Our "Business Exodus" Report Gets New Data

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"The annual net employment change in California due to relocation -- a loss of about 9,000 jobs -- represents only 0.05% of California’s 18 million jobs."

And with that, new data today from the Public Policy Institute of California again calls into question political claims that a mass exodus of businesses from the Golden State is underway, a claim we examined last week as part of our coverage of the race for governor.

The new look at whether businesses are moving jobs out of state, and how many are doing so, will no doubt fail to end the heated debate about the issue. Even so, today's PPIC report fails to find much hard evidence for a growing trend.

And in what may be one of the more intriguing findings, analyst Jed Kolko says the data shows that several other states across the nation have a much larger percentage of job loss that can be attributed to companies moving out of state. Tops on the list: the District of Columbia, where 6.9% of jobs from 1992-2006 were lost due to an exodus, followed by Delaware (4.5%) and New Jersey (3.9%). Compare that to California's record over the same 14 year period: 1.7%.

Last week, we reported that one of the more frequent anecdotes offered by Republican nominee Meg Whitman appeared to miss the mark. That's the case of aerospace giant Northrop Grumman, which decided earlier this year to relocate his corporate HQ -- and about 350 jobs -- to northern Virginia, while still keeping some 30,000 jobs here in California (that's about one quarter of their global workforce).

Whitman continues to mention the company by name on the campaign trail, doing so again two days ago at a stop here in Sacramento. "You watched Northrop Grumman move its corporate headquarters to northern Virginia," she said. (Note: this time, she clarified that it was the company's HQ that left, and not -- as she's done in the past -- that the entire company left.)

"Jobs are leaving for neighboring states," she said. "I want to be the governor that stops that exodus."

And yet, based on the PPIC report, such comments are reflective of anecdotal evidence, not substantive research. Here's the report's conclusion on the real factor(s) behind job creation and loss in California:

Most job gains are due to the births and expansions of locally owned businesses; most job losses are due to the contractions and deaths of locally owned businesses. Businesses headquartered outside a county contribute much less to local employment fluctuations. The homegrown shares of job gains and losses are even higher in smaller cities and towns and in rural areas. Among the non-metropolitan counties in California, 79% of job gains and 74% of job losses are homegrown. Thus, although luring businesses from elsewhere or convincing them to open or expand locally is a common economic development strategy, and preventing businesses from leaving the state is a political refrain, most job gains and losses are homegrown.

Don't expect such research to squelch the issue on the campaign trail, or among those who steadfastly insist that the anecdotes point to a trend not yet seen by researchers. And as mentioned last week here on the blog, one wonders whether Whitman's criticism of business climate issues since, oh say late 2003, won't start to eventually rankle the guy whose corner office she hopes to occupy come January.

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About John Myers

John Myers is senior editor of KQED's new multimedia California Politics & Government Desk.  He has covered California politics for most of the past two decades -- serving previously as Sacramento bureau chief for KQED News and, most recently, as political editor for KXTV News10 (ABC) in Sacramento. He moderated the only gubernatorial debate of 2014, and was named one of the nation's top statehouse reporters by The Washington Post. Follow him on Twitter @johnmyers.
  • Parsing the context

    Campaigning spin aside, looking at just “relocation” doesn’t cover the whole ‘jobs lost’ issue. When California-based companies such as Google (http://www.fastcompany.com/blog/ariel-schwartz/sustainability/google-expands-its-empire-energy-subsidiary), Intel (http://www.oregonlive.com/business/index.ssf/2010/08/intels_new_fab.html) and yes, Northrop Grumman (http://www.standard.net/topics/business/2010/09/16/anchor-tenant-deal-means-falcon-hill-building-can-start) choose to expand their businesses – add jobs, new facilities, etc. they are choosing to do it elsewhere.

  • http://www.MoreJobsNotTaxes.com Scott Macdonald

    Our coalition has major concerns that your piece examining the possibility that California policies might play a role in jobs moving out of state misses several important points.
    1. There are myriad reasons any business would make such a dramatic decision as to move its operations out of state. It’s probably all but impossible to ever pinpoint one motivating factor. However, we feel there is no doubt California regulations and taxes fall on only one side of that move/don’t move checklist and we continue to add to that list.
    2. Our Golden State is moving through unchartered waters. The unemployment rate has risen to 12.4%. More than 2.3 million Californians can’t find a job. Where I live – Los Angeles County – unemployment is the highest it has ever been: 12,6%. California’s invincible shield of weather, beaches, glamour, etc. has crumbled to the point that if it weren’t for Michigan we would have the worst unemployment in the country. Are we to believe that state policies have nothing to do with that?
    3. For whatever reason, you fail to review the largest impact of California policies on employment: in-state companies choosing to expand in other states. I’ve attached our recent news release detailing five high tech companies that have each decided to expand operations in Utah. It is a powerful example of companies born from California’s entrepreneurial spirit that have thrived here but now discover they can’t afford to share their success and growth with California’s shrinking middle class. The argument presented in your piece seems to say that if we keep Silicon Valley executives here we are doing our job.
    4. The list of issues where California ranks at or near the bottom that impact businesses is to long to go through here, however one more example is a business’ exposure to lawsuits and liability. Our state stands 46th in the 2010 rankings of Liability Systems Ranking by the Institute of Legal Reform.

    We appreciate coverage of this issue and hope to encourage continuing discussion.


    Scott Macdonald
    Communications Director
    Californians Against Higher Taxes