That big tech exodus out of California turns out to be a bust
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Wannabe innovation hubs from coast to coast have been slavering over the prospect that the work-fromhome revolution triggered by the COVID pandemic would finally break the stranglehold that California and Silicon Valley have had on high-tech jobs.
Here’s the latest picture on this expectation: Not happening.
That’s the conclusion of some new studies, most recently by Mark Muro and Yang You of the Brookings Institution.
They found that although the pandemic brought about some changes in the trend toward the concentration of tech jobs in a handful of metropolitan areas, the largest established hubs as a group “slightly increased their share” of national hightech employment from 2019 through 2020.
Stories of discontented California entrepreneurs decamping for up and coming new hubs or even remote (but broadband-enabled) climes are common fodder in the news.
The Times last year published a sort of diary in which Geoffrey Woo, one such expatriate, wrote about his relocation to Miami to flee the crime and pandemic lockdown of San Francisco. He’s still in Miami.
Yet “the big tech superstar cities aren’t going anywhere,” Muro said. “There’s a suggestion that we’re on the brink of an entirely different geography. I don’t think recent history or the nature of the technologies point in that direction.”
Muro, in harmony with other experts in the geography of work, divides tech employment hubs into three groups.
There are the superstar metro areas: Silicon Valley and San Francisco; New
York; Boston; Washington, D.C.; Seattle-Tacoma; Los Angeles; and Austin. Next come “rising stars”: Dallas, Atlanta, Denver, San Diego, Miami, Kansas City, Salt
Lake City, St. Louis and Orlando. Finally, everywhere else.
The superstars increased their share of total tech employment by 0.3% during the pandemic — less than the increase of 1.4% they experienced in 2015-2019, but still positive. The rising stars as a group increased their share by 0.1%, down from 0.5% in the earlier period. Both gains came at the expense of other would-be hubs.
“The California metropolises really do retain their irreplaceable depth and strength,” Muro says. “That’s not to say there won’t be some movement. Early in the period we saw some exiting, especially from the Bay Area, but it turned out that much of it was within California, rather than to Kansas.”
This shouldn’t be too surprising. The value of concentrated ecosystems in nurturing innovation has been document for decades. As Nicholas Bloom of Stanford and colleagues pointed out in 2020, elite academic institutions attract highly skilled innovators and spin off their learning into new technologies and new industries; their presence tends to attract others like them.
There have been some clues in recent years that the exodus of big business from California hasn’t been all it’s cracked up to be.
In 2020, the headline departures featured in reports of corporate relocations were three: Oracle, Tesla and Hewlett Packard Enterprise. The Brookings study, published this month, mentions three major tech firms: Oracle,
Tesla and Hewlett Packard Enterprise. (Brookings cites a fourth — Palantir, a moneylosing software company headquartered in Denver, but as of year-end 2021 it employed fewer than 1,900 people in the U.S., some of whom work in California.)
Some of the assertions about a California exodus aim to make political, rather than economic or demographic, points. Consider an August 2021 paper by Lee Ohanian of the Hoover Institution and Joseph Vranich, who happens to be the CEO of a Texas business relocation firm.
Far from being a sober statistical survey of business moves, the paper is more of a screed comprising the usual conservative beefs about California, such as too much regulation. It also makes some surprising assertions: “California is notorious for imposing excessive real estate taxes,” for example.
Actually, California’s property taxes are the 36th-highest in the nation; Texas, Vranich’s home state, ranks seventh, with an effective rate more than twice California’s. Thanks to Proposition 13, California is notorious for, if anything, having low real estate taxes.
The political environment is also an imponderable factor. Whether aggressively conservative politics in Texas and Florida, including hostility to the LGBTQ community and the contraction of women’s reproductive health rights, will slow the influx of young and well-educated workers is hard to tell at the moment.
It’s doubtful when, if ever, 100% work-from-home jobs will amount to a large share of employment. Full-scale workfrom-home only applies to about 6% of workers, Moretti says. That’s triple the 2% level of the pre-pandemic era, but still an exception to the rule.
For all that, it’s also true that some “rising star” metros may offer entrepreneurs and tech workers some qualities that established hubs have lost. That’s what has kept Woo, who wrote about his decision to relocate, in Miami.
Woo, who runs two businesses in startup mode and a venture investing fund, says he hasn’t found business reasons to regret moving from San Francisco. (The dearth of decent Asian food is the one drawback he mentioned.)
As for Florida politics, “the most impactful policy for normal citizens is COVID policy,” he says. “I’ve been used to not having to wear a mask or show vax cards for every little thing, and it’s been great.”