The business environment is California is changing, and not for the better. Large employers are already fleeing high-tax coastal areas, and that’s far from the only reason for the lackluster business growth in the traditionally lucrative California communities. Numerous companies have relocated their businesses away from California within the past few years; some of which include Nestle, Toyota, and Occidental Petroleum. Silicon Valley is known for its tech-savvy environment, but as companies get started in California, many companies from the tech industry are leaving this area, and California in general. Some are relocating entirely, whereas companies like Adobe and Toby Scammell’s startup Womply are expanding into surrounding states and downsizing their respective headquarters.
Companies pay high taxes along coastal areas, especially in California. This tax burden has forced many companies such as Weatherby to relocate altogether. In some cases, other states offer significant tax incentives to attract that business and drive up wages in their state. For example, Virginia offered over $16 million in tax breaks to Nestle.
Regulations and Laws
Many of the laws in California have been turned against large companies. California has consistently made it clear that they are on the side of the unions and the bureaucracy, and many companies have found themselves in very expensive lawsuits. The costs of regulation have caused many companies to pay unnecessarily large amounts of money to operate their businesses in California.
Cost of Living
California cities, such as San Francisco, are getting much more expensive to live in. Although the cost of living in California affects the companies looking to run their businesses in the state, it affects employees even more. Many employees demand higher salaries from the tech companies that are located in these expensive cities to compensate for their rent and living expenses. For employees that like to go out and have fun with their friends, these expenses can be especially challenging due to the high prices of entertainment. Many major cities that are located outside of California can offer employees a nice balance between a fun lifestyle and a low cost of living. As a result, many tech companies have become drawn to these cities.
California will slowly experience a brain drain as a result of the large of technology companies leaving the state, and taking their highly educated workforce with them, or maybe the individuals are bailing and taking their companies with them. Either way, if laws and regulations are not changed soon, many talented and educated people will follow the jobs out of the state. This phenomenon is and will continue, to result in a loss of revenue for the state as well. If California could lower the overall costs for tech companies and cost of living for individuals, there is hope that they can remain competitive in the future.