Major exodus of workers from NYC and LA observed as they relocate to cost-effective cities in the South
In a recent study, economist Daniel Shoag of Case Western Reserve University highlighted the key reasons behind the mass exodus of workers from New York City (NYC) and Los Angeles (LA). The primary drivers, according to Shoag, are economic and business factors such as slow job growth, high taxes, rising labor costs, an inhospitable regulatory environment, and a general perception of an unfriendly business climate.
The weak job market in NYC, with only 956 new private-sector jobs added in the first half of 2025 compared to 66,000 the previous year, signifies labor market weakness, high unemployment (4.7%), and limited opportunities, especially for young professionals.
Meanwhile, California, home to LA, has lost more companies than it has gained since 2014. High income and business taxes, with the highest earners and business profits taxed up to 13.3%, have pushed firms and workers to relocate to lower-tax states like Texas.
The entertainment industry, a significant contributor to LA's economy, is also feeling the pinch. Increased labor costs, high interest rates, and insufficient tax incentives are causing film and TV productions to move toward other locations, eroding job opportunities in LA.
Moreover, the general perception of an inhospitable business environment in California, coupled with stricter immigration policies that have led to a decline in immigration to the US and California, further exacerbates workforce shortages and economic challenges.
As a result, workers are moving from NYC and LA primarily due to limited job creation, economic pressures, high taxes, and a challenging business climate, pushing them toward more affordable regions in the South and West that offer better economic opportunities and lower costs of living.
In 2023, Los Angeles, Long Beach, and Anaheim experienced a net loss of 17,477 workers, while cities like Jacksonville, Fla. gained 10,558 workers more than they lost. All of the top 15 metro areas for attracting workers in 2023 were in the south and southwestern parts of the US.
The exodus is significant, with over 1 million people leaving each area. The high cost of living in NYC and LA is driving workers to move to more affordable destinations in the South and West. Cities like Houston and the Dallas area saw the largest net gains of workers in 2023, with Houston gaining 11,954 workers more than it lost and the Dallas area gaining 16,903 new workers.
Even the Nashville area, known for its lower cost of living compared to NYC and LA, gained 10,492 workers more than it lost in 2023. The rising cost of housing, even in regions where it was previously cheaper, is contributing to the exodus of workers from expensive cities like New York and Los Angeles.
Shoag's research also indicates that people are moving to more affordable destinations, particularly in the Sun Belt, due to cost-of-living differences. Interestingly, while cities like Jacksonville, Fla., one of the top cities that gained workers, have a lower average median income compared to the New York metro area, the lower cost of living seems to outweigh this factor for many workers.
In conclusion, the mass exodus from NYC and LA is a testament to the power of economic and business factors in shaping migration trends. As these cities struggle with slow job growth, high taxes, and an inhospitable regulatory environment, workers are voting with their feet and seeking better opportunities in more affordable regions.
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