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Blog Post · August 16, 2022

California’s Population Shifts May Lead to New Income Divides

photo - Woman Packing and Stacking Moving Boxes

California’s population growth slowed and then reversed over the last few years, driven by declining birth rates and immigration, COVID’s unusually high death toll, and accelerating migration to other states. This last driver has received a lot of attention. People leaving the state have lower incomes and education levels than those moving in, with the state’s high housing costs frequently cited as a reason for leaving. Yet census data suggest housing costs also drive migration within the state, with potential consequences for income patterns across California.

It stands to reason that most Californians moving to less expensive states are leaving the areas where housing costs are highest. That is, the major coastal metros of the Bay Area, Los Angeles, and San Diego would lose proportionately more people to other states and less expensive regions than would the cheaper interior.

But every region is a loser when it comes to net migration out of California: more people leave each region for another state than arrive into it from another state. The rate of loss is somewhat lower along the Central Coast and the San Joaquin Valley, but the differences are not large—the far eastern border has an especially high outflow rate, but also very few people.  Though rates across the state are comparable, it is worth noting that the large sizes of the Bay Area and Los Angeles make those regions account for 43% of the 3.3 million people who have left the state.

figure - Expensive regions lose people to other states at about the same rate as cheaper ones

Housing costs more obviously drive migration within the state. Expensive coastal metros have been net donors to other areas of California, while all other regions have gained more intrastate movers than they have lost. These numbers reflect dynamics through 2020; the pattern may have accelerated during the COVID pandemic.

figure - Migration within the state closely reflects housing costs

Housing costs still play a role in departures from California, as costs are high all over the state relative to many of the primary destinations of out migrants, like Arizona or Texas. For almost any location in California, people can find a comparable and cheaper alternative in another state. This likely creates an incentive to leave California, but the draw of strong job markets in places such as San Francisco can still attract people, and may offset the rate of out-migration for the expensive coastal regions.

Leaving the state entirely is also a big decision that affects more than changing location. Moving across state lines usually involves changing jobs or putting social networks out of reach. Moving within state is less disruptive, and so may end up more determined by housing costs.

The pattern between states and within California suggests that a geographic polarization of income may be occurring—with income differences growing between regions but shrinking within each region. California is slowly sorting into a higher-education, higher-income state—and within the state, people are leaving higher-income regions in favor of lower-income ones. The downstream effects might be significant for policy, resource planning, and politics.


Economic Trends Economy Housing Population Poverty & Inequality