Since 2020, hundreds of companies and tens of thousands of people have moved out of California to other states; however, the labor market in California continues to show signs of strength.
According to data provided by the corporate marketing consultancy Build Remote, as of June 2024, more than 90 companies with over 100 employees have left California in the past four years, including Tesla, Neutrogena, Chevron, and Ruiz Foods.
In addition, at least 68 companies with less than 100 employees have also left California, including Public Square, Hart Inc., and The Joe Rogan Experience.
Companies such as Tesla began to relocate after the COVID-related policies limited business operations. Tesla’s CEO Elon Musk filed a lawsuit against Alameda County, where the factory is located, in 2020 because the county’s health regulations forced its electric car factory to shut down.
Tesla officially moved its headquarters from Palo Alto, California to Austin, Texas in 2021.
Eyewear manufacturer Wiley X announced in April 2021 that it would move its headquarters from Livermore, California to Frisco, Texas. According to a press release issued by the company in February, it will complete the production of all products for 2024 in Frisco this year.
A report from the Hoover Institution showed that from 2018 to 2021, California lost a total of 352 corporate headquarters, leading to the loss of thousands of jobs. The study pointed out that the departure of businesses from California not only resulted in job losses but also in the loss of corporate income tax revenue, corporate property taxes, rental income for property owners, fees paid to contractors, and revenue losses for travel-related businesses like hotels and car rental companies.
The research institute believes that high tax rates are one of the main reasons for corporate relocation. According to the Tax Foundation’s 2022 State Business Tax Climate Index, California ranks 48th in the country. In 2023, financial software company Intuit pointed out that California has the highest income tax rate in the country, reaching 13.3% for individuals with incomes over $1 million.
Despite the increasing trend of corporate relocation, data from the California Employment Development Department (EDD) shows that California employers added 43,700 non-farm payroll jobs in May 2024, marking the 49th consecutive month of job growth in the job market.
Governor Gavin Newsom stated in a June announcement, “California is creating quality job opportunities across the state to support Californians and their families.” According to the Governor’s Office, California still has the most Fortune 500 companies in the United States, with a total of 57; while Texas and New York each have 52.
However, employment data presents a complex situation. The unemployment rate dropped from 5.3% in April to 5.2% in May, but compared to the same period last year, California has lost 113,500 jobs. From April to May, California’s job growth accounted for 16.1% of the total national growth (272,000 jobs).