Why California Is Bleeding Tech Jobs — Decline Is a Policy Choice

Silicon Valley isn’t dying — it’s decentralizing. Tech firms are expanding in lower-cost states and taking jobs with them.

By Vance Ginn. Excerpts:

"What California is now experiencing is not a cyclical tech downturn or a post-pandemic anomaly. It is a measurable, policy-driven decline in relative competitiveness. The most important evidence is not that tech employment has fallen in absolute terms, but that California’s share of national tech employment has been shrinking, while other states gain ground.

Markets are responding to incentives exactly as economic theory predicts."

"According to Bureau of Labor Statistics Current Employment Statistics data, California’s technology employment growth has underperformed national trends for several years, including during periods when tech hiring stabilized or rebounded elsewhere, and recently has been declining. California’s share of US tech jobs is falling from roughly 19 percent pre-2020 to closer to 16 percent in recent years, a nontrivial shift for an industry this large."

"Office vacancy rates across Silicon Valley remain elevated well beyond what remote work alone would explain. Bay Area office markets have not recovered in the way peer regions have."

"US Census state-to-state migration data show continued net domestic outmigration from California, particularly among working-age adults."

"Founding activity reflects legacy advantages such as universities, networks, and capital concentration. Scaling decisions reflect marginal costs. Increasingly, firms are choosing to incorporate or raise seed funding in California while expanding headcount in lower-cost, lower-regulation states."

" Scaling in California exposes firms to the nation’s highest marginal income tax rates, comparatively punitive capital gains taxation, rigid labor mandates, slow permitting processes, and volatile regulatory expectations. These costs rise nonlinearly as firms grow."

"California lawmakers have pursued some of the most expansive state-level AI regulations in the country. These proposals extend liability, mandate preemptive risk assessments, and impose compliance obligations before alleged harms are empirically demonstrated or even defined."

"Extensive empirical literature shows that high fixed compliance costs reduce entry and increase concentration. The OECD’s work on regulation and competition consistently finds that heavier regulatory burdens favor large incumbents at the expense of startups and challengers."

"Europe’s experience with digital (over)regulation offers a cautionary parallel, acknowledged even in European Commission competitiveness reports."

"California has the highest top marginal income tax rate in the United States, and taxes capital gains as income. Housing scarcity, documented extensively by UC Berkeley’s Terner Center, raises labor costs without increasing real purchasing power. Energy prices remain among the nation’s highest, as shown by EIA electricity price data."