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Low-wage states with cheap housing dominated the post-pandemic jobs boom • Stateline

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More than half of the nation’s jobs created in the past five years have come in two states: Texas and Florida.

They’re at the forefront of a job creation revolution in which states with lower wages and a lower cost of living are gaining the highest share of new jobs, according to a new Stateline analysis of U.S. Bureau of Labor Statistics data.

Meanwhile, high-wage states such as California, New York, Washington state and Massachusetts tumbled out of the top 10. California, which had the highest share of new jobs from 2014-2019, crashed to the very bottom in job creation.

The changes closely follow state-by-state labor trends in the years during and since the COVID-19 pandemic. Employers have been less willing to create jobs in higher-wage states. Workers, meanwhile, are avoiding skyrocketing housing costs and taking advantage of new options for remote work.

As a key labor union pushes into the South, red states push back

“In the pandemic’s wake, workers are likely playing a bigger role because many have new flexibility about where to work and live,” said Aaron Sojourner, a labor economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan.

“About 1 in 10 U.S. workers now work fully remote jobs, an expansion enabled by organizations’ investments in distributed work capacity during the pandemic,” Sojourner said. “Many families with high-paying remote jobs migrated towards areas with lower living costs because they’re no longer tethered to a high-cost place.”

Between 2014 and 2019, California gained 1.4 million new jobs — more than any other state and 12% of the national total. But for the past five years California has been dead last in job creation, losing about 214,000 jobs. Texas moved into first place during that time, seeing almost 1.3 million new jobs, almost one-third of all new jobs created nationally.

Florida was not far behind, with about 911,000 new jobs, almost 25% of the national total of about 4 million.

Besides California, which plunged from No. 1 to No. 51 in job creation for the states and the District of Columbia, New York fell from No. 5 to No. 50, and Massachusetts from No. 7 to No. 47.

Washington state, Michigan and Tennessee also fell out of the top 10, while Arizona, Utah, Virginia, South Carolina, Oklahoma and Colorado moved into the top 10.

High wages in some states are playing a part in lagging job creation, according to an April analysis by the Economic Innovation Group, a Washington, D.C.-based research organization.

California and New York have average salaries about 18-20% higher than the national average of $65,500, while Texas and Florida are 6-7% lower, according to federal Occupational Employment and Wage Statistics data.

“For the first time since the Great Recession, the richest metro areas are no longer creating the majority of new jobs in the U.S.,” the report noted.

Some of the shift in job fortunes comes from a struggle between California’s Silicon Valley and Texas’ capital city of Austin for primacy in tech jobs. California’s share of tech jobs began to plummet during the pandemic as Texas’ share rose.

Swing states see newcomers as Americans move from blue to red counties

In a 2020 Wall Street Journal opinion piece headlined “California, Love It and Leave It,” venture capital entrepreneur Joe Lonsdale described moving his company from San Francisco to “a new land of opportunity: Texas.” He blamed bureaucracy for slowing business progress during the pandemic and restrictive zoning that made it impossible for employees to afford housing near their jobs.

More recently, Jeffrey VonderHaar discussed in February his plans to move much of his business, Specialized Orthopedic Solutions Inc., which involves manufacturing prosthetic limbs and other medical equipment, back to Texas after 14 years in California. In an interview with Business Insider, he complained of business regulations and taxes in California, as well as high housing prices that fed homelessness and people living in parked RVs near his office in suburban Los Angeles.

Last year, Texas Republican Gov. Greg Abbott gleefully proclaimed Austin “THE destination for the world’s leading tech companies” in a tweet, mentioning Tesla’s and Samsung’s expanding operations in the Austin area. Democratic U.S. Rep. Lloyd Doggett, who represents the Austin area, told Stateline that Samsung is building a third semiconductor fabrication plant in the area and already employs thousands of Texans.

But recent cutbacks in tech have led to setbacks in Texas as well as in California. Oracle announced in April a move to Nashville, Tennessee, from Austin, where it had built a massive lakefront campus with the help of tax breaks, citing even more generous incentives from Tennessee. Tennessee approved $65 million in tax incentives in 2021, when Oracle pledged to bring in about 8,500 jobs; Tennessee’s average salary is also about 5% lower than in Texas.

Oklahoma made the biggest jump in the Stateline analysis of job creation rankings, from No. 31 to No. 9. The state has seen a reversal of the “brain drain” it experienced in the late 2010s, a period when it lost educated residents to other states, according to research this year by the Oklahoma City branch of the Federal Reserve Bank of Kansas City.

The state had been losing college graduates and higher-income people to other states before the pandemic, but that has reversed, said Chad Wilkerson, the Oklahoma City branch executive for the bank and author of the report.

Leaders want to grow Oklahoma’s job landscape beyond the cyclical energy industry that attracts blue-collar workers but also creates boom-and-bust cycles, Wilkerson said. Many new Oklahomans have higher education levels and are employed in business services such as research and development and engineering, as well as retail management, reflecting both population growth and a more diverse economy.

“It’s been intentional to some degree by chambers [of commerce] and state policy, the desire to attract more than just oil and gas,” said Wilkerson.

The privately funded Tulsa Remote program, for example, has brought in thousands of remote tech workers from other states with a promise of lower living costs and a shared work space to encourage networking and friendship. A 2021 study found that $4.5 million spent luring new residents paid off in the form of $62 million in new jobs — both for those workers and other jobs created to support them.

In the pandemic’s wake, workers are likely playing a bigger role, because many have new flexibility about where to work and live.

– Aaron Sojourner, labor economist at W.E. Upjohn Institute for Employment Research

Most states have some form of job creation incentives and evaluate them regularly for effectiveness. Oklahoma has tax incentives for data processing and research and development jobs, and a state commission last year recommended keeping them.

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State tax incentives can pay off in the long run, but the effect is modest, said Robert Chirinko, a University of Illinois finance professor whose most recent study of state job creation tax incentives was published in September by the National Tax Journal.

Florida has enjoyed a decade of job creation, moving up the rankings from No. 3 to No. 2 in the past five years. But overall, its economic landscape is mixed.

Wages have not kept up with inflation, and housing prices in the Miami area are especially high, making poverty an increasing concern, according to a report last year by Florida International University’s Center for Labor Research and Studies.

“It is a tale of rich and poor,” said Ravi Gajendran, a business professor at Florida International University in Miami. “A lot of the migration [to Florida] is due to well-off individuals moving to Miami, which is part of the reason why real estate prices have risen here to a greater extent.

“For someone moving from New York or California, real estate prices are still cheap here in Miami,” he said. “But for local Miamians, this increases real estate and rental costs, making it less affordable to stay here.”

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