Nestle is Leaving Glendale — and Taking Over 1000 Jobs With Them
Nestle USA is moving its headquarters from Glendale, Calif., a pocket suburb just miles from downtown Los Angeles, to Rosslyn, Va., near Washington, D.C., and taking 1,200 California jobs with it. Why? As many companies have found, California is an awful place to do business.
The $26-billion-a-year food conglomerate is discreet, of course, about its reasons, citing a desire to be closer to its core customers and other bland corporate pabulum. But the fact is, Nestle and its corporate brethren in California that actually make things are overtaxed and overregulated, and elected officials treat them not as honored members of the community but as rapacious pirates.
A Glendale official, for instance, blithely insisted Nestle’s departure was no big deal, but rather an “opportunity.” Some opportunity.
Though Nestle has offered jobs to their affected California employees in far-off places like Missouri, Ohio and Virginia, the city seems to think it will be able to fill their own Nestle job void by growing the high-tech job base.
“We just completed a study two weeks ago, which shows that we have more than 1,000 businesses in Glendale that are tech-focused,” said Darlene Sanchez, Glendale’s deputy director of community development. “We’d like to see some more co-working space that would cater to this burgeoning technology industry that has organically grown here.”
Why did Nestle really leave?
Meanwhile, Virginia pulled out all the stops to get Nestle to come, offering tax incentives worth some $16 million. Glendale says it didn’t even find out about the move until Wednesday. But there were signs it wanted to leave. Glendale did nothing, as far as we can tell.
Still, you may wonder, why did Nestle really go?
Well, apart from having higher taxes, absurd housing costs and more regulations than nearly any other state, California’s wacky laws have turned the Golden State into a venue of choice for activist groups to file costly class action lawsuits — or to launch anti-corporate PR campaigns against big, wealthy targets like Nestle.
In recent years, Nestle has faced two such activist-led actions, both spurious: One involves allegations that Nestle improperly documented its anti-slave-labor policies. Not that it employed slave labor, it just didn’t document it online.
The other involves Nestle’s selling of California mountain water under the Arrowhead brand, a decades-old business that has suddenly become environmentally incorrect.
Such corporate harassment is now routine in a state whose top officials and local politicians — virtually all of them far-left progressive Democrats — actively despise capitalism.
Until just two years ago, Nestle made its signature “Hot Pockets” brand turnovers in another L.A. suburb, Chatsworth. But it couldn’t expand. So it moved the operations and hundreds of jobs to Kentucky. If anyone in Los Angeles objected or tried to help them find a way to grow, we’re not aware of it.
But Nestle is only the latest to understand that California has rolled up the welcome mat for job-creating businesses that actually make things.
In recent years, Toyota shifted its U.S. headquarters and thousands of jobs from Torrance, Calif. — another L.A. suburb — to Dallas, while global oil giant Occidental Petroleum moved its corporate HQ from Los Angeles to Houston.
Sadly, such tales are common. But because many of the companies that skedaddle are much smaller than Nestle, Toyota or OxyPete, they don’t attract as much notice.
There Are More. Many More.
According to a report by business relocation expert Joseph Vranich, from 2008 through 2015, at least 1,687 California companies pulled up stakes and moved elsewhere. And those are only the reported ones, Vranich says.
He cites a rule of thumb among business site-selection experts that five companies leave for each one that actually gets reported in the press. So it’s probable that as many as 10,000 companies have left in recent years.
Why are they leaving? Despite relentless, Chamber of Commerce-style blather by state and local governments, California is now one of the worst places to do business in America.
“In California, costs to run a business are higher than in other states and nations — largely due to the state’s tax and regulatory policies — and the business climate shows little chance of improving,” wrote Vranich, in his 2016 report on business departures.
Two years ago, the Ewing Marion Kauffman Foundation and Thumbtack.com surveyed 12,632 small businesses to grade California for its business-friendliness: It got an F. The American Legislative Exchange Council’s “Rich State, Poor State” report has ranked California near the bottom in both economic freedom and competitiveness for nine straight years.
Survey after survey shows the same thing, but the state doesn’t care. As the jobs leave, thousands and thousands of educated, trained workers leave, too.
California Loses More People than Move In
From 2004 to 2013, some 5 million Californians packed their bags, while about 3.9 million people came from other states, according to a report in the Sacramento Bee, citing IRS data. So the state lost over 1 million mostly middle-class people, representing a net loss of about $26 billion in annual income. Remember this statistic the next time California reports, as it does nearly every year, a “surprising” shortfall in tax revenues.
It’s true California is undergoing a tech boom right now — largely because it’s mostly an unregulated industry, and Silicon Valley entrepreneurs give lavishly to California’s left-wing politicians, who tread lightly on tech.
But history shows such booms are fickle, and inevitably turn to bust. In the next downturn we’ll again be hearing about “two Californias” — one of wealthy, highly educated tech entrepreneurs and the legions of white-collar professionals in major cities, and another of struggling, semi-employed people with little schooling or training, and poor immigrants who are just scraping by.
And then the “secession” talk will stop, and California will put its hand out for federal aid.
Meanwhile, California’s clueless officialdom will once again propose more environmental regulations, higher taxes and more spending as the answer. And then wonder why things don’t get any better.