May 16, 2022 Last Updated 07:10 AM EDT

News

California's Mass Tech Exodus: What's Driving Tech Giants Away?

Jan 25, 2021 10:47 PM EST

Billionaire Facts: Elon Musk Wakes Up at 7, Skips Breakfast, And More
(Photo : Photo by Britta Pedersen-Pool/Getty Images) SpaceX owner and Tesla CEO Elon Musk arrives on the red carpet for the Axel Springer Award 2020 on December 01, 2020 in Berlin, Germany

Is it the relentless COVID-19 pandemic? Is the coronavirus crisis causing California's Mass Tech exodus? Yes and no.

The COVID-19 pandemic is not the main cause. Not really. Surprisingly, the increasingly high taxes imposed on the rich, not to mention the already unimaginable living costs and heavy regulations that firms and individuals face when they choose to reside in California are also not the main reasons.  

Elon Musk, Larry Ellison, Drew Houston and More Leave California

Billionaire Facts: Elon Musk Wakes Up at 7, Skips Breakfast, And More
(Photo : Photo by Britta Pedersen-Pool/Getty Images)
SpaceX owner and Tesla CEO Elon Musk arrives on the red carpet for the Axel Springer Award 2020 on December 01, 2020 in Berlin, Germany

According to CNBC, as Oracle, Palantir, and Hewlett-Packard Enterprise transferred their headquarters out of California, and Elon Musk decided that Texas better suits his strategies and expansion, many analysts are now alarmed why there seems to be a mass exodus of these prominent tech companies. 

Apart from Elon Musk, presently the world's richest man, tech industry personalities such as Larry Ellison, Drew Houston, and Joe Lonsdale have decided to move out. Naturally, with big firms and names leaving, there is bound to be an affect.

One of the noticeable trend as early as now is that California's population and job growth have slowed down significantly. 

While not the main reason, the pandemic can still be blamed for this mass exodus, based on the CNBC analysis

Remote Work the Culprit of California's Mass Tech Exodus?

Specifically, the pandemic uncovered one reality that firms refused to see in the past - that people can work at home and even prefer to work remotely.

That said, with the rise of remote work in 2020, at least 135,000 already left California, which is significantly higher than the number of people moving in the state.

READ MORE: Stock Market Overheating? Signs Suggest S&P 500 Trouble on the Way

This represents the third largest net migration loss ever recorded for California.  

One recent survey even showed that two out of every three Bay Area workers claimed they would rather leave the state permanently since they can continue working at home or anywhere they want anyway. The survey also revealed that this is a setup they want to adhere to indefinitely. 

Some tech companies themselves have heeded the call of the modern employees' desire. Dropbox, Twitter, and Facebook have already decided to offer permanent remote work to most of its employees. 

As early as July of 2020, CFR already made a study on the possible economic impact of this trend. On the one hand, economists are quite optimistic about this trend, even though they have not focused on the tech industry or California.

According to these economists, remote work has been shown to increase worker productivity. Jody Miller, co-founder as well as co-CEO of the Business Talent Group, claimed that the trend towards remote work could create a much more real global talent marketplace. 

On the other hand, economists asserted that big cities can witness massive declines, as companies move away from dense office spaces.

They predicted that exoduses can naturally happen, which can cause strain to city budges, more so those that are relying on high tax revenues they are receiving from these giant tenants. 

An analyst, is quite optimistic however.

According to CFR senior fellow Edward Alden, an outflow from major metropolises, even if they have rigorous economic activity, could be advantageous in general. "This may be a way to spread the benefits of the new economy more widely on a geographical basis," he says. 

READ MORE: Step-by-Step Guide on Getting Your Stimulus Check (2020 Return or 2nd Stimulus)

Must Read

Real Time Analytics