Blog Post

AEIdeas

Toyota’s announcement on Monday to move its headquarters and 3,000 jobs from Torrance, California to Plano, Texas has been in the news this week, here’s one report:

Toyota delivered a surprise pink slip to California on Monday, announcing the company would move its U.S. headquarters and about 3,000 jobs from the Los Angeles suburbs to the outskirts of Dallas. The world’s largest automaker will keep a foothold in the Golden State – about 2,300 jobs will remain in California after the company settles into its new corporate campus in Plano, Texas. But the announcement is an economic and symbolic slap for California, a historic center of American car culture that has been trying to shake its reputation as a frustrating place to run a business, whether that involves shooting a film or selling a Prius. Toyota’s announcement comes about two months after Occidental Petroleum Corp. disclosed it was moving its headquarters to Houston from Los Angeles. “When you look at the whole package, it’s difficult to be a business here,” lamented Torrance Mayor Frank Scotto, whose community on the edge of the Pacific will suffer as the jobs migrate to Texas.

The Torrance mayor is right about the difficulty of being a business in California. According to Forbes, California ranks as the 12th worst state in the country for doing business, while Texas ranks as the 7th best state for business overall, and No. 1 for “economic climate.” The Tax Foundation ranks Texas No. 11 for state tax climate, while California ranks second-worst in the country at No. 49.

An interesting and revealing market-based measure of the relative attractiveness (and migration patterns) of the two states is to compare the cost of a one-way U-Haul truck going from California to Texas vs. the cost going in the other direction. To rent a 26-foot truck one-way, here are the current prices being quoted by U-Haul for June 18:

Torrance, CA to Plano, TX: $2,626

Plano, TX to Torrance, CA: $1,264

Los Angeles, CA to Dallas, TX: $2,558

Dallas TX to Los Angeles: $1,232

Bottom Line: The cost of a one-way U-Haul truck leaving California for Texas is more than twice the cost to rent that same truck going from Texas to California, suggesting that there are twice as many trucks and people leaving California for Texas than vice-versa. Based on the huge difference in demand for one-way truck rentals, there is a premium of more than 100% for Californians to rent trucks going to Texas, and large discounts for trucks going in the opposite direction to California. U-Haul’s market-based pricing seems to confirm the California exodus to Texas of jobs, people and businesses like Toyota and Occidental.