The Real Calexit: Californians leaving for lower-cost locales
Author: Michael Saltsman
Publication Date: March 2017
Newspaper: Orange County Register
Activists agitating for California to separate from the United States better start considering the border wall they’ll need to build if successful — to keep their residents in.
An analysis of Census Bureau data by the Sacramento Bee shows that between 2005 and 2015 800,000 working-class Californians on net left for other states. Twenty percent of this net working-class outflow — 156,000 — went to one state in particular: Texas. Meanwhile, new data from the Census Bureau show that six of the 10 fastest-growing counties in the United States are in Texas or Utah; none are in California.
What’s driving this exodus? For decades California has championed policies that supposedly make it a working-class Mecca. For instance, its forthcoming $15 minimum wage — or $30,000 a year full-time — will put even starting employees roughly at the U.S. median personal income level. Texas, on the other hand, does not have the supposedly helpful social programs of California, and its minimum wage is less than half California’s coming standard.
And yet employees are happily leaving for Texas — not to mention Utah and Nevada — because they’d rather have the economic opportunity and affordable cost of living they can’t find in California. The reality is that California’s dramatic minimum wage increase to $15 as well as other workplace regulations are forcing some small businesses and their employees to states like Texas. In these states, their business model is encouraged and their employment is welcomed.
For example, Competitive Edge, a communications firm in San Diego, moved its entire call center operations consisting of 75 jobs to El Paso Texas last year as a result of California’s minimum wage costs. “My employees who will move over there will get a 50 percent pay raise in a sense, because cost of living is lower there,” said Chief Executive John Nienstedt.
California Composites, an aerospace manufacturer, originally located Santa Fe Springs, moved to Fort Worth last year, taking 45 jobs with it, partially because of the $15 minimum wage. “This is the last thing I want to do, but I don’t see that I have a choice,” said President Fred Donnelly. “If I were to stay, it would probably make me a nonprofit within a couple years or so.” The move will allow the company to hire an additional 30-35 employees. Donnelly says that many of his suppliers are considering a similar move.
Also last year, the iconic California company Jamba Juice announced that it would move its headquarters from Emeryville to Frisco, Texas, cutting 120 jobs in the process. CEO David Pace chalked the move up to looking for a place that had “competitive operating costs” and an “attractive cost of living,” among other factors.
Numerous other California businesses have left the state or are looking to leave the state for other areas of the country with reasonable regulatory environments. (See specific stories at Facesof15.com.)
The low-margin businesses in California that can’t leave the state have faced their own problem. For instance, the Bay Area has seen numerous business closures, with 64 restaurants closing this winter alone. Many cited the minimum wage-induced labor costs as a contributing factor. Hannah Hoffman made the decision to close all of Doughnut Dolly’s locations in the Bay Area after taking a hard look at the finances and choosing to cut her losses rather than continue them. “I took out loans, I put in every penny of my savings, I cut costs wherever I could, and it just didn’t work. It got worse,” Hoffman said. She cited the price of labor as part of the reason for the closure.
Perhaps California activists should spend less time plotting to leave the country and more time trying to encourage their working-class population to stay.