Tall tales about Texas
Many American conservatives look to Texas as their bright shining light. They hold it up as a model of limited government, where low taxes and business-friendly regulation have led to job growth and economic growth surpassing the national average over the last three decades. If the rest of the country followed the Texas model, the tale goes, our economic woes would be behind us and we would all share in a more prosperous future.
The conservatives do have at least the beginnings of a case. Texas has outstripped the rest of the country in job creation. Since the business cycle peak in 1981, the number of jobs in Texas has increased by more than 78 percent. That compares with less than 52 percent for the country as a whole.
The gains are not just oil, although oil is a big part of the picture. If we chose the business cycle peak in 2000, when oil prices were low, as the basis of comparison, then the Texas job growth story would be less impressive. It beats national job growth by just 1.1 percent (47.1 for Texas and 46.0 for the U.S.).
Hot air — or to be more generous, a warm climate — is also a big part of the story. Southern states in general have seen more rapid growth in recent decades as people, especially retirees, have migrated to warm-weather states. Florida, which has a minimum wage that is 70 cents higher than the national minimum, has seen job growth of 110 percent since 1981, far exceeding the pace in Texas over this period.
But conservatives can still point to the fact that job growth in Texas has substantially exceeded growth in California, which also has the benefit of a warm climate. This provides a clear political contrast, since California has become one of the most Democratic states in the country, while Texas has become one of the most Republican.
Red-state Texas easily bests blue-state California in the job growth contest since 1981, 78 to 59 percent. But the main reason for this gap is simply that the states are not playing the same game. Texas has consciously promoted development with little concern for its implications for either the environment or residents’ quality of life.
The result has been that Texas has more and cheaper housing than California. Just to take a couple of examples: The fair market rent for a two-bedroom apartment in Los Angeles County is $1,398 a month, according to the Department of Housing and Urban Development. By contrast, in Harris County, Texas, which includes Houston, it’s just $926. The fair market rent for a two-bedroom apartment in Santa Clara County, which includes San Jose, is $1,649 a month. It was just $894 in Dallas County in 2010, the most recent year available.
The gaps are even larger for home sale prices. According to CoreLogic, the median house price in Los Angeles is $456,000. This compares with a median price of $187,000 in Houston. There is a similar story for other cities across the state. I won’t even mention house prices in San Francisco.
Higher housing costs are a predictable result of restricting supply; it is far more difficult to arrange a new development in San Francisco, Oakland, Los Angeles or other California population centers than in Texas. Builders will have to meet environmental restrictions and density limits in many areas. The Census Bureau reports that between 1980 and 2010 the number of housing units in Texas increased by 81.9 percent, compared with just 41.3 percent in California.
Restricting supply makes it more expensive for people to live in California, but it also makes it a more desirable place to live. Less building improves the quality of life for the people who live in the state by making it less crowded, thereby reducing stress on the infrastructure and environment. Restrictions on building mean that Californians are less likely to live near exploding fertilizer plants than people in Texas.
The people of California have chosen to restrict the number of people who live in their state in the same way that rich people buy large plots of land and exclude others. That’s good for both the people of California and the rich, but less good for the excluded.
There are other factors that go along with better living in California. At 80.8 years, its life expectancy is almost two years above the national average. Texas’ 78.5-year life expectancy is slightly lower than the national average. This is perhaps not surprising since Texas ranks No. 1 in the percentage of its population without health insurance, reflecting the poor quality of many jobs in Texas.
Texas also scores well below the national average in pay. According to the Bureau of Labor Statistics’ Occupational Employment Statistics data, the median hourly pay rate in Texas is $15.81, 6.7 percent below the median for the country as a whole. The pay scales in Texas look even worse compared with a bastion of blue state liberalism such as Minnesota, which also has relatively low housing costs. A typical worker would have to get by with 12.1 percent less pay in Texas than Minnesota.
Of course, lower pay for those at the middle and bottom of the wage ladder can translate into better living for those at the top. To put it simply, low pay makes it easier to find good help in Texas. That’s good news if you’re among the group looking to hire people to clean your house or mow your lawn. It’s also good news for businesses looking for low-cost labor. It’s not very good news for the people who have to work at these jobs at low pay. And that’s the real story of the Texas economic miracle.
Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.