FacebookTwitterGoogle+RedditEmail

The Texas-California Job Growth Derby

by DEAN BAKER

In recent months conservatives have been boasting about the strong job growth of red state Texas compared to the much weaker job growth of blue state California. They use this comparison to promote their line that low taxes and pro-business regulations are the key to low unemployment and prosperity. It’s worth taking a closer look.

First, the story is not simply one of Texas growth being driven by oil and gas, although its abundance of energy is clearly a factor. Using the business cycle peak in December of 1981 as a start point, employment has grown by 77.9 percent in Texas compared to just 59.0 percent in California.

The 1981 start point is a good base of comparison because it was also a period when high energy prices were helping to drive the Texas economy. This means that we are picking up the growth between two energy booms. If instead we looked at the growth between the 1981 business cycle peak the 2000 business cycle peak, a period of low energy prices, California narrowly wins the job growth prize, 48.6 percent to 47.1 percent.

In this sense Texas is a bit like an OPEC country, clearly energy prices are an extremely important factor to its economy. But energy prices are not the whole story, and neither are low taxes and pro-business regulations.

The most obvious difference that would hit anyone comparing California and Texas is the enormous difference in housing costs. To take a couple of examples on the rental side according to the Department of Housing and Urban Development the fair market rent for a two-bedroom apartment in Los Angeles County is $1,398 a month. In Harris County, Texas, which includes Houston, it’s just $926 a month. 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.

Home sale prices show the same story. According to CoreLogic, the median house price in Los Angeles is $456,000. This compares to a median price of $187,000 in Houston. There is a similar story for other cities across the state.

This enormous gap in housing costs has certainly made a difference in the pace of job growth in the two states. A person working full-time at the national median wage median wage (@ $17 an hour) earning $2,720 a month before taxes, could afford a two-bedroom apartment in Texas and could even buy a home. That would not be true in much of California.

The difference in housing prices is explained by differences in regulatory decisions. California has sharply restricted construction in most areas. As a result, the Census Bureau reports that the between 1980 and 2010 the number of housing units in Texas increased by 81.9 percent, compared to just 41.3 percent in California.

Restricting the number of new homes that can be built 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 the environment. It means, for example, that Californians are less likely to see their homes blown up by exploding fertilizer plants. But it also means that fewer people will live there. For this reason it shouldn’t be surprising that Texas would win the job growth derby; California has effectively decided to constrain its growth.

The dividend for Californians shows up in various ways. At 80.8 years, life expectancy in California is well above the national average. The 78.5 year life expectancy in Texas is slightly below the national average. Large chunks of California have been parceled off in protected forests, sea shores, and deserts that people across the globe come to see. There is not much by way of protected nature in Texas.

If you were fortunate enough to buy a home in the state 25 or 30 years ago, you have likely made a huge amount of money. A house that sold for $150,000 in Los Angeles in 1987, would sell for $540,000 today. This implies a gain of $232,500, after adjusting for inflation. By contrast, house prices in Texas have largely just kept pace with the rate of inflation. Of course that is good news if you’re a young person interested in buying a home.

It’s possible to make an argument that a growth path that allows for largely unrestricted development is a better way to go than a path one that tries to constrain growth to protect the quality of life. However it doesn’t make sense to argue the case based simply on the fact that the former path leads to more growth.

There is no doubt that the Texas growth path will lead to more jobs. The question is whether it creates a society where people want to live. Many people are willing to pay lots of money to live elsewhere.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This essay originally appeared on Baker’s HuffPost blog.

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.

May 04, 2016
Kshama Sawant
It’s Not About Bernie: Why We Can’t Let Our Revolution Die in Philadelphia
Conn Hallinan
Baiting the Bear: Russia and NATO
Joshua Frank
Hanford’s Leaky Nuke Tanks and Sick Workers, A Never-Ending Saga
Paul Craig Roberts
TIPP: Advancing American Imperialism
Ted Rall
Hillary to Bernie Supporters: Don’t Vote for Me!
Eric Draitser
Hillary Clinton and Wall Street’s Neoliberal War on Latin America
Leslie Scott
The Story of Jill Stein: Putting People, Peace and the Planet Before Profits
Ann Garrison
Building the Greens Into a Mass Party: Interview with Bruce Dixon
Tom Clifford
Crying Rape: Trump’s Slurs Against China
Lawrence Davidson
Getting Rid of Bad Examples: Andrew Jackson & Woodrow Wilson
Ellen Brown
Bank of North Dakota Soars Despite Oil Bust: A Blueprint for California?
Nelson Valdes
Is Fidel Castro Outside or Part of Mainstream Thinking? A Selection of Quotes
Jesse Jackson
Don’t Send Flint Down the Drain: Fix It!
Nathan Riley
Help Bernie Keep His Halo
Rivera Sun
Remembering Nonviolent History: Freedom Rides
Clancy Sigal
Rachel and the Isolationists: How Maddow Blew It
Laura Finley
Changing the Conversation About “The Woman Card”
CJ Hopkins
Coming this Summer … Revenge of the Bride of Sophie’s Choice
May 03, 2016
Gary Leupp
Hillary Clinton’s Foreign Policy Resumé: What the Record Shows
Michèle Brand – Arun Gupta
What is the “Nuit Debout”?
Chuck Churchill
The Failures of Capitalism, Donald Trump and Right Wing Terror
Dave Marsh
Bernie and the Greens
John Wight
Zionism Should be on Trial, Not Ken Livingstone
Rev. John Dear
A Dweller in Peace: the Life and Times of Daniel Berrigan
Patrick Cockburn
Saudi Arabia’s Great Leap Forward: What Would Mao Think?
Doug Johnson Hatlem
Electoral Votes Matter: Hillary Clinton or Bernie Sanders vs Donald Trump
Chris Gilbert
Venezuela Today: This Must Be Progress
Pepe Escobar
The Calm Before the Coming Global Storm
Ruth Fowler
Intersecting with the Identity Police (Or Why I Stopped Writing Op-Eds)
Victor Lasa
The Battle Rages on in Spain: the Country Prepares for Repeat Elections in June
Jack Rasmus
Is the US Economy Heading for Recession?
Dean Baker
Time for an Accountable Federal Reserve
Ted Rall
Working for US Gov Means Never Saying Sorry
Dave Welsh
Hunger Strikers at Mission Police Station: “Stop the execution of our people”
John Eskow
The Death of Prince and the Death of Lonnie Mack
May 02, 2016
Michael Hudson – Gordon Long
Wall Street Has Taken Over the Economy and is Draining It
Paul Street
The Bernie Fade Begins
Ron Jacobs
On the Frontlines of Peace: the Life of Daniel Berrigan
Louis Yako
Dubai Transit
Bill Quigley
Teacher, Union Leader, Labor Lawyer: Profile of Chris Williams Social Justice Advocate
Patrick Cockburn
Into the Green Zone: Iraq’s Disintegrating Political System
Lawrence Ware
Trump is the Presidential Candidate the Republicans Deserve
Ron Forthofer
Just Say No to Corporate Rule
Ralph Nader
The Long-Distance Rebound of Bernie Sanders
Ken Butigan
Remembering Daniel Berrigan, with Gratitude
FacebookTwitterGoogle+RedditEmail