Is There An Historic “California Exodus” Taking Place?

Elon Musk has built a new spaceport at Boca Chica Beach, Texas and he has now left California to … [+] live in Texas. (Photo by Robert Daemmrich Photography Inc/Corbis via Getty Images)

Corbis via Getty Images

In 2020, California experienced something that’s never been recorded since statehood in 1850—a loss of population.  Is this just a temporary bump due to the Covid-19 pandemic, or the start of an historic “exodus” where the state’s climate challenges, taxes, and failure to provide affordable housing have finally caught up with it?

First, the numbers.  The California Department of Finance does annual estimates of the state’s population, and they concluded the Golden State lost 182,083 people in 2020.  That’s only about 1/2 of one percent of the state’s over 39 million people, not a very big number.

But 2020’s decline is part of a longer-term trend in the 2000s.  Population changes come from three factors:  natural increase or decrease (births versus deaths), net internal movement from other states within the USA (the balance between people moving in and moving out), and foreign immigration.

Conservative analysts Joel Kotkin and Wendell Cox examine these three trends in a  provocatively titled article, “California Fleeing.”   They emphasize negative net internal migration, noting “the state has suffered net outmigration in every year of the twenty-first century.”  This negative trend had been offset by foreign immigration and new births, many of those to immigrant families who tend to be younger and have higher fertility rates.

Kotkin and Cox blame California’s taxes, economic regulation, and high housing prices for the population loss.  And they aren’t alone.  You can find some conservatives almost gleefully arguing that there’s a “California Exodus” taking place, “spurred by tax hikes” resulting in “many high net worth individuals…eyeing the exit door.” 

Of course, the poster boy for the “exodus” argument is billionaire Elon Musk.   Musk is the second richest person in the world according to the 2021 Forbes’ world billionaire list, and in 2020 he said he’s relocating from California to Texas. 

Musk said at the time “If a team has been winning for too long, they do tend to get a little complacent” and “California has been winning for too long.”  In Texas, he will be closer to several Tesla

facilities along with a major Space X base.  Not incidentally, by moving his residence to Texas, it’s estimated Musk could save multiple billions in taxes.

There’s no question that California has higher taxes and more regulations than Texas.  But even Musk is quick to note that “Tesla and Space X obviously have massive operations in California,” and others note that Silicon Valley’s combination of venture capital and innovative talent continue to profit and grow.

In fact, some experts are questioning the validity of the whole “exodus” story.   A 2021 survey from scholars at the University of California at San Diego found “no evidence of an abnormal increase in residents planning to move out of the state.”

The survey is part of a “larger, multi-institution research project” led by the University of California that contradicts the “exodus” story.  Those scholars have found that “residents are moving out of the state, but not at unusual rates”; “there is no evidence of ‘millionaire flight’ from California”; and “California’s economy attracts as much venture capital as all other states.”

Other analysts point out that California has suffered from declining international immigration.  Donald Trump’s crackdown on immigration hit not only lower-income and undocumented workers, but higher skilled tech workers as well.

In fact, Musk’s Tesla joined with Google

, Apple

, and Amazon to criticize Trump’s 2020 suspension of visas for many high-tech workers.  There are abuses of these visas that need to be reformed, including their negative impact on women and people of color in STEM occupations.  But Trump’s total suspension was widely seen as an election year play to further use immigration as a divisive issue.

California’s population loss is made up of all three factors—declining birth rates and an aging population, net negative internal migration, and restricted international immigration.  In my next blog, we’ll look at who is moving out, and why, and also what the state might be able to do about it.  Sneak preview:  it isn’t the wealthy who are driving the outmigration numbers, but lower and middle-income residents, and that’s linked to a lack of affordable housing.  Stay tuned.