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Gubernatorial candidate Meg Whitman and other Republicans contend that California's poor business climate is driving employers and their jobs out of the state, but an updated study by the Public Policy Institute of California found otherwise.

Relocations account for a tiny percentage of the state's job losses, the PPIC study found - just 1.7 percent from 1992 to 2006 and never more than 2.3 percent in any one year.

"Few businesses move into or out of California," says the report, written by PPIC's Jed Kolko. "From 1992 through 2006, about 16,000 jobs annually moved into California and about 25,000 jobs annually moved out of California. The annual net employment change in California due to relocation - a loss of about 9,000 jobs - represents only .05 percent of California's 18 million jobs."

Furthermore, Kolko's research found, California's losses from employer movement are well below the national average of the states. Washington, D.C., suffers the biggest such loss, 6.9 percent of its total employment decrease.

"In California," Kolko continues, "74 percent of job gains and 68 percent of job losses are homegrown. Most job gains are due to the births and expansions of locally owned businesses; most job losses are due to the contractions and deaths of locally owned businesses.

"Businesses headquartered outside a county contribute much less to local employment fluctuations. The homegrown shares of job gains and losses are even higher in smaller cities and towns and in rural areas. Among the non-metropolitan counties in California, 79 percent of job gains and 74 percent of job losses are homegrown. Thus, although luring businesses from elsewhere or convincing them to open or expand locally is a common economic development strategy, and preventing businesses from leaving the state is a political refrain, 4 most job gains and losses are homegrown."

What Kolko's research does not - and cannot - show, however, is whether the state's business climate is a significant deterrent to new job-creating investment. There's no objective way to determine why investments are made inside or outside the state, since investors don't reveal their reasons for such decisions.

The full PPIC study can be found here.


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