The Unintended Consequence of California Tech Companies Going Remote

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Oct 2, 2020
This article is part of a series called COVID-19 Coverage.

Before COVID-19 turned the world on its axis, working remotely was an employee perk enjoyed by only a small portion of the workforce. While home offices and shared co-working spaces had been growing in popularity — mostly among startups and tech companies — the majority of North American businesses kept traditional onsite workplace policies intact. Times have changed, of course.

Recently Twitter and Square CEO Jack Dorsey announced that employees of both companies would no longer be required to come into an office, creating a new normal for nearly 8,000 employees, most of whom were based in the Bay Area. 

Mark Zuckerberg announced a change in policy at Facebook, too, allowing employees to work remotely for the time being. He also shared his prediction that around half of the company’s employees would continue to work from home even after it becomes safe to return to the office. Shortly thereafter, Amazon, Apple, Microsoft, and hundreds of other Calif.-based tech companies announced remote workplace expansions. 

All it took was a global pandemic to hit fast-forward on this widely predicted “future-of-work” shift. Much sooner than expected, we’ll likely see even slow-moving corporate giants enact sweeping remote workplace policies, as well. For proof, look no further than Pinterest’s announcement that they are spending $89 million to pull out of their lease in an expansive new San Francisco office development. 

In light of such shifts, Codility, a hiring platform for engineering professionals, recently examined its data around career progress trends among candidates and companies. Comparing the period of April 1 to July 15 this year vs. last year, we discovered that the rules of hiring and job-hunting have completely changed, especially in California. 

A Shifting Landscape

In 2019, the tech industry saw a massive surge in hiring, which included millions of fully remote technical-skill evaluations and interviews being conducted. Companies like Microsoft, Twitch, Bird, and Tesla expanded their engineering teams quickly, while their recruiters sought new sources of qualified candidates. Instead of sticking to the typical feeder schools of U.C. Berkeley and Stanford, recruiters started to consider candidates from less-traditional schools. South-Asian and Eastern European talent hubs also became more appealing now that relocation costs were being offset by lower salaries. 

The Bay Area’s sky-high cost of living combined with a major housing availability crisis led experts to predict that this region would experience a decline. Nevertheless, the lure of unrivaled six-figure salaries, California’s second-to-none employee protection regulations, and inspiring startup success stories continued to draw top talent from around the world to the state. 

Until, that is, COVID-19 threw a wrench into this formula by enabling tech workers to keep their Silicon Valley salaries while relocating to states with more reasonable living costs.

We’ve now seen five months of California tech workers fleeing the state for lower-cost cities like Portland, Austin, or Asheville, N.C. Our data suggests that both workers and employers in the state have been behaving differently since COVID-19 began, compared to the same period last year in California.

While job-seekers in nearly every state in the country have seen a drop in available job opportunities, the impact in California has been particularly striking. There has been a 34% decrease in the number of companies hiring for highly technical positions, compared to the same pre-COVID period last year. Yet there has been no change in the volume of Calif.-based job applicants, forcing in-state candidates to compete with an exponentially larger pool of candidates for a rapidly diminishing number of positions at Calif.-based companies.

While you might assume that there would be a significant increase in applicants due to layoffs and furloughs, that hasn’t yet been reflected in our April to June data. It’s worth noting that tech companies in the aggregate likely had an easier time pivoting workers into fully remote roles, so layoffs and furloughs likely didn’t hit as suddenly as in other industries.

This has led recently unemployed or furloughed tech workers to think outside the box or, more accurately, outside the state. According to our data, 2019 saw 71% of California tech job-seekers applying to positions in-state. That number dropped to 47% this year. In addition, there has been a 10% increase nationally (from 58% to 68%) in tech job-seekers hunting for positions outside of their home states. (This is likely a mix of individuals eager to experience lower living costs, as well as remote candidates hoping to widen their job search by reaching across state lines, without relocating.) 

Multiple Scenarios Happening

One resulting scenario is that there are California residents leaving the state for cheaper rent while keeping jobs in-state for higher salary because remote is more achievable now. (Though it’s worth noting that some companies are already threatening to lower wages for those workers if their cost of living decreases as the result of such a move. It’s not entirely clear that this is even legal, and we should expect to see state-by-state lawsuits seeking to settle this question over the course of the next five years.)

There are also workers seeking jobs out of state but staying in California, and working remotely.

Additionally, there are now workers outside of California applying to jobs in California without moving there. 

And finally, there are California residents leaving the state, while also getting jobs at companies outside of the state.

It’s a melting pot. And we can confidently say that the year-over-year data shows an abrupt shift in how applicants are behaving, though the exact nature of what is happening will remain a bit cloudy as we continue to roll through the coming year.

In short, California tech job-seekers are now more than twice as likely as people in other states to seek out-of-state employment. 

Optimism Persists

I’ve recently spoken with CEOs in the energy and media sectors who say that they are relatively optimistic about how these changes could actually benefit the job markets in their industries. Both sectors have seen an increase in hiring, mostly in high-tech positions. The hiring surge has been so significant that they are even experiencing a talent shortage. Additionally, some international companies are offering higher salaries for new hires to compete for the smaller pool of candidates. In other words, the job markets across various industries are vastly different.

With all of this in mind, what should we expect as 2020 begins winding down? The future remains frustratingly uncertain, but tech CEOs with whom we’ve spoken say that remote hiring practices will continue through 2020 and beyond. California’s tech workers will be competing with equally qualified candidates around the world. Ultimately, there is no question that California’s job market, and the technology industry as a whole, has stepped into a completely new playing field. 

This article is part of a series called COVID-19 Coverage.
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