Trouble in paradise: The crumbling California model

The state’s troubles don’t stop there. California is creating fewer professional business-service jobs, the largest source of high-wage employment. According to Toplansky and Murphy’s analysis of BLS data, over the past three decades, California has lagged behind the national average and grown at half the rate of Texas, Washington State, Utah, Florida, and Colorado. The growing exodus of key business service firms — Bechtel, Jacobs, McKesson — has both epitomized and accelerated this decline.

But the biggest crisis could be a decline in the all-important “innovation” sector. Last year, Tesla, Hewlett Packard Enterprises, and Oracle moved their headquarters to Texas. Some 40 percent of Bay Area tech workers say that they would like to move to a less expensive region. Leading tech firms now expect a large proportion of their workforce — roughly 50 percent of whom could work remotely — to stay elsewhere after the pandemic, with workers seeking out cheaper and less congested climes, most notably in Texas or further out in the relatively cheaper California interior.

To be sure, the core Bay Area counties still contain virtually all the country’s billionaires under 40. But there are some signs that this may not be the case much longer. The state’s share of venture-capital investments has fallen, and the rate of start-ups is rising in competitive regions such as Arizona, Nevada, Texas, and North Carolina. Over the past 30 years, California’s innovation sector, note Toplansky and Murphy, has lagged that of several other states, notably Utah and Washington, and others too could catch up.