PESTEL analysis of California (California state profile)

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PESTEL analysis of California (California state profile)

This is a detailed PESTEL analysis of California. It aims to examine some of the political, economic, social, technological, environmental, and legal issues that have impacts on the state. California is a western U.S. state. It is in fact one of the largest and most populous states in the country.

Political factors that affect California

There are three branches of the government in California – the executive branch, the legislative branch, and the judicial branch. California sends two senators to the U.S Senate and 53 representatives to the House of Representatives. However, it may lose one congressional seat because of its slow population growth potentially resulting in shrunk political power in Congress (Lightman and Bojorquez, 2021).

California is a liberal state. It leans towards the Democratic party, though people have differing political views. Californians generally have a positive attitude to immigrants and believe that they are a benefit to the state (McGhee, 2020).

It is worth noting that numerous organisations have been campaigning for the independence of California from the USA for a long time. However, many analysts argue that the campaigns are not that powerful compared to those in Catalonia (Spain) or Scotland.

Economic factors that affect California

California’s GDP in 2020 was around $3.09 trillion (Statista, 2021). It is the largest state economy in the USA. If it were an independent country, it would have been the 5th largest GDP in the world staying ahead of the UK, and only behind the USA, China, Japan, and Germany. It is interesting to note that California’s economy fared better than other states during the lockdowns in 2020/21. However, some experts forecast that economic and job growth in California will be slow over the next five years.

Top industries in California are agriculture, tourism, technology, entertainment, and education. Construction and health care industries are rapidly growing as well. Some of the fastest growing occupations are statisticians, information security analysts, software developers, web developers, camera operators, chefs and cooks, supervisors of food preparation, staff trainers, animal trainers, taxi drivers and chauffeurs, biological scientists, medical assistants, personal care aides, and nurse practitioners.

Unemployment rate is high in California. Despite this, many job positions in businesses such as bars, restaurants, and retailers go unoccupied causing businesses staff shortages. The major reasons are low wages in those areas of work and many women dropping out of the labour market because of childcare and home-schooling issues.

There are different personal tax brackets and rates in California starting from 1% and ending in 12.3%. Apart from the 1% tax rate, the rest of the rates also accompany a fixed amount (Orem, 2021). There are three types of corporation tax i.e. a franchise tax, a corporate income tax, and an alternative minimum tax. Businesses are subjected to one or more of these taxes depending on both their amount of taxable income and their legal status.

Social factors that affect California

California is a liberal, tolerant, vibrant, and multi-cultural state. Its population is around 40 million and many people have Asian, African, and Latino roots. However, hate crimes against ethnic minorities have seen a surge recently.

California has a massive entertainment industry with Hollywood being the centre of focus. Hollywood is a big part of the Californian dream. It produces about half of all the films shot in the country. In fact, the entertainment industry employs hundreds of thousands of people in the state.

Some of the top U.S. colleges and universities are in California. Unsurprisingly, the state is a very popular destination for international students. However, it should be mentioned that some of the country’s poor-performing elementary and secondary schools are in the state as well.

McGhee (2020) reports that housing crisis is acute in California. The high price of housing is pushing people out of the state and contributing to poverty rates. Over 160 thousand people are homeless which has raised serious concerns. To tackle this crisis, the state governor has unveiled a $12 billion plan that is expected to build 46,000 housing units.

Ageing population could be a challenge for California as it will increase the health care costs. The number of those over 65 is forecast to reach around 8.4 million in 2030. Moreover, around 3 million people live without health insurance (Kang, 2019). These issues need to be addressed well and fast.

Technological factors that affect California

Technology is an important topic of discussion in the PESTEL analysis of California. The state houses Silicon Valley, which is a great centre of global technological innovation, and provides job opportunities for over 250,000 people. So many high-tech companies such as Apple, Google, and Facebook have their headquarters in the Valley. Likewise, Los Angeles caters for over 500,000 tech jobs.

It is worth noting that though California is the world leader in innovation in the private sector, tech in the public sector faces numerous challenges. For instance, a series of technology glitches were reported in the past several years. Likewise, sporadic public backlash against emerging technologies and services such as GM products and nanotechnology also need to be taken into account.

Environmental factors that affect California

California is a stunning state with so many wonderful visitor attractions. Misty redwood forest, beaches, deserts, mountains, lakes, theme parks, and other numerous attractions make Disneyland look normal. However, California is often affected by natural disasters such as wildfires, floods, droughts, earthquakes, landslides, cold, and storms.

Legal factors that affect California

Due to the limited scope, this article offers a brief discussion on the legal environment. California has its own state law; however, people are subjected to both the state and the U.S. federal laws. The state has comprehensive labour laws that ensure employee welfare and penalties for those employers who are found in breach of the laws. In fact, California has perhaps the most pro-worker employment laws in the United States.

We hope the article ‘PESTEL analysis of California (California state profile)’ has been useful. You may also like reading PESTEL analysis of the USA and SWOT analysis of the USA. Other relevant articles for you are:

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Last update: 02 July 2021


Kang, I. (2019) The top issues and candidates for Californians in 2020, available at: (accessed 30 June 2021)

Lightman, D., and Bojorquez, K. (2021). California is about to lose a seat in Congress for the first time. Texas will gain 2, available at: (accessed 30 June 2021)

McGhee, E. (2020) California’s Political Geography 2020, available at: (accessed 02 July 2021)

Orem, T. (2021) California State Tax: Rates, Who Pays in 2020-2021, available at: (accessed 01 July 2021)

Statista (2021) U.S. Gross Domestic Product (GDP) by state 2020, available at: (accessed 02 July 2021)

Author: Joe David

Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.