The Rise of Remote Work: Effects on California's Labor Market

analysis full 2026-27 BUDGET The Rise of Remote Work: Effects on California’s Labor Market GABRIEL PETEK | LEGISLATIVE ANALYST MAY 2026 www.lao.ca.gov 1 analysis full AN LAO REPORT 2 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT Executive Summary Remote Work Rates Remain Much Higher Than Before Pandemic. Remote work expanded rapidly in the early part of the COVID-19 pandemic. As health restrictions eased and many people returned to in-person work, the share of people working remotely declined. Since 2023, these declines have slowed, resulting in persistently higher rates of remote work. Today, one-eighth of all California employees work mainly from home—three times as many as in 2019. Remote Work Has Transformed Wide Swath of Jobs. The expansion of remote work has been especially pronounced for four key job groups: technology, finance and accounting, business and government operations, and sales and marketing. Roughly one-third of workers in these jobs are now fully remote. Heavily Remote Jobs Have Grown More Than Twice as Fast Outside California. Since the pandemic, the state’s job growth in fields that are not heavily remote has tracked somewhat closely with the national trend (top right panel in the figure below). Yet in heavily remote jobs, employment has grown 16 percent in the rest of the U.S. but just 7 percent in California (top left). Across each of the heavily remote job groups, the state’s job growth has lagged behind the rest of the country (bottom four panels). Heavily Remote Jobs Have Grown More Slowly in California Cumulative Change in Employment Heavily Remote Jobs All Other Jobs 30% 30% 25 25 20 20 15 15 Rest of U.S. 10 10 5 5 California -5 -5 -10 -10 -15 -15 2019 2020 2021 2022 2023 2024 2025 2019 2020 2021 2022 2023 2024 2025 Technology Finance & Accounting Business & Gov Ops Sales & Marketing 30% 25 20 15 10 5 -5 -10 -15 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 Gov Ops = Government Operations. Source: Current Population Survey. www.lao.ca.gov 3 analysis full AN LAO REPORT Since Pandemic, Workers in These Jobs Have Been Leaving California. Before the pandemic, more workers in heavily remote job groups moved to California than left. Since the pandemic, this pattern has reversed, with more of these workers moving out of California than in. Remote Work Has Altered the Labor Market Landscape. California has long benefited from a concentration of industries that define the information economy and have attracted skilled workers and investment money from around the world. This has always presented trade-offs: compared to other states, California’s workers face a higher cost of living but tend to earn higher wages. Employers, for their part, face higher costs but gain access to talented workers and industry clusters. The rise of remote work has changed the way workers and employers balance these competing forces. Employers who once recruited locally can now draw from a national pool of workers. Workers who would have come to California to pursue these opportunities can now live elsewhere. This labor market transformation heightens the urgency of discussions about improving California’s affordability and quality of life. It also raises new questions, such as how to support affected workers and how to tax income earned from remote work. 4 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT INTRODUCTION For decades, California’s economy has benefited others—has decoupled. Employers who once from a concentration of industries that define recruited locally can now draw from a national the information economy: technology, finance, pool of workers. Workers who would have come marketing, and business operations. Dense to California to pursue these opportunities can industry and university networks, especially in now live elsewhere. In this report, we describe the Bay Area and parts of Southern California, trends in remote work in California and examine key have attracted skilled workers and investment implications for workers in certain types of jobs. money from around the world. These factors have (This includes some government workers, but the compounded over time, generating the wages, tax report does not evaluate the merits of the state revenue, and economic activity that have helped government’s remote work policies.) make the state prosperous. The first section of the report summarizes overall The rise of remote work has weakened this trends in remote work in California and the U.S. The economic engine. As work in these fields has second section looks at the types of jobs that have become less connected to physical location, the been transformed by remote work. Subsequent geographic link between these industries and sections examine how the rise of remote work has their workers—software developers, accountants, changed California’s labor market and raise issues human resources workers, financial advisors, for legislative consideration. information systems managers, and many RECENT TRENDS IN REMOTE WORK COVID-19 Pandemic Led to Dramatic who worked mainly from home before and after the pandemic. These data come from the American Growth in Remote Work Community Survey (ACS), a very large household Pandemic Severely Disrupted In-Person survey covering a wide range of demographic and Work. COVID-19 reached California in late economic issues. The figure shows that the share of January 2020. As the virus spread across the employees working mainly from home was growing state, policy responses—such as school closures gradually before the pandemic, reaching 4 percent and shelter-in-place orders—placed major limits by 2019. As described above, the pandemic on in-person work activity. For many workers accelerated this growth dramatically. By 2021, this and employers, the pandemic necessitated the number had risen to 21 percent in California and rapid adoption of video meetings, chat channels, 16 percent in the rest of the country. If remote work cloud storage, online project coordination, and instead had continued its gradual pre-pandemic e-signatures. In just weeks, jobs that involved growth trend, it would have taken many years to analyzing, overseeing, or managing digital reach these levels. information no longer needed to happen in a The data in Figure 1 have a couple of notable specific location. (In the box on the next page, limitations. One is that they identify California-based we define remote work and related terms used in workers but not California-based employers. this report.) Another is that they omit 2020 because the Key Indicators of Remote Work Grew Rapidly pandemic disrupted household surveys, so they in Early Part of Pandemic. Figures 1 and 2 show do not tell us how remote work changed in the how key measures of remote work changed over turbulent early months of the pandemic. the first couple of years of the pandemic. Figure 1 on the next page displays the share of employees www.lao.ca.gov 5 analysis full AN LAO REPORT Key Definitions Information About Remote Work Comes Mainly From Two Surveys. Our assessment of remote work relies mainly on two national surveys, the Current Population Survey (CPS) and the American Community Survey (ACS). The CPS is a monthly survey designed to provide timely information about U.S. labor markets. The ACS is a larger annual survey that covers a wider range of economic and demographic topics, such as migration. To make the best use of the data, this report considers a few distinct concepts related to remote work, which we define below. Remote Work. We define remote work as work that an employee performs when they are not at an employer’s work site or at the same location as a client or customer. Since October 2022, the CPS has asked workers whether they teleworked or worked from home at any point during the prior week. Workers who teleworked or worked from home also report how many hours they teleworked or worked from home and how many hours they worked overall. We classify workers as fully remote if they teleworked or worked from home for all their reported hours. Work From Home. We define work from home as work performed at the place where the employee lives. The ACS asks workers how they usually get to work, with “worked from home” as one option. This captures regular work patterns over the course of the year, so we consider workers mainly remote if they gave this answer. For many types of jobs, this likely is a good proxy for remote work, but there are some notable exceptions. On one hand, these responses do not include remote work performed in other locations, such as co-working spaces, libraries, or coffee shops. On the other hand, they also include non-remote workers who happen to work at home, such as in-home childcare providers and self-employed artists. To address the latter issue, our analysis focuses on jobs with relatively low rates of self-employment. Hybrid Work. Hybrid workers work some hours remotely and some hours in person. We can identify these workers in the CPS but not in the ACS. These workers are not the focus of this report because, unlike fully remote workers, they remain geographically connected to their employer’s location. Figure 2 complements Figure 1 Figure 1 with some data on the share of online job postings that offer Share of Employees Who Work Mainly From Home remote (including hybrid) work. Still Higher Than Before Pandemic These data reflect the employer’s 25% location. The figure shows that some employers responded very quickly to changing conditions in 20 the early months of the pandemic. Employees Living in California In particular, the number of ads 15 offering remote work roughly doubled from March 2020 to Employees Living in Rest of U.S. April 2020. 10 In First Year of Pandemic, Measure Based on Job Ads 5 Grew Faster in Bay Area. After April 2020, jobs posted by Bay Area employers followed a 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 noticeably different trend from the Source: American Community Survey. rest of the state and the nation. Note: Graph omits 2020 due to concerns about data reliability. 6 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT After rising from 4 percent in March to 7 percent in Rather Modest Declines Since 2023. Since April, remote work offerings by Bay Area employers October 2022, the Current Population Survey (CPS), continued to grow at a fast clip, exceeding a major monthly labor market survey, has asked 13 percent by February 2021. In contrast, after the respondents about remote work. In our view, this is sharp uptick in April 2020, remote work offerings by the most reliable ongoing measurement of remote employers in other parts of the state and the nation work at the state and national level. Figure 3 tracks grew more modestly and were still below 10 percent the share of employees who report fully remote in February 2021. work in the CPS each quarter. From 2023 through early 2026, the nationwide rate of fully remote Remote Work Rates Still Much Higher work held steady around 9 percent, while the rate Than Before Pandemic In recent years, much of the public discourse about remote Figure 2 work has focused on its purported Remote Work in Job Listings decline, sometimes called Still Higher Than Before Pandemic return-to-office. We find: Share of Job Listings Offering Remote or Hybrid Work • Key indicators of remote work declined from their early-pandemic peak to 2023. 18% Bay Area 16 • Declines in remote work since 14 2023 have been quite modest. 12 • Rates of remote work 10 remain elevated far above 8 pre-pandemic levels. Rest of California 6 In the rest of this section, 4 U.S. we discuss these findings in 2 more detail. 2019 2020 2021 2022 2023 2024 2025 Declines Through 2023. In Figure 1, the share of employees Source: Data downloaded from wfhmap.com on April 7, 2026. Documentation in Hansen et al., 2023 working mainly from home peaked (full citation in Appendix). in 2021. From 2021 to 2023, the work-from-home share dropped Figure 3 from 21 percent to 13 percent in California and from 16 percent Rate of Fully Remote Work to 13 percent in the rest of the Has Declined Slightly Since 2024 country. In Figure 2, the share of Share of Employees Who Do All of Their Work Remotely job listings offering remote work peaked around mid-2022. At this 12% point, 16 percent of Bay Area California Employees 10 employers’ listings offered remote 8 All U.S. Employees work, compared to 11 percent 6 in the rest of the state and 4 nationwide. By the middle of 2023, remote work offerings had dropped 2 to 13 percent in the Bay Area, 2022 2023 2023 2023 2023 2024 2024 2024 2024 2025 2025 2025 2025 2026 8 percent in the rest of the state, Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 and 10 percent nationwide. Source: Monthly Current Population Survey. www.lao.ca.gov 7 analysis full AN LAO REPORT for California residents declined from 10 percent around 14 percent to 15 percent. The California to 9 percent. Similarly, Figure 1 shows that the share currently is around 15 percent, about 1 to statewide and nationwide work-from-home rates in 2 percentage points below its 2024 peak. These the ACS dropped by less than 1 percentage point numbers suggest that the overall scale of recent from 2023 to 2024, and Figure 2 shows barely return-to-office has been limited. perceptible declines in remote work offerings from Remote Work Remains Much More Prevalent 2023 to 2025. Than Before Pandemic. Looking back over Nuanced Measure Suggests Return-to-Office Figures 1 and 2, we can see that the most recent Has Not Been Widespread. So far, we have data show rates of remote work that far exceed reviewed relatively coarse, binary measures 2019 levels. In 2024, 13 percent of California of remote work—a job is either remote or it is employees and 12 percent of U.S. employees not. In practice, however, discussions about worked mainly from home—triple the pre-pandemic return-to-office often focus on more nuanced, rates. Twelve percent of jobs posted by Bay Area continuous measures of remote work, such as employers, 8 percent by other California employers, reducing remote work from five days a week and 10 percent nationwide offered remote work— to three. With the CPS data, we can look at also much higher than before the pandemic. remote work trends in a way that accommodates this nuanced continuum. To do this, we look Figure 4 at two key metrics: (1) the total Nuanced Measure of Remote Work number of hours that all employees Has Not Changed Much Since 2023 work; and (2) the number of hours that employees work remotely. We Remote Share of All Employee Hours Worked take (2) and divide it by (1) to get the remote share of all employee 20% 18 California Employees work hours, a number that should 16 capture any movements in the 14 All U.S. Employees 12 continuum between working 10 remotely and in person. 8 6 Figure 4 displays statewide 4 and nationwide trends in the 2 remote share of all employee 2022 2023 2023 2023 2023 2024 2024 2024 2024 2025 2025 2025 2025 2026 hours. Throughout the period Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Source: Monthly Current Population Survey. from 2023 through early 2026, the nationwide share has held steady REMOTE WORK HAS TRANSFORMED WIDE SWATH OF JOBS Remote Work Has Become Commonplace to be well-compensated—on average, they pay for Many Types of Jobs. The new, higher hourly wages that are twice as high as other jobs. overall prevalence of remote work is driven by Figure 5 shows rates of remote work for the job dramatic structural changes towards remote groups that have undergone the largest structural work in several key groups of jobs. Most workers changes: technology jobs, finance and accounting in these roles produce or oversee information, jobs, business and government operations jobs, analysis, communication, or decisions rather and sales and marketing jobs. Workers in the than physical goods or services. These jobs tend technology group were most likely to work remotely 8 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT Figure 5 Rates of Fully Remote Work Higher Among Key Job Groups Job Group Share Working Fully Remotely California Major Employment Occupations Software developers Technology 1,020,000 Mathematical scientists Information systems managers Computer support specialists Finance & Accountants 620,000 Accounting Billing clerks Loan Officers Financial advisors Business & Management analysts Government 570,000 Operations Human Resources workers Market research analysts Compliance officers Sales & 330,000 Marketing managers Marketing Insurance sales agents Securities sales agents Advertising sales agents All Other Jobs 0 10 20 30 40% Note: Figures reflect average from October 2022 to March 2026. Source: Current Population Survey. (38 percent of workers), followed by sales and workers in these job groups were more likely to marketing (31 percent), business and government work from home than other workers. Nevertheless, operations (30 percent), and finance and more than 90 percent of these workers worked in accounting (24 percent). These four groups include person. Pandemic stay-at-home orders brought roughly 2.6 million California workers, or about 1 in about the widespread adoption of remote work 7 workers statewide. In this report, we refer to these among these job groups. By 2021, between groups as “heavily remote.” (See the appendix for 35 percent and 55 percent of workers in each more detail about these job groups.) heavily remote job group were working from home. Remote Work Rates Jumped During Rates of remote work then declined in 2023, after Pandemic, Signaling New Work Environment health restrictions had eased. Since 2023, these for These Jobs. Figure 6 on the next page employers and workers—now accustomed to tracks work from home in heavily remote job remote work arrangements—appear to have settled groups over time. Even before the pandemic, into persistent, higher rates of remote work. www.lao.ca.gov 9 analysis full AN LAO REPORT Likelihood of Working in Figure 6 These Jobs Varies by Age and Race. Before we examine the Big Jump in Work From Home in Certain Types of Jobs labor market consequences of this Share of U.S. Employees Who Work Mainly From Home shift to remote work, we will take a closer look at which Californians 60% are most likely to be affected. Sales & Marketing 50 Technology Figure 7 displays the shares of Business & Government Operations 40 Finance & Accounting various demographic groups that All Other Jobs work in the heavily remote groups 30 of jobs identified above. As shown 20 in the figure: 10 • Workers age 25 and up are 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 more than twice as likely to work in these jobs as those Source: American Community Survey. under 25. Note: Graph omits 2020 due to concerns about data reliability. • Asian/Pacific Islander workers are about Figure 7 three times as likely to work in these jobs as Which Californians Work in Heavily Remote Job Groups? Latino workers, with other Share of California Workers in Group Who Work in a Heavily Remote Job Group racial/ethnic groups falling in between those extremes. Age Under 25 • Men and women are about 25 to 34 equally likely to work in 35 to 44 these jobs. 45 to 54 55+ Likelihood of Working in These Jobs Varies by Race/Ethnicity Educational Background. Latino Rates of work in these jobs vary White most dramatically by educational Asian/Pacific Islander background. Workers with Black Native a bachelor’s degree but no American postgraduate degree are 14 times Gender as likely to work in these jobs as Women workers without a high school Men diploma, and four and a half times Educational as likely to work in these jobs as Attainment workers who graduated from high No high school diploma High school school but did not attend college. diploma Workers with a postgraduate Some college Bachelor's degree degree are more likely to work in Postgraduate these jobs than most groups, but degree 5 10 15 20 25% somewhat less likely than those Source: 2024 American Community Survey. with just a bachelor’s degree. Note: This figure includes both payroll employees and self-employed workers. 10 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT Figure 8 Racial Differences Vary by Racial/Ethnic Gaps Are Different for College Graduates Educational Background. In Share of California Workers in Group Who Work in a Heavily Remote Job Group Figure 8, we take a closer look at the overlap between race/ethnicity 35% and educational background. Among Californians who do 30 not have a bachelor’s degree, 25 white workers are somewhat 20 more likely to work in one of the 15 heavily remote job groups than other workers. Among workers 10 with at least a bachelor’s degree, 5 however, Asian/Pacific Islander workers are by far the most likely Latino White Asian/Pacific Black Native Latino White Asian/Pacific Black Native Islander American Islander American to work in one of the heavily No Bachelor's Degree Bachelor's Degree or Higher remote job groups. Source: 2024 American Community Survey. Note: This figure includes both payroll employees and self-employed workers. REMOTE WORK’S EFFECTS ON LABOR MARKET In this section, we first look at employment and outside of California than within California since migration trends for the heavily remote job groups the pandemic started. described above. We then discuss some of the Among Job Groups, Gap Largest for economic forces that could be driving these trends. Business and Government Operations. Had California heavily remote job growth kept pace with Employment Trends the rest of the country, the state would have added Heavily Remote Jobs Have Grown More Than about 200,000 more heavily remote jobs than it Twice as Fast Outside California. Figure 9 on the has. Nearly half (90,000) of “missing” jobs are within next page displays job growth trends in California the business and government operations group, and the rest of the U.S. for heavily remote jobs and while the remaining gap is distributed evenly among all other jobs. The two main figures demonstrate technology jobs, finance and accounting jobs, and that the number of California non-remote jobs has sales and marketing jobs. tracked somewhat closely with the national trend, Within California, Slowdown Driven by yet the number of California heavily remote jobs Lagging Job Growth in Largest Urban Areas. has not kept pace with growth seen in the rest of Figure 10 on the next page compares the pace the country. Relative to 2019, California has added of recent job growth in heavily remote roles for 160,000 (7 percent) heavily remote jobs. Meanwhile, different parts of the state and the rest of the U.S. the rest of the U.S. has seen 2.6 million (16 percent) Heavily remote roles have grown more slowly in new heavily remote jobs. the six-county Bay Area and the Los Angeles area California Job Growth Slower Across Each (Los Angeles and Orange Counties), while growing Heavily Remote Job Group. The four smaller somewhat faster in the less urban parts of the state. graphs in Figure 9 show the same comparison for each of our four main job groups: technology, Migration Trends finance and accounting, business and government Before Pandemic, Workers in These Jobs operations, and sales and marketing. In each Were Coming to California. Overall, the number case, heavily remote jobs have grown faster of people leaving California has consistently www.lao.ca.gov 11 analysis full AN LAO REPORT Figure 9 Heavily Remote Jobs Have Grown More Slowly in California Cumulative Change in Employment Heavily Remote Jobs All Other Jobs 30% 30% 25 25 20 20 15 15 Rest of U.S. 10 10 5 5 California -5 -5 -10 -10 -15 -15 2019 2020 2021 2022 2023 2024 2025 2019 2020 2021 2022 2023 2024 2025 Technology Finance & Accounting Business & Gov Ops Sales & Marketing 30% 25 20 15 10 5 -5 -10 -15 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 2019 2021 2023 2025 Gov Ops = Government Operations. Source: Current Population Survey. Figure 10 Job Growth in Heavily Remote Fields Has Been Slowest in State’s Largest Urban Areas Cumulative Change in Employment in Heavily Remote Job Groups, 2019 to 2024 20% 15 10 5 San Francisco Bay Area Los Angeles Area Rest of California Outside California San Francisco Bay Area includes Alameda, Contra Costa, Marin, Santa Clara, San Francisco, and San Mateo Counties. Los Angeles Area includes Los Angeles and Orange Counties. Source: American Community Survey. 12 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT exceeded the number of people Figure 11 coming here from other states for about a quarter-century. Against Since the Pandemic, Workers in Heavily this backdrop, heavily remote job Remote Job Groups Have Been Leaving California groups once served as a bright spot. As shown in Figure 11, 90,000 before the pandemic, around 80,000 Workers in Heavily Remote 55,000 workers in these job groups 70,000 Job Groups Coming to CA would move to California in a 60,000 typical year, while 50,000 would 50,000 40,000 move to other states, yielding a net Workers in Heavily Remote 30,000 inflow of 5,000 workers. Job Groups Leaving CA 20,000 Since Pandemic, Workers in 10,000 These Jobs Have Been Leaving 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 California. As shown in the figure, the pandemic changed both the Source: American Community Survey. Notes: Omits 2020 due to data reliability concerns. Includes both payroll employees and self-employed inflow and the outflow of workers workers. in these job groups. In 2021, 43,000 of these workers moved to Figure 12 California from other states, while 80,000 left—a net outflow of 37,000 Fewer Workers in Heavily Remote Jobs in that year alone. After 2021, the Moving to the State's Largest Urban Areas net outflow of these workers shrank Net Migration of Workers in Heavily Remote Job Groups but has remained substantial. Fewer Workers in Heavily 15,000 From Rest of U.S. to Largest Urban Areas Remote Jobs Moving to Largest 10,000 Urban Areas From Other 5,000 States… In Figure 12, we look From Rest of U.S. to Rest of CA -5,000 at net migration separately for -10,000 California’s largest urban areas From Rest of CA to Largest Urban Areas -15,000 (the Bay Area and the Los Angeles -20,000 area) and the rest of the state. -25,000 We can see that the net positive -30,000 migration of these workers to 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 California before the pandemic Source: American Community Survey. was concentrated entirely in these Notes: Omits 2020 due to data reliability concerns. Includes both payroll employees and self-employed workers. Largest urban areas consist of six counties in the Bay Area (Alameda, Contra Costa, Marin, San Francisco, urban areas. By 2019, however, San Mateo, and Santa Clara), Los Angeles County, and Orange County. net migration from other states to these urban areas already was declining substantially. The areas to other parts of the state than to migrate pandemic accelerated this trend, resulting in net inward. This net outflow from the largest urban outflows. These net outflows from the major urban areas accelerated in 2021, driven entirely by areas to other states were biggest in 2021 but workers moving out of these urban areas. The remain substantial. number of workers moving into these areas from …And From Other Parts of California. Even other parts of California remained close to the before the pandemic, Californians in these heavily pre-pandemic average. remote occupations were somewhat more likely to migrate outward from California’s largest urban www.lao.ca.gov 13 analysis full AN LAO REPORT What Economic Forces Figure 13 Are Driving These Trends? Median Hourly Wages Higher in California Across Most Heavily Remote Jobs Before we turn to a brief discussion of potential policy Pre-Pandemic Median Hourly Wage for Largest Jobs in Each Remote Group, 2025 Dollars implications, we consider some economic forces that Technology underlie employers’ and Computer Support Specialists workers’ decisions and Computer Occupations, All Other Computer Systems Analysts likely have contributed to Computer Programmers California’s weak growth in Software Developers heavily remote jobs. Computer and Information Systems Managers Wages Are Higher in Finance and Accounting California. At a basic level, an employer’s decision to Bookkeeping Clerks hire a worker depends on the Billing and Posting Clerks Credit Counselors and Loan Officers worker’s productivity relative Accountants and Auditors to the costs of employing Personal Financial Advisors them. Productivity and some Financial Analysts employment costs are hard to Business and measure, but data on wages Government Operations are readily available. Figure 13 Purchasing Agents shows pre-pandemic wages Human Resources Workers Business Operations Specialists for heavily remote jobs in Market Research Analysts California compared to wages Compliance Officers for the same jobs in the rest Management Analysts of the U.S. For most of these jobs, wages tend to be higher Sales and Marketing in California. All else equal, U.S. Wage California Wage Travel Agents this means employers can Insurance Sales Agents reduce their costs by moving Advertising Sales Agents jobs elsewhere. Sales Agents, Other Securities, Commodities, and Higher Wages Typically Financial Services Sales Agents Marketing and Sales Managers Come With Higher Productivity. Many California employers also have locations 20 25 30 35 40 45 50 55 60 65 $70 elsewhere, and many California businesses compete Source: Monthly Current Population Survey, January 2017 through December 2019. directly against businesses largest urban areas are expensive, yet many have elsewhere. These competitive been willing to pay these high costs in exchange for forces put pressure on employers to reduce costs, labor market opportunities and other amenities. yet they nevertheless have paid higher wages in Remote Work Has Altered the Landscape. The California. This suggests that hiring these workers widespread adoption of remote work arrangements likely has provided a commensurate benefit— has changed the way employers and workers namely, higher productivity. balance the competing forces described above. Living in California Is Expensive. Historically, This has altered the landscape of the state’s labor jobs have been one of the main factors driving market in several ways, each with potentially people’s decisions about where to live. California’s different policy implications: 14 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT • California Workers Can Move to Less together—a phenomenon that economists Expensive Places Without Losing Access call “agglomeration.” This productivity to Jobs. California-based fully remote workers boost can be an additional factor drawing can keep their jobs but leave the state. Their employers to the largest urban areas. The rise decisions about where to live may no longer of remote work—and the broader shift from depend on their employer’s location. For in-person interaction to online interaction— example, an advertising sales representative could diminish the economic benefits employed by an Orange County company of agglomeration. can now relocate to another state and retain Migration Accounts for Large Part of Jobs their job. Trend. Some of the ways that remote work has • Out-of-State Workers Can Access contributed to weak job growth in California involve California Jobs Without Taking on Higher changes in migration, while others do not. We can Living Costs. Out-of-state applicants for get a rough sense of the importance of migration many California-based roles no longer must by combining some of the information presented move to California and instead can remain earlier in Figures 9 and 11: in their current location, working remotely. • From 2019 to 2024, if California’s employment For example, a graduating computer science in heavily remote job groups had grown at major in Austin, Texas could start their career the nationwide rate, the state would have had with a Sunnyvale company without leaving 200,000 more jobs in 2024 than it actually Texas, as they would have been expected to had. This is the basic “jobs gap” that we are before the pandemic. trying to explain. • Workers Who Remain in California Face • If workers in heavily remote job groups had Greater Competition. Californians competing continued to move into the state at the same for remote roles with in-state employers now rate as before the pandemic, the state would face competition from applicants across have had around 25,000 more of these the country. For example, a longtime San workers in 2024. This suggests that the Diego resident competing for a remote public lower inflow of workers accounts for about relations position may lose out to a candidate one-eighth of the jobs gap. from elsewhere. • If workers in heavily remote job groups had • California Employers Can Hire Workers continued to move out of the state at the Across the Country. California employers same rate as before the pandemic, the state can now hire remote workers from a national would have lost fewer people and had around labor pool rather than a regional labor pool. 100,000 more of these workers in 2024. This Businesses that once needed to attract suggests that the higher outflow of workers workers who reside in higher-cost areas of accounts for about half of the jobs gap. California can now hire from anywhere in the country. For example, a San Jose financial Remainder Driven by Employer Shifts to services company hiring a remote operations Hiring Out-of-State Applicants. As described manager no longer needs to limit its search above, people moving into and out of California to candidates in Silicon Valley. Accessing this account for slightly more than half of the overall broader pool of workers can make it easier for jobs gap we identify in heavily remote job groups. businesses to find high-productivity workers The rest of the gap is the result of employer choices at lower costs. during the era of remote work to hire applicants • Employers May Have Less Incentive who live outside California when previously they to Locate in Industry Hubs. In a world may have hired an in-state resident for these roles. dominated by in-person interactions at work and elsewhere, workers and businesses become more productive when they are close www.lao.ca.gov 15 analysis full AN LAO REPORT ISSUES FOR LEGISLATIVE CONSIDERATION Remote Work Has Transformed California’s who become unemployed due to the remote Labor Market. Recent artificial intelligence work transformation, California’s Unemployment advances have captured policymakers’ interest Insurance (UI) benefits might not support them as observers try to anticipate the technology’s long enough to find another job in their field. potential to displace workers across many types of The state limits UI benefits to $450 per week, jobs. While this possibility remains on the horizon, well below the wages that many higher-income another labor market transformation has already technology, finance, operations, and sales workers taken hold—the rise of remote work. For many typically earn. jobs, remote work has quietly restructured where Should the State Revisit How It Taxes Income Californians work, where they live, and where From Remote Work? Under longstanding tax employers look to hire. policy, the state taxes income mainly based on How Can the State Attract and Retain where workers are physically located while they are Remote Workers? Remote workers can now make working. Workers who leave the state retain their decisions about where to live based more heavily California employment but no longer owe state on quality of life and cost of living. To the extent that income taxes. Likewise, out-of-state workers who the state’s high housing costs and overall cost of take a remote job with a California employer owe living have contributed to out-migration of remote no taxes. Several states, including New York, have workers, the rise of remote work heightens the begun to tax earnings paid by in-state employers urgency of discussions about improving California’s regardless of where the work is performed. Such affordability and quality of life. an approach could expand the state’s income tax What Tools Does the State Have to Support base but is not without risks. For one, taxing remote Affected Workers? With remote work expanding income would make it more difficult for California the pool of workers available to California-based employers to hire out-of-state remote workers. employers, California workers face broader If employers responded by leaving the state competition for positions for which they once entirely, they would take their business income— may have been top candidates. This could lead to another key source of tax revenue—with them. new types of labor market dislocation. The state’s Additionally, such a policy might compel other longstanding retraining programs for dislocated states to respond with reciprocal taxes on California workers tend to focus on in-person manufacturing residents who work remotely for employers in those and energy plant closures—for example, when a states. This could offset any revenue benefits and local oil refinery closes. This approach may not needlessly complicate the tax system for workers be well-calibrated to assisting workers in heavily and employers. remote jobs. Additionally, for higher-wage workers 16 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT APPENDIX Classification of Jobs Appendix Figure 1 List of Job Group Occupations Technology Total Employment Remote Share Software Developers 460,000 33% Computer Occupations, All Other 120,000 27 Computer and Information Systems Managers 80,000 36 Miscellaneous Mathematical Science Occupations 70,000 37 Computer Support Specialists 70,000 37 Computer Systems Analysts 60,000 35 Computer Programmers 42,000 38 Web Developers 24,000 58 Operations Research Analysts 22,000 22 Information Security Analysts 19,000 37 Network and Computer Systems Administrators 18,000 21 Database Administrators 13,000 41 Computer Network Architects 11,000 35 Computer and Information Research Scientists 7,000 25 Actuaries 2,000 44 Total Employment 1,020,000 Business and Government Operations Total Employment Remote Share Management Analysts 120,000 41% Human Resources Workers 110,000 30 Market Research Analysts and Marketing Specialists 80,000 32 Business Operations Specialists, All Other 60,000 22 Compliance Officers 32,000 22 Purchasing Agents, Except Wholesale, Retail, and Farm Products 27,000 13 Claims Adjusters, Appraisers, Examiners, and Investigators 23,000 41 Meeting, Convention, and Event Planners 22,000 12 Cost Estimators 21,000 7 Logisticians 20,000 11 Wholesale and Retail Buyers, Except Farm Products 19,000 12 Training and Development Specialists 13,000 34 Fundraisers 12,000 22 Agents and Business Managers of Artists, Performers, and Athletes 7,000 31 Compensation, Benefits, and Job Analysis Specialists 5,000 35 Total Employment 570,000 (Continued) www.lao.ca.gov 17 analysis full AN LAO REPORT Finance and Accounting Total Employment Remote Share Accountants and Auditors 190,000 26% Bookkeeping, Accounting, and Auditing Clerks 140,000 18 Personal Financial Advisors 49,000 29 Billing and Posting Clerks 38,000 33 Financial Analysts 35,000 19 Credit Counselors and Loan Officers 33,000 30 Financial Clerks, All Other 21,000 18 Payroll and Timekeeping Clerks 21,000 20 Tax Preparers 18,000 20 Financial Specialists, All Other 13,000 22 Insurance Underwriters 13,000 38 Appraisers and Assessors of Real Estate 11,000 21 Loan Interviewers and Clerks 9,000 36 Tax Examiners and Collectors, and Revenue Agents 8,000 15 Budget Analysts 8,000 3 Bill and Account Collectors 5,000 6 Credit Analysts 5,000 20 Procurement Clerks 5,000 30 Financial Examiners 2,000 33 Total employment 620,000 Sales and Marketing Total Employment Remote Share Marketing and Sales Managers 150,000 26% Sales Representatives, Services, All Other 80,000 33 Insurance Sales Agents 60,000 31 Securities, Commodities, and Financial Services Sales Agents 22,000 39 Advertising Sales Agents 11,000 34 Travel Agents 7,000 37 Total Employment 330,000 Employment is average number of jobs in California from October 2022 through March 2026. 18 LEGISLATIVE ANALYST’S OFFICE analysis full AN LAO REPORT Selected References Boarnet, Marlon, Andre Comandon, Seva Rodnyansky, Marley Randazzo, and Bonnie Wang Agrawal, David R. and Jan K. Brueckner (2025). (2024). “The Impact of Remote Work on Job and “Taxes and Telework: The Impacts of State Income Housing Location in the Bay Area-Central Valley Taxes in a Work-From-Home Economy.” Journal of Region: An Analysis of the Relationship Between Urban Economics 145. Traffic, Telecommuting, and Migration During Agrawal, David R. and Kirk J. Stark (2022). and After COVID-19.” Pacific Southwest Region “Will the Remote Work Revolution Undermine University Transportation Center. Progressive State Income Taxes?” Virginia Law Hansen, Stephen, Peter John Lambert, Nicholas Review 42. Bloom, Steven J. Davis, Raffaella Sadun, and Akan, Mert, Jose Maria Barrero, Nicholas Bloom, Bledi Taska (2023). “Remote Work Across Jobs, Tom Bown, Shelby Buckman, Steven J. Davis, and Companies, and Space.” National Bureau of Hyoseul Kim (2025). “The New Geography of Labor Economic Research Working Paper 31007. Markets.” National Bureau of Economic Research Li, Wenli and Yichen Su (2026). “The Great Working Paper 33582. Reshuffle: Remote Work and Residential Sorting.” Bick, Alexander, Adam Blandin, Aidan Caplan, European Economic Review 182. and Tristan Caplan (2025). “Measuring Trends Liu, Sitian and Yichen Su (2025). “The Effect in Work From Home: Evidence from Six U.S. of Working from Home on the Agglomeration Datasets.” Federal Reserve Bank of St. Louis Economies of Cities: Evidence from Review, Fourth Quarter 2025. Advertised Wages.” Review of Economics and Bick, Alexander, Adam Blandin, Karel Mertens, Statistics, forthcoming. and Hannah Rubinton (2024). “Work From Home and Interstate Migration.” Federal Reserve Bank of St. Louis Working Paper 2024-012A. www.lao.ca.gov 19 analysis full AN LAO REPORT LAO PUBLICATIONS This report was prepared by Chas Alamo and Seth Kerstein, and reviewed by Brian Uhler and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, California 95814. 20 LEGISLATIVE ANALYST’S OFFICE