A new report found that companies are increasingly leaving California while fewer are relocating to the Golden State.
The Public Policy Institute of California (PPIC) recently issued a report that found the increase is companies leaving California.
The big picture: Per the report, while the number of companies leaving California has been small, companies have been leaving at a greater rate.
- In 2011, the PPIC found that around 150 headquarters left California, a number which jumped to over 200 in 2021.
- Over that same time period, the number of relocations from other states dropped from nearly 140 to under 70.
- Companies have relocated to other large states, such as Texas, New York and Florida, or nearby states like Nevada and Arizona.
Zoom in: Around half of the companies that left California were in manufacturing, wholesale trade or business services.
Driving the news: The PPIC found that companies tend to leave California for states with lower taxes and less regulation.
- California’s tax and regulatory burden remained mostly unchanged during the decade studied by the PPIC, while most other states reduced their tax and regulatory burdens.
By the numbers: California has over 47,000 companies headquartered in the state.
- From 2011 to 2021, 789 companies moved their headquarters out of California, 1.9% of the total number of companies in the state. That resulted in a decrease of around 77,600 headquarter jobs – around 3.7% of all headquarter jobs in the state.
- Over that decade, California saw 7,250 companies launch in the state while 12,700 closed, with no year-by-year trends in either direction.
What they’re saying: “Tax and regulatory burdens are key factors for businesses when deciding where to locate their headquarters, and may explain some of the recent trends in headquarter moves,” the PPIC said in a policy brief. “However, these relocations are a relatively small fraction of overall headquarter activity, and there are other signs of California’s appeal for headquarters, such as the number of launches.”
- The PPIC said it is too early in its research to make firm policy recommendations based on its look at the number of headquarters leaving the state.
- “But a broad and simple lesson is that the state should continue to examine ways to maintain or strengthen the features that make it attractive to headquarters (and businesses more generally) while critically evaluating the costs and benefits associated with policies that may be causing headquarters to leave,” the PPIC said in the brief. “Such efforts will require digging beyond the headlines to ultimately identify effective policy options for creating an environment that is conducive to growth and retention of businesses and jobs.”
