Worksheet_Economics Reading
CALIFORNIA MIGRATION
A COMPARATIVE ANALYSIS
MARCH 2016
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Sarah Henry
Marcia E. Perry
Stephanie Leonard
PREPARED BY:
Beacon Economics Christopher Thornberg
Jordan Levine
Rafael De Anda
Brian Vanderplas
DESIGN BY:
José Fernandez
ONLINE AT
www.next10.org
Data in this report can be accessed on
www.Compare50.org, where users can chart and compare all 50 states on over
150 indicators.
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California%Migration:%A%Comparative%Analysis% % March%2016%2%
Overview' % In%recent%years,%California%has%experienced%negative%domestic%migration,%meaning% more%people%are%moving%from%California%to%other%states%than%the%number%of% residents%moving%to%California%from%other%parts%of%the%country.%The%increase%in%the% number%of%residents%moving%out%the%Golden%State%to%other%parts%of%the%United%States% is%often%blamed%on%California's%high%personal%income%taxes.%However,%data%from%the% U.S.%Census%Bureau%show%this%perceived%connection%between%outKmigrants%and%the% state’s%income%tax%is%overblown%at%best,%and%nonKexistent%at%worst.%% % In%fact,%statistics%on%the%characteristics%of%California’s%inbound%and%outbound% migrants%suggest%patterns%in%migration%over%the%past%decade%are%more%related%to% housing%costs%in%the%state%than%to%tax%structure.%That’s%not%to%say%California’s%tax% structure%does%not%require%reform—indeed,%streamlining%the%tax%code,%broadening% the%tax%base,%and%lowering%tax%rates%would%likely%bolster%the%state’s%economy%further.% However,%that%does%not%implicate%the%tax%regime%as%the%sole,%or%even%the%primary,% source%of%outKmigration%from%California.% % While%it%is%true%domestic%migration%into%California%has%continued%to%be%negative%in% recent%years,%it%is%important%to%look%at%who%is%leaving%the%state%and%where%they%going.% This%report%analyzes%data%on:% %
1. Where%California%ranks%among%other%states%in%terms%of%net%domestic% migration%
2. The%income,%educational%attainment%levels,%and%occupations%of%California's% inbound%and%outbound%migrants%
3. The%reasons%that%migrants%are%opting%to%leave%the%state% % Additionally,%it%is%important%to%consider%the%characteristics%of%those%entering%the% state%from%other%countries.% % This%analysis%is%based%on%the%most%current%data%available%from%the%U.S.%Census% Bureau’s%American%Community%Survey%(ACS).%The%ACS%details%if%an%individual%moved% in%the%past%year,%where%they%moved%to,%where%they%moved%from,%their%income,%their% educational%attainment,%and%their%occupation.%This%data%will%give%insight%into%not% only%the%number%of%people%who%are%migrating%in%and%out%of%California,%but%key% demographic%features%about%these%migrants.%Additionally,%this%dataset%allows%us%to% exclude%the%migration%of%college%students%who%often%only%move%temporarily.% % The%main%findings%in%this%analysis%include:%
• California%experienced%a%negative%net%domestic%migration%of%625,000%from% 2007%to%2014.%In%other%words,%625,000%more%people%moved%out%of%California% to%other%states%than%moved%into%California%from%other%states.%
• The%vast%majority%of%outKmigrants%went%to%just%five%states:%Texas,%Oregon,% Nevada,%Arizona,%and%Washington.%
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• California%was%a%net%importer%of%residents%from%15%states%and%the%District%of% Columbia%from%2007%to%2014.%
• Californians%25%years%of%age%and%over%that%do%not%possess%fourKyear%college% degrees%accounted%for%over%469,800%outKmigrants.%However,%California%was% actually%a%net%importer%of%nearly%52,700%residents%with%a%bachelor's%degree%or% higher.%%
• California%remains%the%top%state%attracting%international%migrants,%many%of% which%are%lowKincome%earners%and%those%that%have%obtained%a%bachelor’s% degree.%
% Despite%seeing%an%overall%negative%net%domestic%migration,%California%is%continuing% to%attract%new%residents%to%the%state.%Despite%the%rhetoric%regarding%California’s% oppressive%tax%regime%or%its%overall%hostility%to%business,%individuals%coming%to% California%are%primarily%concentrated%in%highKwage%occupations,%which%enable%them% to%better%absorb%the%state’s%high%housing%costs%and%cost%of%living.%In%contrast,%the% majority%of%California's%outbound%migrants%tend%to%earn%less%than%$30,000%annually.% % Migration%trends%also%show%that%the%middleKclass%is%being%priced%out%of%the%state.%Net% migration%of%those%earning%between%$30,000%and%$49,999%accounted%for%43,100% residents%leaving%California.%Meanwhile,%lowKincome%earners%from%other%countries% are%replacing%lowKincome%earners%leaving%California%for%other%states.% % High%housing%costs%have%made%California%an%increasingly%difficult%place%for%lowerK income%residents%with%less%education%to%maintain%their%quality%of%life,%while%many% middleKincome%residents%are%having%trouble%moving%from%renting%to% homeownership.%Meanwhile,%those%with%higher%education%and%highKwage% occupations%continue%to%find%the%state%an%attractive%place%to%live.%Ultimately,%the% choice%of%where%to%live%is%one%of%consumption%and%reflects%a%variety%of%preference% factors.%Based%on%the%data,%it%appears%that%despite%a%high%cost%of%living,%individuals% who%can%afford%to%live%in%California%will,%because%of%all%the%state%has%to%offer.%
Where'are'Californians'Migrating'To?' % From%2007%to%2014,%California%saw%625,000%more%U.S.%residents%migrate%out%of%the% state%than%in.%The%vast%majority%of%these%migrants%went%to%only%a%handful%of%states.% The%state%seeing%the%largest%net%migration%from%California%was%Texas,%which%saw% over%212,600%net%domestic%migrants%from%California%between%2007%and%2014.%Other% states%that%were%primary%destinations%of%CaliforniaKoutbound%migrants%were% concentrated%in%the%western%United%States,%with%Oregon,%Nevada,%Arizona,%and% Washington%rounding%out%the%top%five.%Together,%the%top%five%states%for%California’s% net%outbound%domestic%migrants%accounted%for%over%550,800%(or%88%).% % California%was%not%the%only%state%to%see%net%outbound%domestic%migration%from%2007% to%2014.%Indeed,%23%other%states%saw%negative%net%domestic%migration%over%the%same% period.%Besides%California,%which%had%the%second%largest%outbound%migration,%the% states%seeing%the%largest%amount%of%net%outbound%migration%were%concentrated%in%
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the%northeast,%with%New%York%seeing%the%largest%number%of%net%outbound%domestic% migrants%(967,400).%Illinois,%Michigan,%and%Alaska%also%saw%domestic%migration%turn% negative%over%the%period,%however%losses%were%not%as%steep%in%absolute%terms%as% losses%in%New%York.% % Importantly,%California%saw%positive%net%domestic%migration%from%15%states%and%the% District%of%Columbia,%despite%an%overall%negative,%from%2007%to%2014.%The%states% accounting%for%the%largest%inflows%to%California%include%New%York,%Illinois,%Michigan,% New%Jersey,%and%Alaska.%Together%these%states%accounted%for%a%net%inflow%of%over% 119,600%migrants%to%California%from%2007%to%2014.%California%attracted%many% residents%from%some%states%that%do%not%have%an%income%tax,%including%Alaska% (20,700)%and%Florida%(18,000).%%As%will%be%discussed%below,%this%counters%the% perceived%link%between%migration%and%tax%rates,%and%suggests%other%factors%are% driving%migration%trends.% % In%2014,%California%saw%outKmigration%fall,%with%just%over%52,000%residents%leaving% California,%on%net.%That%puts%California%third%in%net%negative%domestic%migration% behind%New%York%and%Illinois.%Florida%attracted%the%most%domestic%migrants,%with% net%inKmigration%totaling%over%136,300%in%2014.%What’s%more,%half%the%states%in%the% nation%saw%negative%net%domestic%migration%over%the%period,%indicating%that%this%is% not%a%CaliforniaKspecific%trend.% %
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Who'are'California's'Migrants?' % While%California%has%seen%a%significant%number%of%residents%leave%the%state%in%recent% years,%it%is%important%to%look%at%who%is%opting%to%leave%the%state,%and%conversely%what% the%demographic%makeKup%is%of%those%still%moving%into%the%state.%A%common%theme%is% to%look%at%the%migration%out%of%California%and%blame%it%on%a%poorly%performing% economy%or%income%taxes%without%looking%at%who%the%people%migrating%actually%are,%
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or,%ultimately,%why%they%are%leaving%the%state.%This%is%especially%important%from%a% public%policy%perspective%in%that%having%the%right%diagnosis%is%critical%to%overcoming% challenges.%Indeed,%if%tax%rates%are%the%drivers%of%outKmigration,%the%policy% recommendation%that%logically%follows%is%to%lower%the%tax%rate.%However,%if,%as%the% data%suggests,%there%are%other%more%important%drivers,%then%the%reduction%of%tax% rates%will%do%little%to%stem%the%tide%of%those%leaving%the%state.%% % Looking%at%the%income%levels%of%domestic%migrants%undermines%the%assertion%that% California’s%progressive%tax%system%is%driving%residents%from%the%state.%In%fact,%from% 2007%to%2014%California%has%actually%seen%a%net%positive%domestic%migration%of% individuals%who%earn%over%$50,000%annually.%This%means%there%are%factors%other% than%income%taxes%impacting%migration%decisions,%since%the%majority%of%out% migration%can%be%attributed%to%residents%who%earn%less%than%$30,000%and%are%not% subject%to%California’s%higher%upperKincome%tax%brackets.%This%also%follows%the% earlier%finding%that%California%gains%residents%from%states%with%no%income%taxes.% Indeed,%it%appears%that%California’s%high%cost%of%living%and%housing%costs,%particularly% for%middleK%and%lowerKincome%residents,%is%playing%a%larger%role%in%the%decision%to% move%into%or%out%of%the%state.% % Educational%attainment%levels%of%California’s%migrants%provide%perhaps%some%of%the% best%insight%into%the%underlying%nuances%of%migration%in%the%state.%To%illustrate,%from% 2007%to%2014,%California%residents%25%years%of%age%and%over%with%a%bachelor’s%degree% or%higher%had%the%lowest%propensity%to%leave%the%state,%with%this%demographic% actually%seeing%a%net%inflow%of%nearly%52,700%domestic%migrants%over%the%period.%In% contrast,%California%residents%who%do%not%possess%a%bachelor’s%degree%had%the% highest%propensity%to%leave%the%state,%with%this%demographic%seeing%a%net%outflow%of% over%469,800%domestic%migrants%over%the%period.%This%should%not%come%as%a%surprise% given%that%education%is%a%primary%driver%in%income%disparities%and%the%concentration% of%outKmigrants%in%the%lowerKincome%categories.% %
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% The%data%on%outKmigration%from%California%by%occupation%tells%a%similar%story%as% when%analyzed%according%to%educational%attainment%and%income%levels.%The%vast%
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majority%of%outbound%migrants%were%concentrated%in%lowerKskilled,%lowerKpaying% fields—namely%Sales,%Office%Administration,%Transportation,%and%Food%Preparation,% which%together%accounted%for%a%net%outflow%of%over%192,700%domestic%migrants%over% the%period.%In%contrast,%California%continues%to%attract%workers%in%highKskilled,%highK wage%fields%like%Computer/Mathematical,%Healthcare%Practitioners,%Science,%and% Architecture/Engineering%occupations,%attracting%54,200%net%inbound%migrants.%% % These%occupational%patterns%support%the%argument%that%high%housing%costs%rather% than%income%taxes%are%impeding%positive%net%domestic%migration%to%the%state.%Since% California%is%a%relatively%progressive%tax%state%in%terms%of%income%taxes,%increases%in% the%income%tax%burden%are%less%likely%to%affect%workers%in%lowK%and%middleKwage% occupations%than%those%in%higherKwage%jobs.%Yet,%it%was%lowerKwage%and%middleK wage%workers%who%left%the%state%in%greater%numbers%while%there%was%actually%an% influx%of%higherKwage%workers.% %
Why'are'Californians'Migrating?' % Ultimately,%the%choice%of%where%to%live%is%one%of%consumption,%and%reflects%a%variety% of%preference%factors.%High%housing%costs%have%made%California%an%increasingly% difficult%place%for%lowerKincome%residents%with%less%education%to%maintain%their% quality%of%life,%while%those%with%higher%education%in%highKwage%occupations%continue% to%find%the%state%an%attractive%place%to%live.% % For%years,%California%has%suffered%from%a%chronic%undersupply%of%housing%despite% rising%population%and%increased%demand.%For%example,%although%home%to%more%than% 12%%of%the%nation’s%population,%California%has%consistently%accounted%for%just%8%%of% residential%permitting%for%almost%twenty%years.%In%fact,%between%2007%and%2015,% California%accounted%for%just%9%%of%the%new%residential%permits%in%the%nation.%The% state%simply%has%not%built%enough%new%housing%to%keep%pace%with%its%expanding% population%over%the%long%term.% % Indeed,%the%lack%of%permitting%does%not%appear%to%be%a%demand%issue.%According%to% the%California%Association%of%Realtors,%inventory%levels%averaged%just%over%four% months%of%supply%in%2015%in%California,%while%the%nation%overall%saw%inventory%levels% average%over%five%months%of%supply.%This%means%at%the%average%rate%of%sales%in%2015% the%stock%of%available%homes%in%California%would%dry%up%in%just%four%months,%while% the%stock%of%available%homes%in%the%nation%overall%would%last%five%months.% %
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% % What’s%more,%vacancy%rates%in%California%are%well%below%the%nation%overall,%where% the%homeowner%vacancy%rate%was%1.9%%in%2014,%compared%to%just%1.1%%in%California.% The%story%is%similar%for%renters,%with%the%rental%vacancy%rate%at%7.6%%in%the%United% States%overall%compared%to%just%4.5%%in%California.%This%suggests%homes%in%California% are%more%inKdemand%relative%to%the%nation%overall.% % Homes%in%California%also%tend%to%be%more%expensive%than%in%other%states.%For% example,%homes%in%Austin%(the%most%expensive%metro%area%in%Texas)%sold%for%a% median%price%of%just%over%$261,000%in%2015,%compared%to%nearly%$395,000%in% California%as%a%whole,%according%to%the%National%Association%of%Realtors.%Prices%are% even%higher%near%the%coast%with%homes%in%the%Bay%Area%selling%for%a%median%price%of% over%$700,000%in%2015.%This%puts%the%dream%of%home%ownership%out%of%reach%for% many%residents,%especially%for%those%who%are%not%in%highKwage%occupations.% % The%rental%market%in%California%is%also%expensive%compared%to%other%metropolitan% areas.%According%to%REIS,%the%cost%to%rent%an%apartment%in%the%United%States%averaged% $1,227%in%2015,%while%the%cost%to%rent%in%California’s%major%job%centers,%like%San% Francisco%($2,557),%San%Jose%($2,109),%Los%Angeles%($1,602),%and%San%Diego%($1,545),% was%well%above%this%rate.%With%these%figures,%an%individual%opting%to%live%in%an%area% with%rents%near%the%national%average%could%save%over%$10,000%annually%compared%to% the%San%Francisco%and%San%Jose%areas.%%%% % It%is%important%to%note%that%these%price%differences%are%not%just%a%result%of%California% being%a%more%desirable%place%to%live%relative%to%other%areas.%Our%research%suggests% that%a%litany%of%fees,%CEQA,%NIMBYism,%and%the%fact%that%Proposition%13%forces% municipalities%to%look%to%permit%and%development%related%fees%for%revenue,%all% contribute%to%California’s%affordability%issue.%So,%to%solve%the%outKmigration%issue,%the% focus%should%be%put%on%these%roadblocks,%rather%than%the%state’s%personal%income%tax% rate.% %
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1995 1998 2001 2004 2007 2010 2013 Source: U.S. Census Bureau
1995 to 2014 California's Share of U.S. Residential Permits
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California%Migration:%A%Comparative%Analysis% % March%2016%8%
Based%on%the%data,%it%appears%that%despite%a%high%cost%of%living,%individuals%who%can% afford%to%live%in%California%will.%However,%it%is%important%to%look%closely%at%how% affordability%has%impacted%migration,%and%why%it%has%been%a%persistent%issue%in% California%over%the%years.% %
International'Migrants' % Counter%to%the%trends%observed%in%domestic%migration,%California%continues%to%be%the% most%popular%destination%for%international%migrants.%Between%2010%and%2015,% 835,000%net%international%migrants%moved%into%California%–%more%than%any%other% state%during%that%period.%New%York%(630,800),%Florida%(610,500),%and%Texas% (463,400)%have%also%been%popular%states%for%international%migrants.% % Furthermore,%unlike%patterns%in%domestic%migration,%the%majority%of%international% migrants%moving%into%California%earned%very%low%incomes.%More%than%80%%of% migrants%entering%California%between%2007%and%2014%earned%less%than%$30,000%per% year,%which%is%not%much%different%from%international%migrants%entering%in%New%York% (78%),%Florida%(85%),%or%Texas%(78%).% % Despite%earning%low%wages,%many%international%migrants%enter%the%nation%with%an% advanced%education.%Approximately%33%%of%California’s%international%migrants%25% years%of%age%and%above%had%obtained%a%bachelor’s%degree,%similar%to%the%rate%in%New% York%and%greater%than%the%27%%rate%in%both%Florida%and%Texas.%The%majority%of% international%migrants%entering%California%with%a%bachelor’s%degree%come%from%Asia.%% %
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Conclusion' % Although%California%experienced%a%negative%net%domestic%migration%of%625,000%from% 2007%to%2014,%it%appears%that%despite%high%housing%costs%and%a%high%cost%of%living,% individuals%who%can%afford%to%live%in%California%will%and%international%migrants% destined%for%the%Unites%States%will%continue%to%start%their%search%for%a%better%quality% of%life%in%California.%This%is%in%contrast%to%the%common%talking%point%that%individuals% are%deciding%to%move%from%the%state%because%of%high%personal%income%taxes.%In%fact,% California%has%seen%a%net%inflow%of%residents%who%earn%over%$50,000%annually,%have% bachelor’s%degrees%and/or%advanced%degrees,%and%work%in%highKskilled%occupations.%%
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% California%still%has%plenty%of%room%for%improvement.%The%state’s%permitting%rules%and% its%building%regulatory%environment%could%be%eased%and%streamlined%to%address% California’s%real%enemy:%the%high%cost%of%housing.%High%housing%costs%have%made% California%an%increasingly%difficult%place%for%lowerKincome%residents%with%less% education%to%maintain%their%quality%of%life,%while%those%with%higher%education%and% who%work%in%highKwage%occupations%continue%to%find%the%state%an%attractive%place%to% live.% %
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