Report finds remote work driving California job loss, migration

(CN) — The rise of remote work since the Covid-19 pandemic has weakened California’s economic engines, according to a report published on Wednesday by the state’s Legislative Analyst’s Office.

The report, “The Rise of Remote Work: Effects on California’s Labor Market,” found that one-eighth of California workers now work from home and that more remote workers are now leaving the state than moving to the state since the pandemic.

California’s robust industry and university systems, particularly in the Bay Area and Southern California, have been a longtime attraction for skilled workers and investors from all over the world, historically leading to high wages, high tax revenue and other economic drivers that increased the state’s prosperity, the report says. But that prosperity has taken a hit since the rise of remote work in certain fields.

“As work in these fields has become less connected to physical location, the geographic link between these industries and their workers — software developers, accountants, human resources workers, financial advisors, information systems managers, and many others — has decoupled,” Legislative Analyst Gabriel Petek wrote in the report. “Employers who once recruited locally can now draw from a national pool of workers. Workers who would have come to California to pursue these opportunities can now live elsewhere.”

People working from home comprised about 4% of the workforce in California and the United States, a figure that was gradually increasing. But by 2021, that number jumped to 21% in California and 16% in the rest of the country, the report says.

It would have taken many more years to reach those rates without the pandemic, according to the report.

Between 2021 and 2023, remote work declined sharply before reaching its current rate at about 13%, or one-eighth, of the employees in California and the United States.

According to another survey, those numbers continued to decline for fully remote workers between 2023 and 2026 with the California rate dropping from 10% to 9% and the national average holding steady at about 9%.

Additionally, job growth in heavily remote jobs in the state, such as technology, finance, business, government operations and marketing, has lagged behind the rest of the United States, the report says. While heavily remote job employment has increased by 16% in the rest of the U.S., California has seen only 7% growth in those same jobs.

The state’s approximately 1 million tech workers remain the most likely profession to work remotely (38%), followed by sales and marketing (31%), business and government operations (30%) and finance and accounting (24%), the report says.

The number of people leaving California for other states has consistently outpaced those moving to the state for at least the last 25 years. But workers in heavily remote jobs outpaced those who were leaving each year before the pandemic by about 5,000, the report says. After the pandemic, those numbers flipped.

“In 2021, 43,000 of these workers moved to California from other states, while 80,000 left — a net outflow of 37,000 in that year alone,” the report says. “After 2021, the net outflow of these workers shrank but has remained substantial.”

The state’s high wages that once offset its high cost of living are now threatened by employers who can hire cheaper out-of-state workers and allow existing employees to move elsewhere without losing their jobs, the report says.

The potential for additional job displacement as a result of artificial intelligence as well as the state’s high housing costs were among other issues for legislative consideration, the report highlighted.