Column: California isn't 'hemorrhaging' people, but there are reasons for concern
Goodbye Elon Musk: Tesla's boss says he's moving to Texas, but his company's best domestic market is still California.
This sound that Californians hear from across the Sierra and as far as the Gulf of Mexico boasts.
The announced relocation of Oracle and Hewlett Packard Enterprise in Silicon Valley brings Texas and other states to look back on their success in attracting entrepreneurs and companies from the Golden State.
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Farewell, Elon Musk of Tesla and SpaceX, decamped to Texas. Goodbye Larry Ellison who now lives in Hawaii.
No more merchants or employees are wanted; and of those who come later, nine tenths will return or stay disappointed or impoverished.
Horace Greeley from California in 1860
From this side of the state border you can even see hand presses. As reported by my colleagues Hayley Smith and Hailey Branson-Potts, in the year ended July 1, California population growth dropped to 0.05%, a level not seen since 1900 Cost of Living.
The Sacramento Bee mined the same data, calling California "no longer a boom state".
The tale of California's decline is almost self-evident. In just one month, three major companies have announced relocations or other moves from California: Hewlett Packard Enterprise will move its headquarters from San Jose to Houston and Oracle from Redwood City to Austin.
Musk says he's moving from Los Angeles to Texas because his two signature firms operate there. Other tech companies are considering whether or not to want to stay in California.
But can we get real for a moment?
Yes, the state's population growth has slowed to a trickle. This is also the case with employment growth, as my colleague Margot Roosevelt reports.
The flattening in population growth appears to be a "fundamental change" historically, notes Hans Johnson, demographer at the Public Policy Institute of California.
However, Johnson also notes that "in some ways, last year's data is just a gradual change from what we have seen over a couple of decades, which has slowed California's population growth."
He adds that population trends have nothing to do with the erosion that upper-tier states and Rust Belt cities like Detroit, Cleveland and St. Louis, which have more than half of their population over the past 50 years, are suffering have lost.
"California doesn't look like it," he told me. "We don't have any areas where getting in and tearing down houses is one of the challenges facing metropolitan government. What we have in California is high property prices because we couldn't build enough housing. So we can't get more people to work. than we normally would. "
This points to the most important challenge facing the California government - housing construction. We will come back to this shortly. Suffice it to say that for all its pluses, California has no reason to complain about the future.
First, let's put the state's economic and demographic trends into perspective.
History teaches us to beware of rash declarations that the California dream is over. Since the days of the gold rush and the early years of statehood, visitors to California have noticed scabies mixed in with the glitter.
In an 1855 screed titled "The Land of Gold: Reality Versus Fiction," a North Carolina transplant named Hinton R. Helper cursed the "rottenness and corruption, misery and misery, crime and shame" of the state.
Horace Greeley, famous for advising young men to go west, lamented the spiritual and civic poverty of the Golden State after his only visit in 1859. "During a journey of several hundred miles through the West, parts of this settled State, "he wrote," I remember seeing only two schoolhouses outside the towns and villages. "
California's GDP (blue line) has grown faster than low-tax Florida (red), Nevada (green), and Texas (purple) since 2012. (Federal Reserve of St. Louis)
Greeley became poetic about the riches of the farmland, but warned that "the deplorable confusion and uncertainty of land titles" of the time of the Mexican government prior to the annexation of the United States in 1848 "is the master scourge of that state".
The land disputes would not be resolved in the coming years - an indication of the role real estate has played in the state throughout its history.
In 1860, Greeley warned that California's opportunities were almost exhausted. "There is no longer any search for merchants or employees; and of those who come later, nine-tenths will return or stay here disappointed or impoverished."
When looking at population inflows and outflows, keep in mind that California has seen net emigration to other states since about 1989.
In some years the gap is wider than in others, but it is almost always an infinitesimal percentage of the total population. In 2019, net outflow from the state was 173,340, the second highest net outflow in this decade after 2018. However, it only accounted for 0.4% of the state's 39.1 million inhabitants.
In other words, when Senator Ted Cruz (R-Texas) claimed during a Senate debate in 2018 that California was a "bleeding population," he lied.
Who is coming to California, who is going and who is staying? The state has consistently attracted more college graduates than it loses, a phenomenon Johnson described as "brain gain" in an article last year. In 2012-17, the state gained 162,000 net inhabitants among those with a bachelor's or college degree, while losing the net population in every other education category.
Almost all of the net income was in college graduates ages 20-29. "From a labor market perspective," Johnson wrote, "There is a particular benefit in attracting young college graduates. Young college graduates are beginning their careers providing the state with much-needed needs highly skilled workforce. "
The state also has a net gain for people with incomes of $ 110,000 and above, while it suffers a net loss for people with lower incomes.
Unsurprisingly, younger and low-income residents are leaving the state. The high rents, housing prices, and other cost of living in California place particular strains on cohorts, who tend to be less sedentary and therefore more mobile than older households.
Remaining factors in the population include births, deaths and foreign immigration. California statistics are rejected in all three categories.
The fertility rate, roughly defined as the average number of children per woman of childbearing age, fell from 2.49 in 1990 to around 1.65 in 2019, according to the Treasury Department, which expects the rate to continue to 1 by 2040 Factors that will fall 50 are declining immigration and the gradual aging of the population. The latter are also responsible for an increase in the death rate.
What does this all say about the California economy? Not as much as you might think. Numbers on the number of businesses leaving California are easy to find. Moving companies that make their money by making these moves easier are happy to offer them to get more business.
New business applications in California have increased, sometimes by double-digit percentages, for seven of the last 14 years since at least 2007. (US Census Bureau)
But they only tell half the story. It's one thing to say that 1,800 companies left the state in 2016, the last available year. Not to mention, 5,290 new businesses were launched in the same year after Business Applications. More new businesses have been launched in California than Texas each year since 2016, with the exception of 2020 (until now).
California's economic growth has largely reached that of Texas since the last recession ended in mid-2009, but its economy remains much larger - $ 2.8 trillion in California's gross domestic product as of the third quarter of this year, up from $ 1.8 trillion in the Year Texas.
So far, the investment scene in Silicon Valley seems to have held up well in this pandemic year. According to Fenwick & West, a Mountain View law firm that tracks venture capital flows. In its most recent survey, the company found that risk funding was particularly strong in life sciences, while software funding held up compared to 2019.
These statistics provide a useful context for lobbyists' complaints about California's poor business climate. The objections are generally limited to high taxes and intrusive regulations.
However, things are never that simple. California income tax is high - especially for top earners like CEOs, who have a powerful voice in moving decisions. Those earning more than $ 1 million a year would have to pay a marginal tax rate of 13.3% in California but would not pay anything in Texas. However, California property tax is relatively low (thanks to Proposition 13).
Oracle, Hewlett Packard Enterprise, and Tesla aren't going to be escaping California corporate taxes because they're based on the percentage of sales in the state. California accounts for more than 40% of Tesla's domestic sales. Oracle and HPE say they are leaving most of their California employees in place but plan to hire more people elsewhere.
California labor and environmental laws are undoubtedly a nuisance to many employers and business owners, but they are designed for the good of the community. Musk has grumbled a lot about work and health rules, which he's a serial flouter of.
Tesla has been charged with security breaches at the factory and defied government orders to shut down during the pandemic. Texas may be more lenient if Musk opens a factory there, but that may not be entirely to the benefit of its workers.
Of course, the lurking in all of these statistics gives cause for concern about California's future.
Housing costs are a persistent and exacerbating growth factor. It is a challenge that the leaders and voters have not been able to take up their weapons at all.
Oracle, Hewlett Packard, and other companies should be believed when they say it is easier for them to recruit young workers in places like Austin or Miami than in the Bay Area, where owning a home is everyone's dream except for the highest earners and those who are already in the California real estate market. Most leave California not because they want to but because the cost of living leaves them no choice.
There are limits to what can be done about the California real estate crisis. Obviously, the state has not built nearly enough affordable housing to accommodate growth. However, this is not only due to planning and regulation problems.
California has lost to other states every year for three decades. The question is: who is going and who is arriving? (California Legislative Analyst's Office)
To some extent, the problem is geographic: San Francisco, surrounded on three sides by water, cannot expand, partly because its residents demand restrictions on density. This has been exacerbated by the city's gentrification, which has placed much of its properties out of reach of the middle class.
Much of the rest of urban California no longer has room within a reasonable commute to central cities or nearby suburbs. Some of the pressure could be relieved with better local transport, but progress on this front has been painfully slow and public acceptance has been poor.
One imponderable for California's future is the long-term impact of COVID-19. The habit of working from home has freed millions of employees from the need to live near a central office and potentially eased the pressure on California rents, if not house prices, but how long that lifestyle lasts the end of the pandemic will last beyond is impossible to say.
The future for California may be slower growth than the state was in the past. Whether that might even be a good thing is a question demographers will watch closely. At the moment you are dealing with a historical anomaly.
"It's something we've never seen before a western state joins states with zero population growth," Johnson said.
This story originally appeared in the Los Angeles Times.
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