. Arizona’s population is 7.4 million, up about half a million from the 2010 census results. As the second- fastest-growing state, its population is climbing more quickly than the national average. This begs the question: Is Arizona the new California? 

Arizona’s climate appeals to businesses, especially for small-business owners and entrepreneurs. The high number of competent and educated workers, solid gross domestic product growth, low tax rates, business credits, and limited regulations are inviting to potential business owners and residents alike. 

Arizona’s influx of residents and tourists who are also consumers further encourages the business economy. A three-year study conducted by Spectrum Location Solutions demonstrated that between 2018 and 2021 Arizona came in fifth for most attractive states for businesses leaving California. Profitable industries include real estate, manufacturing and health care. 

“It is true that Los Angeles has high cost-of-living expenses compared to Phoenix, but the average wage is also higher in Los Angeles,” said U.S. Bureau of Labor Statistics economist Nicholas Chung, noting that higher wages, better employment benefits and lower living costs are examples of factors that typically encourage relocation. 

The U.S. Census Bureau provided the following statistics to give some perspective. In Arizona, the median monthly housing costs for individuals living in owner-occupied units with a mortgage in 2021 was $1,545, opposed to $2,548 in California. Further, median real estate taxes in 2021 were $4,804 for Californians, compared with $1,717 in Arizona. Finally, the average household income in Arizona was $69,056; the average in California was $84,907. While Californians earn slightly more on average, the cost of living is substantially higher than in Arizona, which potentially offsets the difference in job earnings. 

“Looking at the (data), you’ll see California’s prices were higher than the national average, and Arizona’s were lower than the national average. California is at 111.8% of the overall national price level. Arizona is 96.7%,” said Connie O’Connell, chief of public affairs and outreach at the U.S. Bureau of Economic Analysis. 

According to World Population Review, California’s population density in 2023 is 251.3 per square mile; Arizona’s is 63 people per square mile. High population densities often equate to high housing costs, more traffic, high pollution and stress on natural resources. However, with approximately 113,594 square miles of area in Arizona, there’s room for businesses to sprawl out while still enjoying the benefits of a healthy economy with promising growth potential.