August 15, 2016

JOEL KOTKIN: California For Whom?

California has been bleeding people to other states for more than two decades. Even after the state’s “comeback,” net domestic out-migration since 2010 has exceeded 250,000. Moreover, the latest Internal Revenue Service migration data, for 2013-2014, does not support the view that those who leave are so dominated by the flight of younger and poorer people.

Of course, younger people tend to move more than older people, and people seeking better job opportunities are more likely to move than those who have made it. But, according to the IRS, nearly 60,000 more Californians left the state than moved in between 2013 and 2014. In each of the seven income categories and each of the five age categories, the IRS found that California lost net domestic migrants.

Nor, viewed over the long term, is California getting smarter than its rivals. Since 2000, California’s cache of 25- to 34-year-olds with college, postgraduate and professional degrees grew by 36 percent, below the national average of 42 percent, and Texas’ 47 percent. If we look at metropolitan regions, the growth of 25- to 34-year-olds with college degrees since 2000 has been more than 1.5 to nearly 3 times as fast in Houston and Austin as in Silicon Valley, Los Angeles, or San Francisco. Even New York, with its high costs, is doing better.

In fact, the only large California metropolitan area which has seen anything like Texas’ growth has been the most unlikely – the Inland Empire. The coastal areas, so alluring to the media and venture capitalists, are losing out in terms of growing their educated workforces, most likely a product of high housing prices and, outside of the Bay Area, weak high-wage job growth.

The location of migrants tells us something about where the allure of California remains the strongest and where it has been supplanted. Almost all of the leading states sending net migrants here are also high-tax, high-regulation places that have been losing domestic migrants for years – New York, Illinois, Michigan and New Jersey. In contrast, the net outflow has been largely to lower-cost states, notably Texas, as well as neighboring Western states, all of which have lower housing prices.

You could revitalize California by making it as easy to get a building permit as it is to vote. I remember talking to the Investor’s Business Daily folks a few years ago — they were headquartered in Marina Del Rey, a lovely place but one where they were constantly visited by inspectors, tax people, etc., all posing problems. When they opened an office in Texas, the state and local government people were all “tell us if we can help you.” Very different experience.

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