Who’s leaving state? Not who you think
For more than a generation, opportunistic California politicians have barraged voters with woeful tales about how the most productive, inventive, wealthy and enterprising Californians are leaving this state in droves to avoid high taxes and excessive government regulation.
These stories, used successfully by the likes of Pete Wilson and Arnold Schwarzenegger while running for governor, and unsuccessfully by failed candidates from Bill Simon to Meg Whitman and Neel Kashkari, tell of rich Californians seeking greener pastures in more laissez faire states like Texas and Idaho.
There’s only one problem with those stories: They don’t match the facts, even though they often are purveyed by folks with a financial stake in the fables, some of them business relocation experts. It’s not just that California has outpaced the rest of America economically for most of the last 20 years. It’s not merely that innovative businesses and venture capital investments here are the largest and most successful in the world.
It’s not only that coastal California real estate, property in the state’s most populous areas, brings more cash than comparable real estate anywhere else in America except Manhattan, but also that there are plenty of buyers around with the cash to pay seemingly outrageous prices. It’s also that truth matters little anymore, with one of the principles peddled by master Nazi propagandist Josef Goebbels in the 1930s and ’40s proving at least somewhat correct: The more often you repeat and broadcast an untruth, the more people will come to believe it.
That especially holds when some numbers appear to back up the untruth. In terms of people leaving California, there is such a number: California had a net population outflow to other states of 625,000 residents between 2007 and 2014. Newborn children and immigrants more than made up for that loss, so don’t expect the state to lose congressional or Electoral College clout after the next Census in 2020.
But the majority of those departing are not the extremely prosperous residents about whom we so often hear from folks described by Gov. Jerry Brown as California “declinists.”
Rather, of those who left during the latest years for which statistics exist, the vast majority earned less than $30,000 per year. A net total of 469,000 of those leaving possessed no college degree. Given the prevailing levels of rents and home prices in California, it’s easy to see their financial motive in leaving for far lower-priced states like Texas, Nevada, Oregon and Arizona.
But as lower-income residents left, there was a net increase of 52,700 residents from other states making more than $50,000 per year who do have at least a bachelor’s degree. The figures come from a Beacon Economics study released this spring (http://next10.org/sites/next10.huang.radicaldesigns.org/files/california-migration.pdf).
The upshot is that while it’s true that a few big businesses have shifted their national headquarters out of California primarily because it’s far cheaper for them to expand their facilities in states with lower land prices, most of this state has not suffered much. New businesses arise and succeed here faster and in larger quantities than anywhere except perhaps Israel, also a center of high tech innovation.
Land values remain the primary reason for businesses shifting headquarters or expansion outside California. It’s difficult to attract and retain workers here with salaries under $50,000, because of housing prices.
Said one executive, “I pay some of my people with master’s degrees $70,000 and $80,000 a year and they still have no hope of buying a house anywhere near Silicon Valley.” That reality explains a lot of the corporate expansion to cheaper states.
So does the price of raw land for expansion in places like Las Vegas, Boise or Tucson, where empty desert abuts directly on city limits. That situation is rare in California, but it makes large tracts of land elsewhere available at very low prices.
The bottom line: Yes, this state has lost some population to other states, but for the most part it has not been the most creative, wealthiest and entrepreneurial Californians who left. Which means that doom-saying politicians and urban “experts” who say the out-migration numbers spell impending disaster are mostly blowing self-serving smoke.