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Blog Post · June 26, 2024

How Has Remote Work Affected Migration around the State?

This post is the third in a series on remote work in California. The first post examined how remote work is changing the state's labor market, and the second analyzed who is working from home.

photo - man using computer at desk in home office

The COVID-19 pandemic has fundamentally transformed the way Californians work, with remote work increasingly prevalent across a range of industries. Better-educated and higher-income employees have seized this advantage, as their jobs often allow remote options. Remote work has changed not only how Californians do their jobs, but also where they live, with especially significant consequences for the San Francisco Bay Area.

figure - Californians have been leaving the Bay Area and Los Angeles for other parts of the state

Migration within California has consisted mostly of movement away from the Bay Area and Los Angeles. People leaving the Bay Area but staying in the state have tended to move to Sacramento, the Northern San Joaquin Valley, and the Central Coast, while the most popular destination for Angelenos has been the Inland Empire. Flows in and out of San Diego have been modest, while Sacramento has seen strong in-flows from both the Bay Area and Los Angeles. These basic patterns preexisted the pandemic, but they accelerated in the latest Census data from 2021 and 2022.

While people have been moving away from the Bay Area and Los Angeles for a while, remote work is likely a significant driver of recent trends. In fact, since the pandemic, remote workers account for the entire increase in movers out of the Bay Area and a majority of the increase in those leaving LA. The pattern is especially pronounced among the highest-income earners. All of this is consistent with the kind of jobs amenable to remote work, which tend to pay higher wages and are disproportionately prevalent in the high-tech industries common to the Bay Area. In fact, if the Bay Area were a state, its 28% remote work rate in 2021 and 2022 would have been the highest in the country (California 19%; rest of the US 16%).

figure - Remote work accounts for overwhelming majority of increases in Bay Area and LA exits

This suggests that the ability to work remotely has given some workers the freedom to relocate to areas with more affordable housing without moving to a new job. At least some of these workers would probably have moved anyway and simply commuted back to their existing jobs, so remote options have saved such workers a long trip each day. But remote work likely enabled others to move, thus accelerating the exodus from job-rich but housing-strapped regions of the state.

The Bay Area is perhaps the state’s most job-rich and housing-strapped region. Its net outmigration has more than doubled since 2018–2019—from 4.1 to 9.3 per thousand—and there has been a substantial increase in remote work and notable net outflow among its high-income earners. By contrast, remote work rates among outmigrants from regions like San Diego and Sacramento have changed far less. And while remote work has been significant in the migration from LA, more people have been moving to LA than to the Bay Area. Its net loss has actually shrunk very slightly since the pandemic, from 4.3 down to 3.5 per thousand.

The Bay Area’s loss of remote workers to other regions could marginally shrink its tax base and sap revenue from local businesses. The regions these workers move to mostly benefit in equal measure, though the new residents also increase housing demand—and hence the cost of housing—in their adopted communities and put stress on renters already living there.

These dynamics highlight the severe mismatch between the state’s employment and housing markets. The Bay Area has a large share of the state’s best-paying jobs but not nearly enough housing. The gap is serious enough to produce ripple effects across the state.

In fact, remote work is not even the largest of these effects. Low-income workers are the least likely to work remotely, but the most likely to struggle with Bay Area housing costs and the most likely to move away from the area. Remote work may open up new living arrangements for some Californians, but it is merely a band-aid for the housing crisis—and it doesn’t even cover the deepest part of the wound. The state has been passing a flurry of legislation to relax constraints on new construction, mostly in dense urban cores.  There has been more construction in some of the places that need housing the most, but those new buildings have not yet been enough to prevent overall population decline. This may change as the full effect of the new laws is felt. PPIC will continue to monitor this area for future developments.

Topics

coronavirus COVID-19 Economic Trends Economy future of work Housing Jobs and Employment remote work remote work trends workers