California's Government Policies Causing Exodus of Skilled Workers and Capital

We’ve written before about the efforts of Texas Gov. Rick Perry to lure California businesses to his state, which elicited a scatological response from Gov. Jerry Brown. Relocation expert Joseph Vranich, who has done such a good jobassembling the list of California firms leaving the state, has a revealing column  chronicling a further list of governors poaching in the Golden State, including Iowa’s Terry Branstad, Pennsylvania’s Tom Corbett, South Dakota’s Dennis Daugaard, and NJ’s Chris Christie, among others. Brown’s reaction has been typically colorful. He even called Iowa “the cold, empty and desolate hinterlands.” Brown’s attitude is reflective of a larger feeling within California’s governing elite which can’t imagine firms leaving the state for anywhere else. But the numbers say something else.



As demographer Wendell Cox has demonstrated, California has lately turned into a net loser of jobs to other states, when migration in and out of states by firms is considered. Confronted with such numbers, California apologists will observe that job re-locations are a small contributor to net employment growth, which is true. A state is far more likely to generate new jobs from growth in existing firms or from start-ups.

But if a state is a net loser in job migration, it tells you something about the overall economic and business climate of the state, which also influences decisions by existing firms and entrepreneurs on whether to invest locally in new jobs. That’s why states that are net losers in job migration also tend to rank poorly compared to other places in new jobs generated by in-state firms.

As Vranich points out, California is now consistently rated by executives as one of the worst places to do business, mostly recently by Chief Executive magazine, where one executive observed that, “California is getting worse, if that is even possible.” Another tipped his hat to one of the state’s advantages, observing that, “California has the best labor pool,” but then he added, “and the worst government.”

People, of course, follow jobs, or maybe jobs follow people. Either way, California is also a net migration loser of people and capital these days.


Steven Malanga, of the Manhattan Institute, is City Journal’s senior editor, a Manhattan Institute senior fellow, and a columnist. He is author of the recently published Shakedown: The Continuing Conspiracy Against the American Taxpayer, about the bankrupting of state and local governments by a new political powerhouse led by public-sector unions. He writes about the intersection of urban economies, business communities, and public policy. He was recently cited as one of Governor Chris Christie’s intellectual influences (BusinessWeek, August 2010). This article originally appeared in PublicSectorInc. and is republished here with permission.

3 replies
  1. A Former Native Californian says:

    While my spouse and I are but one “anecdotal example,” we moved out of California a little over a year ago. The last straw was the proposal (with high likelihood of passing) for increased taxes. Between the taxes and the other high expenses of living in California — and the traffic congestion that will never be addressed (in a timely manner) we decided we were through. It’s sad because my grandparents arrived in San Francisco before the turn of the century (the 19th century) and my wife’s parents likewise took up residence in Riverside at an early date. Our parents were born in California as we were. Our roots run deep and we enjoyed growing up in the state when it was truly golden.

    But too many central planners and others who think they know better than we do on how we should live have come to power. Political competition, even with the voter’s desperate efforts to reform the system by repeated initiatives, has failed. (Competitive legislative districts are better for voters, though the political elite hate them.)

    I spent much of my career as a middle manager for larger and smaller corporations — after “downsizing” in the 80s, I owned a small business. Through good luck and good management, we became affluent — and were taxed accordingly. But I grew tired of politicians constantly making life less pleasurable and raising costs either through taxes or by failing to expand the highway system (creating ever more congestion) — finally we moved to a state with no Income Tax. It also has a lower population density — and even though the locals complain about traffic, they really don’t have a clue about what ‘bad’ traffic congestion really is. (I commuted from west Contra Costa to Mountain View for several years… 3 hours a day on the freeway — but housing was too expensive to move closer.)

    The way California is developing it will have very wealthy — engineers/silicon valley related employees; and the usual Hollywood contingent. The “middle class” will be nearly all government workers and teachers (whose tax payments come out of salaries paid by taxes). And a vast number of poor, poorly educated “underclass” (who mostly receive “benefits” rather than contribute to paying the taxes that support everything).

    At some point, the wealthy at the top may become tired of funding the vast middle of government functionaries. If/when they move away, then California will quickly go bankrupt.

    It’s really a shame.

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