Last mile, geographically constrained jobs like transport and retail remain, but higher skill jobs that are mobile leave, either because it was more cost effective for the employer or because the employer couldn't compete and failed.
Australia experienced this and its economy now is little more than primary resource extraction, all shipped overseas for processing and value adding. Some basic service industry jobs, like retail, but none of them go anywhere because the companies don't have any real presence here except a shopfront.
That doesn't seem to be true of Norway. But Norway retains control of much of its primary resources. Australia could do the same; it's a political problem not a directly economic one.
Yes, the middle class is being hollowed out - but is it really significantly more so than anywhere else in the US?
Even if you assume 100% of them go away - I'd wager voters in California would prefer to have current conditions improved than an ever so slight increase in opportunities in the future.
Yes - small businesses employ the majority of workers. Do small businesses from outside of California with no current presence in California making new hires into California in a given year make up even 0.1% of total jobs? No.
On the flip side - close to 20% of Californians work remote full-time. And some estimates are as high as 40% for workers that work from home at least once a week.
Is this a good policy? Who knows.
Is it going to be popular? I think so.