Gino DiCaro

PPIC reports on job migration

By Gino DiCaro, VP, Communications

Capitol Update, June 21, 2006 Share this on FacebookTweet thisEmail this to a friend

The Public Policy Institute of California recently issued another installment in an ongoing study on the dynamics of the California economy.  This study was made possible through the National Establishment Time-Series (NETS) database, a record covering all business establishments that were located in California at any time between 1992 and 2003.  The conclusion of the study was that although the net migration of California jobs (measured as the difference between firms coming in and firms relocating out) is negative in almost all industries, the net loss is relatively small compared to the overall employment in the California economy.  Thus, concludes the report, migration of jobs to other states is unimportant compared to other factors driving the California economy, such as business expansion, contraction, formation, closure, and the changing business climate itself.

As noted, the updated study takes several new approaches towards looking at interstate business than it did in its previous report in 2005.  First, the new study looks at job loss due to firm relocation by industry.  The four most footloose industries, or those with the highest gross migration, are information, finance and insurance, manufacturing, and professional and technical services; however, each of these industries supply services which can be delivered over long distance, therefore, they do not need to be near their customer base.  On the other hand, in an occupation like a teacher, one must be near their customer base in order to provide services.  This is why industries such as public administration, educational services, utilities, health care and social assistance are among the least "footloose" of California industries.  Nevertheless, regardless of the number of jobs leaving, the top four most footloose industries each show a net migration of less than one percent.

The next step in the study was to analyze the value of jobs for firms leaving or entering California.  It was found that interstate business relocation is more popular for higher wage jobs than lower paying jobs.  By splitting the average pay rates into three different sectors, between 1992 and 2003, California lost 27,000 low paying jobs, 16,000 medium paying jobs, and 55,000 high paying jobs.  (Note that these numbers only include jobs going out and are data for net migration.)  Jobs in high paying industries are also much more likely to move into the state.

The report concludes that looking at job relocation alone is not enough evidence to judge the overall health of an industry.  For example, although finance and insurance percentage-wise lost the most jobs to interstate business, they also gained over 73,000 jobs through expansion and growth.  Thus, migration of jobs is not always a sign of whether or not an industry is successful.  In the end, between 1992-2003, the California job market lost 97,687 jobs to interstate business, nevertheless, this number represents only about .06 percent of all California jobs.  Therefore, job migration should not be considered a major factor in determining the strength of the California market and economy.

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