A truck stops at an Amazon fulfillment center in Eastvale. A new study recommends that the state focus on improving regional “industry clusters” like logistics in the Inland Empire. (Photo by Watchara Phomicinda, The Press-Enterprise/SCNG)
A business exodus from California is gaining momentum, with the number of stores leaving nearly doubling between 2012 and 2019, according to a new state competitiveness study.
The study, commissioned by the Los Angeles Area Chamber of Commerce, follows reports that California’s population has declined since 2020.
“The luster of the Golden State appears to have been tarnished in recent years,” said the study, produced by economists and scholars at the Inland Empire Economic Center. “A seemingly endless stream of businesses are leaving the state, citing high taxes, strict regulations, other business costs and anything but a business-friendly environment.”
State officials and an economist disputed the study’s conclusions, citing a long list of indicators, from rising employment to rising business license applications, that show the state’s economy is booming.
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Economic consultant Christopher Thornberg, a former UCLA economics professor, called the study’s claims “the same old bullshit” he’s been hearing from companies for years.
“The data tells us that California’s economy is alive and well,” Thornberg said. “The pressures to be in California are even greater than the pressures to leave California.”
Three-decade trend
The report tracked business establishment migration patterns from 1990 to 2019, the most recent year available.
Establishments can be an entire business or any branch, division, outlet, or office within a business that has its own Dun & Bradstreet, or DUNS, identification number.
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In 2019, 3,998 establishments moved out of state, or 1,915 more than moved.
The number of stores leaving was nearly double the total in 2012 when 2,237 stores moved out of state, the numbers show. California experienced a net loss in 29 of the 30 years since 1990. In total, 37,313 business establishments moved to California from 1990 to 2019, while 54,630 moved, for a net loss of 17,317 business establishments over that 30-year period, the data shows
On the other hand, the number of checkouts in 2019 represented less than 0.3% of all business establishments in California that year.
Still, a series of high-profile relocations have kept the problem in the spotlight.
Companies that have moved their US headquarters out of the state in recent years include Hewlett Packard Enterprise, Oracle, Charles Schwab, CBRE, Toyota, and Tesla.
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Nevada, Texas, Arizona, Oregon, Washington and Florida ranked as the top destinations for California establishment relocation, the data shows.
The findings parallel those of the latest Hoover Institution study of corporate exodus., Released last September. The Stanford University institution reported that at least 352 companies moved their headquarters out of California between 2018 and 2021, including 11 Fortune 1,000 companies.
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“Headquarters relocations are accelerating substantially, with no sign of reversing course,” the Hoover Institution report said. He blames the departures on a business environment “that ranks near the bottom of every state in the US.”
‘Over my dead body’
Bobrick Washroom Equipment Inc., a century-old manufacturer, maintains its headquarters and manufacturing facility in North Hollywood because of the quality of its workforce and because it recently built a new headquarters there.
But when it comes to opening new plants, the company has opted to move them out of state. It currently has plants in Denver, Albany, Toronto, Oklahoma, Tennessee and the United Kingdom.
“Our manufacturing growth is not happening in California,” said CEO Mark Louchheim. “It’s a tough place to do business.”
For example, when the company sought a height variance for its new headquarters building six years ago, a Los Angeles planning official said, “Over my dead body.” In Oklahoma, a planning official gave the division manager building permits for an expansion before he applied for them.
Los Angeles planning officials “think their job is to say no,” Louchheim said. “There are real barriers in terms of going through the planning process.”
Meanwhile, other states are catching up, with “industry clusters,” workforces and services that resemble California’s.
Atlanta, for example, now competes with Hollywood for movie productions. Austin is stealing information technology companies from Silicon Valley. And North Carolina’s Research Triangle Park has become more attractive to biomedical research companies.
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California needs a strategy that supports local industry groups, such as entertainment in Los Angeles, logistics in the Inland Empire or biomedical research in San Diego, according to the study.
“The important thing is that cities can transform themselves,” said Fernando Lozano, a Pomona College economics professor and co-author of the study. “The way to achieve this is by attracting a skilled and creative workforce.”
Other study recommendations include:
— Develop partnerships between higher education and industry to promote skills needed by local industry.
— Increase housing to address the high cost of living and long commutes.
— Ensure that urban services, such as parks and green spaces, are on a par with those of other states.
old age problem
Reports on the corporate exodus are not new.
Joseph Vranich, a retired business “relocation coach” and co-author of the latest Hoover Institution report, has been tracking business exits for more than a decade.
“Unless California reduces its hostility towards businesses, we will see more business enterprises looking for friendlier locations,” the former Irvine management consultant told the Orange County Record in 2010. Vranich left California in 2018.
However, Thornberg noted that every state has its share of problems and there is no such thing as “business nirvana.” However, the mantra that California is anti-business goes on and on, she said.
“We have been hearing this story year after year after year. However, the state is thriving,” Thornberg said.
Saying he’s not an apologist for all of Sacramento’s policies, Thornberg nonetheless noted that unemployment is at an all-time low, wages have risen more than the rest of the nation and housing vacancies have never been higher. scarce.
If people and businesses are fleeing the state, why do housing costs keep rising? he asked.
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A spokesman for the Governor’s Office of Business and Economic Development, or GO-Biz, said the state’s economy is poised to become the fourth largest in the world. The state is number one in the nation for new business openings, access to venture capital and tourism spending, said Heather Purcell, deputy director of communications for GO-Biz.
And applications for business licenses have risen nearly 47% in the past 12 months, the largest increase of any state, he said.
“Compared to states like Texas and Florida, it’s clear that California is consistently chosen by businesses to start and expand their operations,” Purcell said.
Payrolls are growing three times faster in California than in Texas and Florida, with median business income nearly double the national average, he said.
“And we’ve done all of that as we’ve led the country’s transition to clean energy, equity and workplace standards,” Purcell said.
