More Companies Are Moving Out Of California

By Ellen Kershner on May 28 2020 in Economics

Elon Musk is not happy that Tesla plants were closed because of COVID-19. Photo by Vlad Tchompalov on Unsplash
Elon Musk is not happy that Tesla plants were closed because of COVID-19. Photo by Vlad Tchompalov on Unsplash
  • Companies have been dissatisfied with the state’s difficult business climate for a long time
  • more and more jobs are moving out of state
  • He reopened his Fremont-based factory against lockdown restrictions
  • From 2007 to 2015, it is estimated that around 9,000 companies left California
  • Data showed that approximately 13,000 companies disinvested in California during that time

Even before Elon Musk made headlines about moving Tesla out of California, businesses there had already been packing up and getting ready to relocate. Companies have been dissatisfied with the state’s difficult business climate for a long time, and things are seemingly worse with Sacramento politicians approving strict new policies. Additional restrictions due to the COVID-19 pandemic are only making things worse.

A study by Spectrum Location Solutions claimed that more and more jobs are moving out of state, with 34% happening due to headquarters being moved. Joseph Vranich authored the study, and said that companies are departing as the “state’s business climate continues to worsen.”

Tesla

Elon Musk said that California’s shelter-in-place restrictions were not democratic. Photo by Charlie Deets on Unsplash

Last April, Tesla owner Elon Musk was not shy about voicing his public protests about California’s coronavirus pandemic state and local ordinances. He reopened his Fremont-based factory against lockdown restrictions and threatened to move his companies to Nevada and Texas. He subsequently put up his four Los Angeles homes for sale and may have listed his three other California homes, too.

Musk said that California’s shelter-in-place restrictions were not democratic and fascist, adding that the company was concerned about resuming production in the Bay Area. He also said he was planning to sue the county (Alameda) where the factory was located.

Joe Rogan

Well-known comedian and “The Joe Rogan Experience” podcaster Joe Rogan also threatened to move out of California and settle down in Texas. In mid-May, he stated that if the state remained to restrictive, he did not know if it would be a good place to live. He continued on, stating that it was way too expensive, and the taxes were “ridiculous.”

Earlier Moves

Nestle moved out of California. Photo by Hannah Morgan on Unsplash

From 2007 to 2015, it is estimated that around 9,000 companies left California. One company was the medical technology firm Numira Biosciences, which was founded in Irvine, CA. Others include Nissan North America, Occidental Petroleum, and Jamba Juice. Nestle moved its U.S. headquarters from California to Virginia in 2017, taking about 750 jobs with them. Although it was reported that they received backlash for “bottling water during a water crisis,” their CEO said that move was made to place the company closer to Washington, D.C. and Capitol Hill stakeholders.

Vranich explained that the states gaining the most from the California exodus include Texas, Nevada, Arizona, and others in the Midwest and South. Foreign countries are also recruiting California companies, and some businesses have packed up and moved to Mexico, India, China, and other nations.

What is Causing the Shift?

The “Why Companies Leave California’ study looked at 2008 to 2016, and concluded that the state shows hostility toward businesses, through high taxes and utilities, large fines for minor infractions, and a difficult legal climate. Data showed that approximately 13,000 companies disinvested in California during that time, with close to $77 billion being diverted to other nations and states.

One regulation that was pointed out as an issue was the Immigrant Worker Protection Act. It stipulates that employees who follow Federal immigration law are actually violating state immigration law. As a result, they are committing a crime. Yet at the same time, employers who did not follow Federal immigration law were committing a crime.

California has always been one of America’s harshest business taxers and regulators, and now is being referred to as a “toxic business environment.” Before the pandemic, unemployment was at 12%, and it became an unlikely place for businesses to open or expand. Vranich’s report also find that many of the California companies relocated even though there were not offered any economic incentives to do so by their new communities or states.

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