There’s good news for talent acquisition professionals in the Lone Star State. Despite the coronavirus pandemic, Texas continues to be a magnet for California companies seeking more favorable tax laws, an educated workforce, a lower cost of living and a business-friendly environment. While tech-heavy Austin has attracted a sizeable share of companies fleeing California’s Silicon Valley, businesses of all stripes are ditching the Golden State, not just for Austin but also for Dallas, Houston and San Antonio, the other big Texas metros. ThinkWhy’s LaborIQ Index ranks four Texas cities among the top 50 in the U.S. They are Dallas (No. 1), Houston (No. 9), Austin (No. 11) and San Antonio (No. 42).
- Dallas: Added more jobs in November 2020 (17,600) and December 2020 (26,900) combined than any other city in the country. The area has also lured the headquarters of companies including Charles Schwab and McKesson from California.
- Austin: Oracle announced moving its headquarters from Redwood City, Calif.
- Houston: Hewlett Packard Enterprise announced relocation of its global headquarters from San Jose, Calif.
- San Antonio: Pabst Brewing and furniture maker O.W. Lee moved their headquarters from California to San Antonio.
- Austin and the Texas Gulf Coast: Tesla’s Elon Musk chose Austin for a new assembly plant and Bolsa Chica Village, near Brownsville, for his SpaceX venture.
Musk and organizations like Oracle and HP are among the latest to join the California-to-Texas stampede, but they’re far from alone. Recently the Dallas-Fort Worth area has attracted the headquarters of such Golden State ex-pats as tractor manufacturer Kubota, food distributor Core-Mark, commercial real estate firm CBRE and tech firm DZS, in addition to financial services firm Schwab and McKesson, a healthcare services company. Other big companies like Apple, Google, Facebook and Amazon are expanding their presence in the state.
In a December 2020 ranking of the top 15 U.S. job markets by LaborIQ® by ThinkWhy, Dallas-Fort Worth was No. 1. Austin came in at No. 7 on the list and Houston ranked No. 10. LaborIQ research also shows that Texas was off just 4% from its pre-coronavirus pandemic employment level in December, while California was off more than twice that.
According to relocation experts cited by The Dallas Morning News, more than 700 companies have moved facilities of various types – from corporate headquarters to warehouses to data centers – from California to Texas in the last four years. An annual study by Allied Van Lines, released in December 2020, said Texas was No. 1 among “magnet states” for corporate moves, ahead of California, Illinois, Florida and North Carolina.
Texas Leads in Population Gain
The pandemic has only hastened the trend. Many white-collar jobs have gone fully remote or to a hybrid remote model in recent months, making organizations realize they can source their talent in multiple locations. The pandemic has also affected workers living in big cities like San Francisco, many of whom are pursuing moves to less-expensive locales with a better quality of life.
According to figures from the U.S. Census Bureau, Texas led the nation in population gain in 2020, while California actually lost residents. Business conditions in overtaxed California have also contributed to the trend. According to the Tax Foundation’s 2021 State Business Tax Climate Index, California ranks 48th among the 50 states in terms of the competitiveness of its tax system. In addition, the Cato Institute says California ranks 48th among the states in terms of costly regulatory burdens, while Texas is much lower, at No. 21.
Texas also has no state income tax, in contrast to California, where the top individual tax rate is 13.3%. “Cost of business means a lot,” Texas Gov. Greg Abbott told CNBC. “No income tax means a lot, but also the freedom to operate without the heavy hand of regulation means a lot.”
Mark Calvey, a senior reporter at the San Francisco Business Times, says the California-to-Texas pipeline isn’t apt to sputter out soon. “We don’t think it’s going to, especially in 2021. California is looking for money wherever it can find it,” Calvey told Austin TV statue KVUE. “They may raise the state income tax to as high as 16.8%, something they thought about doing in 2020 that didn’t go anywhere. … And they’re even talking about a wealth tax taxing former Californians for up to 10 years after they leave the state. All that type of talk makes people nervous.”
For talent acquisition pros in Texas, the exodus from California spells opportunity, with more potential roles to fill and a flood of new resumes to consider. But the opposite is true for their counterparts in the Golden State. There, hiring pros may need to offer higher salaries and more flexibility to hold on to local talent or consider recruiting remote workers to offset the lack of available candidates.