Those aren't the two possible outcomes. The third outcome is that without the buses, the employees choose to live closer to work, not in the city. I don't had an opinion on whether that's a better or worse outcome.
There are so many different reasons that people might (at this exact moment) live 50 miles from their job. To simply say "move closer" ignores so many of them.
It's very clear that many more Peninsula tech workers have chosen to live in the city after the advent of private shuttle buses. It doesn't explain all of them (for example, some dual-career couples have one person in the Peninsula and one in the East Bay -- SF is a good point in between), but it certainly enables many of them.