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Job Numbers Moved Little by Relocations

The influence of business migrations on the state's economy is overblown, a study by a nonpartisan group says.

October 26, 2005|Marc Lifsher | Times Staff Writer

Maybe it's time for Arnold to park the moving van.

The migration of companies and jobs out of California during most of the 1990s -- which corporations said highlighted the state's anti-business environment -- prompted Gov. Arnold Schwarzenegger to drive a moving van down the Las Vegas Strip last year, offering to help California employers "come back home."

A new study by a nonpartisan group to be released today suggests that the effect of the exodus on the state's economy was overblown.

Although more companies left California than moved to the Golden State each year from 1993 to 2002, the net number of jobs lost in any one year was never greater than 0.1% of the state's total workforce, the Public Policy Institute of California found. The group studied business relocations during the decade and concluded that almost all of California's job losses during that period were due to businesses closing or downsizing.

For example, in 1997 the state lost a net 17,136 jobs because of businesses moving out of state, according to the study. That represented 0.1% of the state's workforce of 16.5 million that year, the study said.

"Don't keep trotting out the claim that we're losing lots and lots of jobs because businesses are leaving," said David Neumark, a labor economist and one of the study's three authors. That assertion, he said, has skewed the debate over how to improve the state's economy toward a relatively insignificant -- though emotional -- issue.

Instead, Neumark said, policymakers should focus on how to help existing businesses and encourage new ones.

"The public policy implications and solutions may be very different for those dynamics than they are for businesses moving out to set up shop elsewhere," he said.

Business advocates, who have complained for years that the high cost of doing business in California drives companies to other states, questioned the validity of the Public Policy Institute's findings.

"It's very narrowly focused," Sara Lee, a spokeswoman for the California Chamber of Commerce, said of the study. "All they examined were companies that entirely, physically uprooted and took jobs to another state."

The study should have included data on companies that stayed in California but cut their payrolls here, she said.

The California Business Roundtable, whose members include chief executives of companies based in the state, argued that the study underplayed the loss of jobs in what the group called "high value" areas such as manufacturing.

And David Crane, Schwarzenegger's special advisor for jobs and economic growth, said California's high cost of doing business, including taxes and regulations, had hindered job growth in the state and left it vulnerable to the loss of businesses and jobs to other areas.

The Public Policy Institute study, based on Dun & Bradstreet Inc. credit information on individual businesses that opened, closed or moved, "absolutely is pioneering," said Steven Levy, director and senior economist at the Center for the Continuing Study of the California Economy in Palo Alto.

"It's the first time that allegations of businesses fleeing the state have been subject to a data test rather than a collection of anecdotes."

Levy argues that factors such as high-quality schools and universities, clean air and short commutes are as important to businesses as low taxes, less regulation and smaller insurance premiums. He said he hoped the institute's report "would add some reason to the debate" on how to foster economic growth.

That debate is likely to become sharper now that some forecasters are predicting a slowdown in the California economy. The UCLA Anderson Forecast, released a month ago, called the state's prospect for growth "mediocre at best." Last week, the California Employment Development Department reported that the state lost 23,700 jobs in September, the first downturn since December.

The San Francisco-based Public Policy Institute was founded in 1994 with an endowment from Hewlett-Packard Co. co-founder William R. Hewlett. It was charged with doing "independent, objective, nonpartisan research on major social, economic and political issues."



Negligible effect

A study of business relocations from 1993 to 2002 found that only a small percentage of jobs created or lost in California were linked to companies moving into or out of the state.

Sources of new jobs in an average year

Businesses created: 62.4%

Business expansions: 36.7%

Businesses moving from other states: 0.9%


Causes of job losses in an average year

Businesses closing: 71.4%

Business cutbacks: 26.9%

Businesses moving out of the state: 1.6%

Source: Public Policy Institute of California

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