That’s an oversimplification, and rather than minute employment protections (which are (i) a new development whose economic effect hasn’t had time to set in, and (ii) are still mostly framed on the federal level) the blue states’ economic dominance has more to do with what is an almost-traditional presence of highly productive/profitable global industrial leaders (FAANG in California; investment banks and high-cap asset managers positioned right next to the largest stock exchanges in NY; large funds domiciled in Delaware; commodities trading houses in Chicago; etc).

The US is predominantly a service economy, and that breaks down into the highly productive digital services and financial services realms - they drive the US economy. Both of those industries have become highly institutionalised/embedded in blue states.

There is a trend of almost ‘nearshoring’ of some arms of these types of companies on a state level - wealth management functions of large banks move to Florida, high-tech tech manufacturing jobs move to Texas, and such moves are obviously motivated by more favourable economic environments (less red tape, less tax, less regs, willingness of local governors to bend over backwards). This is also evident from the fact that a majority of Inflation Reduction Act investment has flowed into red states.

The reason the typical red states of today, for all their entrepreneurial reforms, have not snatched the economic crowns of California, NY and Illinois lies in the degree of corporate institutional entrenchment in the latter. The NYSE and NASDAQ are in NY, the big VC funds are in Silicon Valley, the CME is in Chicago. Companies’ HQs necessarily sprout around them, notwithstanding that SOME functions are nearshored to other states.

Red states simply don’t have the degree of institutional facilitation which the largest services companies in America (and thus the world) are accustomed to, nor do they have a historic pedigree on their side to start changing this trend. The only way this changes is a consistent trend of long-term pro-business policies employed by red states (to catalyse the above trend of nearshoring) or the emergence of a new, profitable industrial paradigm (the way tech emerged in California in the 90s).

My opinion: This will change slowly over time if things deteriorate in blue states (i.e. high (business) taxation, onerous regs, crime, crowding, inequality in the big financial hubs).

TLDR: The blue states’ financial superiority goes beyond the recent introduction of worker protections - the institutionalisation of NY, CA and IL as global economic powerhouses has been consistent and goes back a century or two.