Part 2 of 3: Global Context & Real-World Impacts
Having established California as a state with high compliance standards in the US, this second installment broadens the perspective to a global context. We’ll compare California with similar economies and analyze how its policies impact workers and employers in real-world situations.
How Does California Compare Globally?
Compared to other major Western economies, California is much less extreme.
To start, most of these countries already have many of these workplace laws in place, but also have unique nuances.
In Canada, the American concept of “at-will employment” is not recognized and broadly considered illegal. Unlike in the US, where employment can be terminated at any time for any legal reason, Canadian employers are required to provide proper notice or pay instead of notice before ending an employee’s employment.
In the European Union, the Working Time Directive guarantees at least four weeks of paid annual leave, limits the average work week to a maximum of 48 hours, and requires daily and weekly rest periods and breaks after six hours of work.
As discussed in my 2024 3Sixty Insight piece, “The Productivity Dilemma,” despite the zeitgeist claiming otherwise, there is generally no marked reduction in productivity in these countries, as measured by GDP per hour.
By those standards, California is stricter than most American norms, but it is broadly in the middle of the pack compared to other advanced economies.
Do These Rules Actually Protect Workers and Businesses?
For workers, California’s framework clearly provides a higher baseline standard.
With a higher minimum wage and clearer statutory rights regarding breaks, overtime, paid sick leave, and misclassification that researchers describe as among the most progressive in the country, as supported by the Oxfam study above and numerous others.
California has dedicated agencies and legal tools that make it easier—at least in theory—for workers to pursue unpaid wages and penalties. While the state has criminalized certain forms of wage theft and uses both agency enforcement and the Private Attorneys General Act (PAGA) for civil penalties, enforcement gaps and wage theft remain widespread. Research estimates workers in California still lose $2.3–$4.6 billion annually to minimum-wage violations, underscoring persistent enforcement and equity gaps even under strong laws.
For workers in retail, food, and service sectors in particular, a 2024 study by UC San Francisco and Harvard found these workers face ongoing violations on the job. Surveying 980 workers in these industries, 91% reported experiencing at least one violation, including working off the clock, unpaid overtime, being paid below the minimum wage, inadequate time off, or rest breaks.
So, while the system isn’t perfect, without those laws and institutions, the losses would likely be larger and more difficult to challenge.
For employers, the short-term impacts are real: increased complexity and regulations, higher staffing costs, and greater legal exposure and repercussions from labor enforcement agencies, especially in sectors like fast food, where owners report raising prices, cutting hours, or closing locations after wage hikes. Ongoing legislative and regulatory activity in areas such as AI, privacy, and industry-specific rules reinforces this sense of constant change.
However, for all of the stress surrounding higher wages, they had a minor or non-existent impact on job losses and prices. In the fast food industry, where the minimum wage increased to $20, prices rose by only 1.5% or “about 6 cents on a four-dollar hamburger,” according to the Berkeley Institute for Research on Labor and Employment.
Still, the same framework can level the playing field against non-compliant competitors and reduce ambiguity once systems are correctly configured.
Is All This Compliance “Bad for Business”?
Despite the narrative, California’s state economy remains the largest in the US. With an economy 51% larger than Texas’ (second place) based on 2024 figures, if California were its own country, its $4.1 trillion GDP would make it the fourth-largest economy in the world, larger than the economy of Japan.
And while a portion of this can be attributed to its size and prominence as a tech hub, the state’s characteristics as a high-productivity, high-income economy remain strong on a per capita basis as well. California’s GDP per capita has grown faster than the rest of the United States since 1998, outpacing other large states over the long term. Globally, on a per capita basis, California’s GDP exceeds that of the US as a whole, as well as China, Germany, and Japan. Median household income in California (~$95–100k) is ~20–25% higher than the national median (~$80k).
However, attributing this solely to labor laws is misleading.
California’s high GDP per capita is driven primarily by its industry mix (tech, entertainment, professional services, and high-value manufacturing), human capital, and innovation ecosystems, with labor laws playing a supporting role rather than a primary growth engine. With an abundance of Fortune 500 headquarters within its borders and a long-standing ban on non-compete agreements, California is widely recognized for fostering innovation and labor mobility. It’s clearly not too regulated to grow.
However, it is worth noting that no country or state thrives or fails solely because of its labor laws. When measuring figures in the billions and trillions of dollars, growth is driven by a combination of factors, including California’s labor laws, which coexist and, in some ways, reinforce a high-productivity, high-income economy.
If California isn’t failing under its own rules (and might even gain from them), why does the idea that you can’t do business there still persist? In Part 3, we’ll analyze that perception, what lies ahead for other states, and how HR technology providers are transforming compliance into a competitive advantage.
Read part 3 here: California Labor Laws and Compliance: Burden, Benchmark, or Competitive Advantage? | Perception, Future Trends, and the Role of HR Tech
Read part 1 here: California Labor Laws and Compliance: Burden, Benchmark, or Competitive Advantage? | Myths, Realities, and US Benchmarks