California employers and job recruiters find it tough to lure out-of-state workers at a time when unemployment rates are falling and housing prices are rising.
Plenty of workers still move West each year for a new job in California. But the state’s high cost of housing may be deterring many other job seekers from moving into the state.
Business leaders up and down the state say California’s expensive housing makes it challenging to recruit new workers — and to keep existing employees here.
“You’re competing, now, with a low unemployment rate in California, and people have options,” said Mary Leslie, president of the Los Angeles Business Council. In April, the state’s unemployment rate hit a record low of 4.2 percent.
“If we don’t have the affordable housing, we’re not as competitive,” Leslie said.
Job recruiters see California’s housing crisis from both sides. They work with employers feeling pressure to raise wages, and they talk with job seekers scared off by median home prices that top $1 million in parts of the Bay Area, and over $500,000 in Los Angeles and San Diego counties.
But Matt Stone, a Los Angeles recruiter with Proven Recruiting, said plenty of workers are still drawn to sunny California.
“Living near the beach, having that active lifestyle, being able to see the Hollywood stars every once in awhile,” Stone said. “Those are the reasons for the people who aren’t from here.”
And he should know. Stone is a transplant himself, moving from upstate New York in 2016. He’s able to walk job seekers through the perks of taking a new job in California, and guide them away from the neighborhoods that could lock them into a terrible commute.
During a call with a certified public accountant in North Carolina, Stone asked, “Have you been out to L.A. before?”
“I have,” said the candidate, who we’re not naming to protect his job with his current employer. “There’s always downsides to everywhere that you go. And I know that there, it’s the crowds and traffic,” he said.
And, of course, California’s sky-high housing costs. The median price of a California home — now $538,640, according to the California Association of Realtors — is more than double the national median home price.
The kind of financial workers Stone recruits could always find work in a less expensive part of the country. They do get a pay bump in California, but their annual salary alone is often not enough to afford a house in urban, coastal Southern California.
“A hundred thousand dollars here isn’t going to go nearly as far as in Kansas or Missouri or any of those states,” Stone said.
It currently takes an annual household income of $112,930 to afford a median-priced Los Angeles home, according to a recent report from the California Association of Realtors. Homes in other parts of the state are significantly cheaper — like the Inland Empire east of Los Angeles — but in San Francisco, homebuyers need to earn as much as $333,270 to keep up with median monthly home payments.
When a candidate does get an offer, Stone sometimes goes outside his job description to help them complete the move. One worker he successfully recruited from the Washington, D.C., area didn’t have much time to find a place to live. So Stone scouted apartments for him.
Stone said he toured the apartments using his phone’s Facetime app, “just letting him know a little bit about the areas the apartment was in as well.”
Even in today’s tight labor market, Proven recruiters said they still find plenty of job seekers living in California who are open to new opportunities.
But recruiting people from out of state is more difficult. In recent years, only seven percent of Proven’s California placements have been filled with people from out of state. Ingram Losner, the firm’s co-founder, said that number was lower than he expected.
“When you look at it on paper, and you see the cost differential between living in California and living outside of California, you can’t live on the promise of a dream,” Losner said. “And that’s clearly where people decide to remove themselves from the process.”
It’s not just Proven Recruiting having a tough time luring people to California. In a 2016 Silicon Valley Leadership Group survey, local CEOs said the area’s high cost of housing was their number one business challenge.
It’s something a lot of employers in Southern California struggle with too. A 2017 University of Southern California survey found that housing costs were concerning to 75 percent of large employers in Los Angeles.
The survey also asked if companies were losing workers due to unaffordable housing. Some weren’t sure, but among those who did answer, 70 percent said yes.
USC public policy professor Raphael Bostic said if housing costs continue to push certain workers out of state, California’s economic growth could be affected.
“If the pressures continue, do they just say this California isn’t the California I thought it was?” Bostic asked. “I don’t think it’s in California’s interest to have more and more people facing that choice.”
The possibility of losing workers has even led some employers, like the Los Angeles Unified School District, to develop housing for certain workers who may not have any other affordable options nearby.
Meanwhile, San Francisco has for years discussed the possibility of building teacher housing within the city, and in April announced the selection of an affordable housing developer to carry out the project.
Tech giants like Google and Facebook also have plans to create new housing near their Bay Area headquarters in the coming years.
Surveys have found some evidence that employers are taking cost of living into account when negotiating hiring packages to lure top-level workers to California. But lower-wage workers are not getting as much help to offset rising rents. If these trends continue, the future could hold more inequality and stagnant growth, said USC professor Gary Painter.
“The kind of economy that California might grow into is one where there’s a few people earning a lot, and then a bunch of lower wage workers,” said Painter. “And that has never been a recipe for long-term quality of life and economic growth in the United States.”
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The California Dream series is a statewide media collaboration of CALmatters, KPBS, KPCC, KQED and Capital Public Radio with support from the Corporation for Public Broadcasting and the James Irvine Foundation.