econscius

Archive for the ‘Texas’ Category

Good News: America Less Segregated Than Ever… Especially in Texas

In Racial Segregation, Racism, Texas on January 31, 2012 at 8:50 pm

Good news to share!  Racial segregation is at its lowest level ever.  The Wall Street Journal highlights the Manhattan Institute report:

“U.S. cities are more integrated now than at any time since 1910, based on analysis of census data from neighborhoods.  Fifty years ago, nearly half the black population lived in a ghetto, the study said, while today that proportion has shrunk to 20%. All-white neighborhoods in U.S. cities are effectively extinct, according to the report.”

Interestingly, the two large cities with the lowest level of racial segregation are in Texas: Dallas and Houston.  Atlanta is third least segregated, followed by Los Angeles and Washington, D.C.  The five most segregated are New York, St Louis, Cleveland, Chicago and, worst of all, Detroit.  Though we often hear how supposedly racist Sunbelt cities are compared to the North, the facts suggest just the opposite.

The full story is found at:  http://online.wsj.com/article/SB10001424052970203920204577193261646566778.html

Pictures (Devon Street, Chicago & a Chicago jazz club) from Wikipedia Commons.

Advertisements

Minimum Wage Workers: 5.4% of Texas Workforce

In Inequality, Job Creation, Minimum Wage, Texas on January 28, 2012 at 10:57 pm

Some left-leaning websites state Texas is heavy with minimum wage jobs.  I looked and using data from the US government’s Bureau of Labor Statistics, the proportion earning at or below the actual minimum wage rate in Texas is only about 5.4%. [1]  Hardly scandalous.

Furthermore, minimum wage workers tend to be young, with a full one-quarter of all teenagers earning minimum wage (full disclosure: that was me, once upon a time!). [2]  The average age in the US 2010 Census was 37.2.   The average age in Texas was 33.6, making it the second youngest state of 51 (including DC). [3]  This means we would expect Texas to be unusually high on minimum wage workers.

Texas has lower taxes (on income tax, actually) and a lower cost of living so a minimum wage worker in Houston lives much better than a minimum wage worker in a similar sized metro area like San Francisco.

For more on impressive job growth in Texas, see my posts https://econscius.wordpress.com/2011/09/03/stellar-texas-job-growth-in-above-average-wage-cities/, https://econscius.wordpress.com/2011/09/11/stellar-job-growth-in-high-wage-austin-texas/, and https://econscius.wordpress.com/2011/10/06/astronomical-job-growth-in-houston-texas/.

 

 

Footnotes:

[1] Calculation:  according to the BLS, 550,000 Texas hourly workers were at or below the minimum wage (http://www.bls.gov/ro6/fax/minwage_tx.htm) but there were 10,089,870 total workers in the state of Texas (http://www.bls.gov/oes/current/oes_tx.htm#00-0000), indicating only about 5.4% of workers were minimum wage.   Note the BLS tends to discuss minimum wage in terms of hourly workers, rather than total workers, for the obvious reason salaried workers are almost never at, or even close to, the minimum wage.  Nearly half of Texas workers are salaried.

Note: some workers, for example restaurant wait staff, may legally be paid below the minimum wage.

[2] Quoting directly from the BLS: 

“Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly-paid workers, they made up about half of those paid the Federal minimum wage or less. Among employed teenagers paid by the hour, about 25 percent earned the minimum wage or less, compared with about 4 percent of workers age 25 and over.” (http://www.bls.gov/cps/minwage2010.htm)

[3] http://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf

Pictures from Wikipedia Commons (Austin, TX skyline & San Antonio, TX Riverwalk).

Which State Has The Most Inequality? Texas or New York? Why?

In Gini Ratio, Income Tax Rates, Inequality, Texas on October 21, 2011 at 12:25 am

Econscius looked into economic inequality by state and found some surprising facts.  Which state did you think has the most economic inequality, defined by the government’s Gini ratio?  Did you guess Texas or Alabama?  The Gini ratio measures unequal outcomes in wealth; a ratio of 0.0 would mean everyone had exactly the same and a ratio of 1.0 would mean one person held all the wealth.

The District of Columbia has the highest level of inequality (Gini ratio of 0.532).  New York has the highest state ratio at 0.502, followed by Connecticut, Texas, Louisiana, Alabama, Mississippi, Illinois, Georgia and Massachusetts which rounds up the Top 10 with a score of 0.468.

The state with the lowest Gini ratio is Alaska at 0.402.  Utah is second most equal at 0.414, followed by Wyoming at 0.415.

Econscius ran several regression analyses of the most recent state Gini ratios, looking for correlations that would help identify the cause(s).  First, I compared “Right to Work” states against the tally of state Gini ratios, expecting the comparative absence of unions might be a factor.  “Right To Work” states prohibit closed shops (mandatory unions).  But there is no statistical correlation (RSquared = 0.01), which can be easily seen by the high rate of dispersion in the graph below.  An interesting follow-up may be to see if there is any difference using the unionized proportion of the workforce in place of Right To Work state.

State Gini Ratio vs Right to Work (1 = yes, 0 = no)

The scatterplot below shows a rather loose relationship between average income and Gini ratio.  The trend line shows high income states tend to be slightly more equal than lower-income states.  (R-squared is 0.08).  In statistical terms, income and Gini ratio should be impacted by co-variance (the two variables are not independent of each other), making it a less than ideal measure.

State Gini Ratio Vs. Median State Income

Next, I ran a regression of Gini ratio against Net State Income Tax Rate, as calculated by the National Bureau of Economic Research.  The NBER is best known as the group that officially dates recessions.  As seen in the graph below, the trend line is the opposite of what one might expect.  Higher state income tax rates actually imply slightly higher inequality (R-squared 0.08). 

The scatterplot graph below clearly shows how the highest inequality states of New York and Connecticut have high taxes and several of the states with no income tax have the lowest Gini ratios, e.g. Wyoming and Alaska.  While higher income taxes are not well correlated with equality, an observation is states known for high property taxes (which are regressive) are bundled amongst the most unequal, including New York, Connecticut, New Jersey, Florida and Illinois.

State Gini Ratio vs. Net State Income Tax Rate (NBER 2009 Tax Data)

Lastly, let’s look at state Gini ratio vs. population density (people per square mile) .  This regressed variable has the strongest correlation with Gini ratio (R-squared 0.14). 

Why would sparsely populated states be more equal and densely populated states have a greater gap between the rich and poor.  I hypothesize higher density means more urbanized areas, which means more specialization of skills.  The economic concept of division of labor shows how the greatest economic benefits come from having each person focus on what they are most economically productive at and then trading their output with the output of someone else for all other items.  One way to think of it is to imagine Steve Jobs working in isolation in a rural area.  He would have less time to spend inventing computers and whatnot if he was unable to employ other people to mow his lawn, clean his car and other household chores.  Imagine if he had to do his own legal work, build his own house, cook his own food because there were no restaurants, etc. 

Large cities allow a high degree of division of labor.   Urban areas tend to be centers of economic specialization.  There are centers of specific industry specialization such as entertainment in Los Angeles, energy in Houston, finance and media in New York, insurance in Hartford, government in Washington DC, pharmaceuticals in New Jersey, autos in Detroit and technology in San Jose.  Most cities provide network benefits for commerce.  Corporate headquarters are mostly found in large metropolitan areas as employers can easily find necessary skilled workers in management, marketing, human resources, accounting, law, consulting and finance. 

The concentration of highly paid professionals in these large cities also leads to a concentration of poorly paid service workers because of the high degree of division of labor.  Whereas a small town worker may handle many household chores on their own, the highly compensated professionals around big cities like Los Angeles and New York hire maids, nannies, gardeners and even dog walkers.  They outsource some of their work to dry cleaners and restaurant employees.  They also may do more retail shopping, which means more need for low skill, low wage workers at retailers plus truck drivers and distribution center workers to deliver the goods.  It is no surprise, then, that large cities like Chicago, New York, Detroit and Los Angeles are both very rich and very poor at the same time. 

The wealthy professionals living in Atherton, CA, Huntington Beach, CA, Wilmette, IL, Grosse Point, MI and Irvington, NY trade some of their copious amounts of money for leisure time by sub-contracting low skill work like house painting and pizza delivery to low skill workers.  These low skilled workers are generally paid below average wages, which helps explain why the large cities, and the states they reside in, are both rich and poor.  This helps explain the high Gini ratios in the more densely populated states.

These four regression analyses do not explain all of the differences in Gini ratios.  While income tax rates have no relationship, it is possible a measure of to marginal tax rates on the rich may be a factor.  We did not look at state and local sales and property taxes.  Other possible explanations may include educational attainment dispersion within each state, the types of industries prevalent in a state, immigration levels, and even cultural differences between states. 

We found New York is actually less equal than Texas, which probably surprises most people but likely reflects the high density of population in metro New York City where many highly compensated, high skilled workers reside as well as many low pay, low skill workers who serve their day-to-day needs.  As we have seen in my posts on Texas, (https://econscius.wordpress.com/2011/09/03/stellar-texas-job-growth-in-above-average-wage-cities/) it is increasingly densely populated and affluent in its large metro areas of Dallas, Austin, San Antonio and especially, Houston.   Metro Houston is the 3rd largest home of Fortune 500 HQs and is now the major home of the energy industry’s professional staffs (senior management finance, legal, accounting, engineering).  Progressive, union-friendly states like Connecticut and Massachusetts are less equal than Right To Work states like Nebraska and Kansas.  It appears one factor is the densely populated concentrations of skilled workers such as hedge fund and insurance workers in Connecticut and biotech and technology in suburban Boston. 

I believe Gini ratio and measures of inequality are overhyped.  If a richer neighbor of mine accidentally drops some of his property, say his iPod, in a river, inequality has been slightly reduced but am I better off?  Nevertheless, the evidence on state Gini coefficients suggests there is no diabolical plot causing high inequality.  Several of the least equal states like New York, Massachusetts and Connecticut are reliably Democratic, high tax and union friendly.  The District of Columbia is the most unequal of all.  The inequality must come from other sources, certainly including the concentration of highly paid, skilled workers in those states. 

 

Notes:

Chart 1: 2009 Gini coefficient data (latest available) from http://en.wikipedia.org/wiki/List_of_U.S._states_by_Gini_coefficient retrieved 10/18/11.   Right-To-Work states from http://en.wikipedia.org/wiki/Right-to-work_law retrieved 10/18/11.

Chart 2: 2006-7 average data (latest available) from http://en.wikipedia.org/wiki/List_of_U.S._states_by_median_income retrieved 10/18/11.

Chart 3: 2009 data (latest available) from http://www.nber.org/~taxsim/state-marginal/avrate.html, retrieved 10/19/11.

Chart 4: Population Density from http://en.wikipedia.org/wiki/List_of_U.S._states_by_population_density retrieved 10/18/11.

Pictures from Wikipedia Commons.

Your comments are welcomed!  What do you think causes inequality?

Astronomical Job Growth in Houston, Texas

In Houston, Job Creation, Oil, Texas on October 6, 2011 at 12:57 am

We saw in https://econscius.wordpress.com/2011/09/03/stellar-texas-job-growth-in-above-average-wage-cities/ the majority (509,560, or 59%) of the 860,740 net new jobs created in Texas in 2001-10 occurred in three metropolitan areas, each of which has enjoys wages above national averages.

After we looked at metro Austin in detail, [1] today we drill into metro Houston (pardon the pun).

The Houston-Sugarland-Baytown MSA, which also includes Galveston and Brazoria Counties, had 5,946,800 residents in the 2010 Census, up 1,231,393 (26%) from 2000. [2]   Metro Houston’s  job growth of 274,510 in 2001-10 accounted for 32% of all Texas job growth. [3]  The rest of the USA actually had negative job growth during the same time frame. 

The Houston-Sugarland-Baytown MSA job growth was in the following US Bureau of Labor Statistics categories:  Business & Financial (+26,870 jobs, average wage $71,190), Sales & Related (+42,080, average wage $38,680), Food Preparation (+50,270, average wage $19,900), Healthcare Practitioners (+37,070, average wage $72,330), Healthcare Support(+21,350, average wage $), Education & Training (+35,600, average wage $51,450), Production Occupations, which includes oil refining (+22,430, average wage $28,671) and all other groupings combined (+38,840 jobs). [3]  This shows most of the job growth was in white-collar jobs. 

Houston MSA Job Growth; Source: BLS data, 2001 vs. 2010

The proverbial “burger flipper” jobs of the Food Preparation category accounted for only 18% of the total job growth, are often held by teenagers, and such growth is to be expected when the metro area had 26% population growth in the decade.  As a proportion of job force, Houston’s Food Preparation category grew from 7% to 8% of the total, which shows the off the cuff claim that “all” the job growth is in “fast food” is incorrect.  By comparison, BLS data shows the USA actually had 9%, a slightly higher percentage of jobs in the Food Preparation category, indicating Houston jobs are less fast-food dependent than jobs are nationally.

Source: 2010 BLS data, http://www.bls.gov

The Houston MSA vs. USA average wages graph below is quite interesting.  It certainly discredits the claims Texas jobs are low wage.  Houston had the greatest absolute job growth of any Texas metro area, accounting for almost a third of the entire Texas total.  As you can see in the graph, Houston wages are competitive with USA averages in all categories. 

One difference shows is how Houston’s skilled professions (management, architecture & engineering, computer and mathematical and healthcare professions are all above US averages, some by wide margins.  The engineering category benefits from Houston’s concentration of well-paid engineers.  The 10,350 petroleum engineers earn a remarkable average of $135,270.  My speculation on why Managers are so well paid would be Houston’s disproportionately large concentration of corporate HQs, meaning the metro area has an unusually large proportion of highly compensated top corporate managers.

On the other hand, a few categories of workers at lower skill levels (Food Preparation, Protective Service and Healthcare Support) earn slightly less than US averages, despite the overall higher Houston wages.  This may reflect the weakness of unions in Houston vis-a-vis the nation at large.  Interestingly, we saw a very similar wage pattern in Austin with the highest skilled workers earning more than national averages and low skilled workers slightly below national averages.

Source: BLS, 2010 data

Houston’s job distribution is quite similar to US averages.   One difference is how the high-wage Architecture & Engineering category is 3.2% of Houston employment, compared to 1.8% nationally.   Another anomaly is the US Healthcare Practitioners & Support categories total 8.9% of workers, but these categories account for 7.6% of Houston workers.  The probable explanation is the younger average age of metro Houston residents meaning they are healthier and less needing of health care.

Source: BLS DataSource: 2010 BLS DataSource: 2010 BLS data

 

Houston has one university in the US News Top 100.  Rice University is ranked #17 [4], which puts it ahead of acclaimed universities like California-Berkeley, Michigan, NYU and Notre Dame.  Other major schools include the University of Houston and the University of Texas maintains a medical center in Houston.  Texas A&M is ranked#58 [5] and is located in College Station, TX, which is 95 miles northwest of downtown Houston.

The 29.7% of metro Houston residents with a college degree matches the US average and exceeds the Texas average of 25.5%.  Interestingly, Houston’s college graduates are more likely to hold a degree in science, engineering and related fields, at 47.4% vs. 43.6% nationally. [6]

What drives the Houston economy?  Energy, both oil and natural gas.  We often hear Houston has grown the way it has “because of oil”.  While oil is extremely important to the Houston story, Houston’s success comes from more than just drilling and refining.  Oil is found in many other places, such as California, Alaska, Pennsylvania, Louisiana, and Oklahoma. 

 Today, Houston is the undisputed capital of the energy industry, but that was not always the case nor was it inevitable.  “In 1960, Houston served as home for only one of the nation’s large energy firms, ranking well behind New York City, Los Angeles and even Tulsa.  Today Houston has 16, which is more than all the other cities combined.”  [7]

ConocoPhillips Logo.svg

Many major energy and related services companies relocated to Houston.  Oil services company Schlumberger relocated its U.S. corporate HQ from New York in 2006.  The corporate HQ of Heartland Oil and Gas moved from Denver in 2007.  CITGO Petroleum switched its HQ from Tulsa to Houston in 2004.   Direct Energy, the Toronto-based electricity provider moved its U.S. head office from Stamford, CT in 2007.  When Houston-based Conoco and Oklahoma-based Phillips Petroleum merged, the new company chose Houston for its HQ.  All of these companies have research & development operations in the Houston area.  Vestas Wind Systems chose Houston for a new US R&D center. [8]  Oil services company FMC Technology relocated from Chicago in 2003. [9]  

Shell logo.svg

Major international energy companies like Shell Oil Company (HQ of the US subsidiary) and BP America moved to Houston.  Pennzoil, now owned by Shell, started in California and had relocated to Houston in the 1970s. [10] BP America relocated its headquarters and some 3,000 employees from metro Chicago in 2008.  [11]  BP again centralized more R&D and even moved jobs from its British HQ in 2010. [12]  BP’s North American operations came from British Petroleum’s purchase of California-based ARCO, Chicago-based AMOCO and Cleveland-based Standard Oil of Ohio. 

Why Houston?  It is not just oil –  presumably, other factors must have made Texas favorable for energy companies.  These factors most likely include low costs of doing business, low taxes, infrastructure, and an educated workforce for the various R&D and corporate HQ staffs.  Eventually Houston attracted enough energy companies to enjoy the benefits of industry concentration. 

Metro Houston has 10,380 petroleum engineers (37% of the entire USA total) with an average wage of $135,270 (higher than the US average $127,970).  There are 9,730 oil and gas derrick, rotary drill & service unit operators (13% of USA total) and they work at slightly above average US wages.  Sixteen percent of the nation’s petroleum pump operators work in Houston at an average wage of $58,540. [3]  If you were a new entrant into the energy business today, your company would probably be very attracted to Houston because the concentration of other energy companies there means a deep talent pool of industry workers.  Houston’s economy includes upstream energy processing such as refineries and chemical companies.

This concentration effect has occurred in other places, such as Detroit with the emerging automotive industry in the 1910s and more recently, Silicon Valley for technology start-ups.   The energy concentration is both an advantage and potential disadvantage for Houston.  Houston has developed some major non-energy businesses, including large computer maker Compaq, which was acquired by HP but still employs 9,000 in Houston (see chart below).  Waste Management relocated from Chicago in 1998 but Houston lost the Continental HQ to Chicago when the airline was acquired by United Airlines in 2011.

Waste Management Logo.svg

How much of the Houston economy is related to energy?  The answer is about half.  The non-energy proportion of the Houston economy decreased from 52.2% in 2001 to 50.3% in 2010 as oil prices surged and companies like BP and CITGO relocated to Houston.  Both figures are better than 1996’s  44.5%. [13]

The Houston MSA area is 38% Latino, 16% Black and 7% Asian [14], compared to the US average of 16% Latino, 13% Black, and 5% Asian. [15]  Thus, non-Hispanic whites are a minority in metro Houston and the city has a much larger minority population than the US average.  Given the lower average educational and income attainment of racial minority groups, it is quite impressive metro Houston is above the US average in income and at the US average for percentage of residents with a college degree.

 
 
Summing up, I find the 2001-10 job growth in Houston to be very impressive, especially when compared to the negative job growth in the rest of the USA in the same 2001-10 timeframe.  The data prove Houston’s wages are above US averages, though there is a skewed effect of the highest skilled workers earning a significant premium to highly skilled workers elsewhere, which presumably reflects the concentration of corporate executives and highly skilled engineers.  On the other end of the spectrum, some low skill worker classifications are slightly below the US averages, quite likely the result of the lack of unions in metro Houston.  The Houston distribution of jobs by type quite closely mirrors that of the US at large, with the largest differences in healthcare as the young Houston population is healthier and in engineering, where Houston is almost twice the national average.   
 
The job growth was across-the-board and not disproportionately in low-wage categories.  In fact, the majority of the job growth was in white collar areas; we even saw how a smaller proportion of Houston workers are in Food Preparation than is the case nationwide.  Houston has an unusually large minority population, which includes an estimated 150,000 or more former residents of New Orleans who were displaced by Hurricane Katrina.  Above all, Houston has a large Hispanic/Tejano population.  Given the lower average wages of racial minorities nationwide, the higher than average wages in Houston show the metro area has done well by most of its residents, including the 54% of the metro area’s population that is Black or Hispanic.
 
Houston is concentrated in the oil industry.  Its success cannot be solely attributed to higher oil prices as nearly the entire American energy industry has slowly but surely been relocating its HQs and R&D groups to Houston.  Higher oil prices had nothing to do with major oil companies leaving Chicago, California, New York, Denver and Oklahoma for Houston.  The open questions on Houston’s future job growth are how well the city will perform if oil and gas prices decline, how much more will it diversify into other non-energy industries, and to what extent will alternative industry players locate in Houston (like Vestas Wind’s R&D group)?  These answers will help determine if Houston continues its astronomical job growth in future decades.
 
We finish with the chart below, showing the largest employers in metro Houston.  The biggest for-profit employers are primarily energy companies like ExxonMobil, Shell, National Oilwell Varco, Chevron, BP, KBR, Baker Hughes, Anadarko and Halliburton but the list also including major non-energy firms UnitedContinental, Kroger, HP (formerly Compaq), and ARAMARK.  Large non-energy firms on the list and headquartered in Houston include Sysco, BMC Software, restaurant chain owner Pappas and Service Corp., the largest operator of funeral homes.
 
Sysco late 2008 logo.png
 
  Metro Houston Employers With More Than 1,000 Employees
1 Houston Independent School District            25,514
2 City of Houston            21,588
3 Memorial Hermann Healthcare System            19,500
4 University of Texas M.D. Anderson Cancer Center            18,599
5 United Continental Holdings            16,000
6 Harris County            14,983
7 The Methodist Hospital System            13,000
8 ExxonMobil            13,000
9 Shell Oil Company            13,000
10 Kroger Company            12,000
11 National Oilwell Varco            10,000
12 The Methodist Hospital*              9,991
13 UTMB-Glaveston Health              9,318
14 Baylor College of Medicine              9,232
15 HP              9,000
16 Cypress-Fairbanks Independent School District              8,917
17 ARAMARK Corp.              8,500
18 Houston Community College              8,098
19 Chevron              8,000
20 Pappas Restaurants              8,000
21 HCA, Inc.              7,855
22 Pasadena ISD              7,447
23 BP America, Inc.              7,387
24 Macy’s              7,000
25 Baker Hughes              7,000
26 AT&T              6,900
27 Katy ISD              6,556
28 Aldine ISD              6,540
29 ExxonMobil Chemical-Baytown              6,500
30 Fort Bend ISD              6,319
31 Dow Chemical              6,100
32 St. Luke’s Episcopal Health System              6,000
33 Texas Childrens Hospital              6,000
34 H-E-B              6,000
35 Halliburton              5,748
36 EPCO, Inc              5,700
36 University of Houston              5,542
37 Fiesta Mart              5,500
38 KBR              5,089
39 LyondellBasell Industries              5,080
40 CenterPoint Energy              5,000
41 Spring Branch Independent School District              4,842
42 UTHealth              4,690
43 ConocoPhillips              4,000
44 Bank of America              3,100
45 Comcast Cable Communications, Inc.              2,700
46 Rice University              2,600
47 Wells Fargo              2,471
48 Amegy Bank              2,215
49 Anadarko Petroleum              2,200
50 El Paso Corporation              2,200
51 Sysco Corporation              1,800
52 Deloitte              1,500
53 The Boeing Company              1,500
54 CITGO Petroleum Corporation              1,367
55 Service Corporation International              1,300
56 Houston Chronicle              1,295
57 BMC Software, Inc.              1,100
58 City of Pasadena              1,088
59 PWC              1,050
60 San Jacinto College District              1,026
61 Oceaneering International, Inc.              1,005
62 Ernst & Young LLP              1,000
63 Accenture              1,000
 

Chart by author, sources: http://www.houston.org/greater-houston-partnership/employers/ and http://hereishouston.com/?q=node/40 and http://www.texastribune.org/library/data/government-employee-salaries/.  This list may not be fully exhaustive, especially of non-public companies.

 

[1] https://econscius.wordpress.com/2011/09/11/stellar-job-growth-in-high-wage-austin-texas/

[2] http://en.wikipedia.org/wiki/List_of_United_States_metropolitan_areas, retrieved 9/29/11.

[3] Houston-Sugarland-Baytown, Brazoria, Galveston-Texas City MSA/PMSA employment and mean wage data retrieved for Total and Occupational categories in 2001 and 2010 from BLS data (2010) http://www.bls.gov/oes/current/oes_26420.htm#00-0000 and (2001) http://www.bls.gov/oes/2001/oes_3360.htm.

[4]http://colleges.usnews.rankingsandreviews.com/best-colleges/rice-university-3604

[5] http://colleges.usnews.rankingsandreviews.com/best-colleges/texas-am-college-station-10366

[6] http://www.houston.org/pdf/research/12AW001.pdf

[7] pg. 61 of http://www.houston.org/economic-development/joel-kotkin/pdf/KotkinReportwithlinks.pdf

[8] http://www.houston.org/pdf/research/16BW010.pdf 

[9] http://www.highbeam.com/doc/1G1-90932695.html and http://www.highbeam.com/doc/1G1-127881332.html 

[10] http://en.wikipedia.org/wiki/Pennzoil, retrieved 9/29/11..

[11] http://www.bizjournals.com/houston/stories/2007/10/15/daily58.html?t=printable and http://www.katyhomefinder.com/blogs/team_dimuria/archive/2008/02/23/bp-relocating-4000-from-chicago-to-houston-3200-request-katy.aspx

[12] http://www.chron.com/business/energy/article/BP-expands-Houston-s-role-centralizes-operations-1695645.php

[13] http://www.houston.org/pdf/research/10FW002-Data.pdf.

[14] http://www.dshs.state.tx.us/chs/popdat/ST2010.shtm

[15] http://en.wikipedia.org/wiki/Demographics_of_the_United_States, retrieved 9/10/11.

Additional background data on Houston comes from http://www.dallasfed.org/research/houston/2005/hb0503.html

Pictures from Wikipedia Commons.

Stellar Job Growth in High Wage Austin, Texas

In Austin, Job Creation, Rick Perry, Texas on September 11, 2011 at 1:19 am
 
The majority (509,560, or 59%) of the 860,740 net new jobs created in Texas in 2001-10 occurred in three metropolitan areas, each of which has average wages above the US average (see https://econscius.wordpress.com/2011/09/03/stellar-texas-job-growth-in-above-average-wage-cities/).  We will look closely at each of these three metropolitan areas, Houston, Austin and Dallas.  
 
We start with the Texas state capital of Austin.  The Austin MSA had 1,716,291 residents in the 2010 Census, up 466,528 (37%) from 2000. [1]   Metro Austin’s  job growth of 101,510 in 2001-10 accounted for 12% of all Texas job growth.  Note the USA actually had negative job growth during the same time frame. 
 
816Congress-Aug2009.JPG
 
 The Austin job growth was in the following US Bureau of Labor Statistics categories:  Computer & Mathematical (+11,950 jobs, average wage $82,960), Office & Administrative (+12,370, average wage $35,200), Education & Training (+16,580, average wage $54,970), Sales & Related (+15,750, average wage $38,240), Food Preparation (+22,740, average wage $19,870), and all other groupings combined (+22,120 jobs). [2] This shows most of the job growth was in white-collar jobs.  Note the proverbial “burger flipper” jobs of the Food Preparation category accounted for only 23% of the total job growth, are often held by teenagers, and such growth is to be expected when the metro area had 37% population growth in the decade.
 
Austin is one of nation’s best educated metro areas as 38.2% of Austin adults hold a college degree vs. 27.7% national average. [3]
 
The Austin area is 30% Latino, 8% Black and 5% Asian [4], compared to the US average of 16% Latino, 13% Black, and 5% Asian. [5] Thus, Austin has a larger minority population than the US average.  Given the lower average educational and income attainment of racial minority groups, the fact Austin is above US averages in both education and income attainment stands out.
 
The graphs below show Austin’s job distribution is similar to US average but slightly more white-collar, being particularly strong in Computer and Mathematical jobs (Austin 6 % vs USA 3 %). 

Occupation Distribution, Austin vs. US Average, May 2010 BLS data

Occupation Code Austin Jobs, 2010 USA Jobs, 2010
Computer and Mathematical 6% 3%
Office and Administrative Support 18% 17%
Architecture and Engineering 3% 2%
Management 5% 5%
Sales and Related 11% 11%
Business and Financial Operations 5% 5%
Education, Training, and Library 7% 7%
Healthcare Practitioners and Technical 4% 6%
Installation, Maintenance, and Repair 3% 4%
Construction and Extraction 4% 4%
Food Preparation and Serving Related 9% 9%
Production 4% 6%
Transportation and Material Moving 4% 7%
All Other 16% 16%

Average Wages by Occupation, Austin vs. US Average, May 2010 BLS data

The wage graph is interesting.  Austin’s average wage of $46,130 is higher than US average of $44,410, but Austin wages are below US averages for less skilled work (food preparation, transportation, production, construction).  This might be due to the lack of unions in Texas.  On the other hand, skilled white-collar work (education, business, finance, computers and office support) are above US averages.  The higher Austin white-collar wages must reflect high worker productivity, which is not surprising given the highly educated workforce and presence of top technology companies in the Austin area.

Austin has a knowledge-based economy.  In addition to state employees, the University of Texas at Austin (“UT”) is an important employer.  Though some like to say Texas education is ‘bad’, the Longhorns rank as the #45 university in the USA, according to US News. [6]   UT’s ranking is more impressive given that most of the top ranked universities are private (e.g. Ivy League).   Texas-Austin is rated #13 amongst US public universities [7], tied at #13 with Univ. of Wisconsin-Madison and just ahead of my undergraduate alma mater, University of Illinois, #15. 

There is an important point here, too.  Some will downplay the Austin job growth by saying the city is the home of a state capitol and flagship university, therefore, the job growth is unimpressive.  However, the similarly ranked University of Wisconsin sits in Madison, which is also a state capitol.  Likewise Ohio State University stands in state capitol Columbus.  Madison and Columbus have held their own compared to other Midwestern cities but are not even in the ballpark of Austin population and job growth.  Champaign, home of the University of Illinois, has little growth.  In fact, the Champaign example is instructive as it shows universities are excellent employers because they are stable and ride out recessions well.  But, student populations grow very slowly, if at all, meaning the number of jobs directly tied to any university hardly changes.  What matters is a culture of entrepreneurs and venture capital driving economic growth around universities.  There is nothing automatic about economic growth in any particular city that houses an excellent university.  One of the nation’s top public universities (#4, see [3]), University of Michigan, is located in the Detroit suburb of Ann Arbor.  Despite its fantastic engineering program, Michigan has been unable to prevent the flow of jobs out of the Detroit area.

Dell logo

Michael Dell famously started Dell Computer in his University of Texas dorm room.  Dell today leads the private employers in employment in the Austin metro area.  Interestingly, Dell Computer now employs more than the University of Texas.  The Top 20 list displays Austin’s strong technology presence as literally every single non-hospital corporation on the list is in technology (Dell, IBM, Freescale Semi, Solectron, AT&T Labs, AMD and Applied Materials).  Another growth company founded and headquartered in Austin is Whole Foods.

Whole Foods Market logo.svg

Metro Austin Top 20 employers: [8]

1. State of Texas – 65,688 employees

2. Dell Computer – 14,000

3. University of Texas at Austin – 13,577

4. Austin Independent School District – 10,714

5. US Gov’t – 10,624

6. City of Austin – 10,000

7. Seton Healthcare – 7,538

8. IBM Austin Research Laboratory – 6,200

9. St. David’s Healthcare – 5,712

10. Freescale Semiconductor – 5,600

11. Internal Revenue Service – 4,728

12. Round Rock Ind. School District – 4,400

13. Travis County – 4,000

14. Austin Community College – 3,258

15. Solectron – 2,900

16. Leander Ind. School District – 2,800

17. Brackenridge Hospital/Dell Children’s Hospital – 2,537

18. Applied Materials – 2,500

19. AT&T Labs – 2,400

20. Advanced Micro Devices – 2,300

The conclusion is Austin has enjoyed stellar job growth in higher-than-average wage, white collar jobs.  As always, your comments are welcome below.

###

[1] http://en.wikipedia.org/wiki/List_of_United_States_metropolitan_areas, retrieved 9/10/11.

[2] Austin-Round Rock-San Marcos MSA employment and mean wage data retrieved for total and Occupational categories in 2001 and 2010 from http://www.bls.gov/oes/2001/oes_0640.htm#otherlinks  and http://www.bls.gov/oes/current/oes_tx.htm#00-0000.

[3] 2008 Census Bureau data in http://www.austin-chamber.org/do-business/greater-austin/greater-austin-profile/population.php, retrieved 9/10/11.

[4] 2007 Census Bureau data in  http://www.austin-chamber.org/do-business/greater-austin/greater-austin-profile/population.php, retrieved 9/10/11.

[5] http://en.wikipedia.org/wiki/Demographics_of_the_United_States, retrieved 9/10/11.

[6] http://colleges.usnews.rankingsandreviews.com/best-colleges/university-of-texas-austin-3658 retrieved 9/9/11.

[7] http://colleges.usnews.rankingsandreviews.com/best-colleges/rankings/national-universities/top-public retrieved 9/9/11.

[8] http://www.austintexashomes.com/topemployers.htm data retrieved 9/9/11.

Pictures from Wikipedia Commons.

Stellar Texas Job Growth in Above Average Wage Cities

In Job Creation, Oil, Texas on September 3, 2011 at 1:53 am
 

Texas Major MSA Population Growth (Outer Ring) & Job Growth (Inner Ring)

The graph above shows how the Dallas, Houston, San Antonio and Austin metropolitan areas account for the vast majority of Texas population growth and job growth in the past decade.  The entire rest of the state is in the olive shading.  This fact exposes a common and untrue claim about Texas job growth, namely that is is adding a lot of jobs but they are low wage.  Dallas, Houston and Austin all have wage levels that are above both the Texas and US averages.

Average Wages and wage growth 2001-10 are shown in the chart below.  Texas is a little behind the US average but actually made up a little of the gap.  We see the aforementioned average 2010 wages in three of the four big metro areas are above both Texas and US averages.  As we just saw above, the bulk of Texas job creation, 509,560 of 860,740 total new jobs, took place in just those three cities.  San Antonio is not far behind ($39,410 average) and with its low cost of living and absence of state income tax; San Antonio accounted for another 130,940 of the 860,740 total.

US & Texas Average Wages in 2001 plus Wage Growth to 2010

 
How does Texas job growth compare to US job growth?  The next chart shows us how impressive the 860,740 jobs created in Texas was.  The United States total was a loss of <883,250>.  When we remove Texas from the USA total (for statistical purposes, not political secession!), we see the non-Texas US total was really a loss of <1.7> million jobs.  The chart below also shows how geographically diverse the Texas job growth was; all four of the large metropolitan areas as well as the fifth largest city, El Paso and the border cities of Laredo and Brownsville-Harlingen far outpaced overall US job growth.
 
This dispersion of job growth is also found in other, smaller Texas MSAs, too:
 

McAllen-Mission 32%
Victoria 32%
Killeen-Temple 24%
Bryan-College Station 21%
Abilene 15%
Corpus Christi 12%
Waco 5%
Beaumont-Port Arthur 2%
Sherman-Denison -3%
   
Chart by Author  
Source: BLS OES, MSA data 2001 vs. 2010  
 

A criticism of Texas job growth made by Paul Krugman is that Texas is a “still energy-heavy economy”. [2]   Oil and gas are actually a small percentage of Texas jobs, however.  “Mining, which encompasses oil and gas, employs only 2.1 percent of the Texas population – a surprising statistic for those unfamiliar with Texas economics.” [3]  It is true some support jobs, for example teachers and restaurant workers, are indirectly employed by supporting the 2.1% directly involved in mining, but Mr. Krugman overstates the case.  It is also true Texas is not the only state with mineral wealth.  Some states with oil such as California and New York have been less diligent about developing their resources than states like Texas, Louisiana, North Dakota and Pennsylvania have.   This impacts jobs. 

The dispersion of job growth also proves false the claims Texas job growth is all energy.  Houston, Beaumont and Corpus Christi are along the oil intensive Gulf Coast but are not exclusively energy, anyway (e.g. SYSCO Foodservice, headquartered in Houston).  Dallas, Austin and San Antonio have more varied, non-energy economies.  Dallas, the largest metro in Texas, is a major white-collar corporate center.  Austin, home of Dell Computer and many chip companies, is a major technology and Venture Capital hub.   The Rio Valley cities are agricultural centers with strong Mexican border trade.  San Antonio is “Military City USA” with low paid soldiers as well as many white-collar back office functions, logistics, tourism and skilled manufacturing (e.g. new Toyota and Caterpillar plants).

Dallas, Austin and San Antonio certainly help account for the fact education, healthcare and professional and business services, account for 26 percent of all jobs in Texas. [3]  Dallas Federal Reserve Bank CEO Richard Fisher pointed out, “Non-agricultural employment growth in Texas has compounded at an annual rate of 1.95 percent over 21 ½ years; that of California at 0.57 percent and New York at 0.19 percent.” Mr. Fisher noted in the period of June 2009-2011, Texas had accounted for 49.9% of net new jobs created in the United States. [3] 

So where are the low wage Texas jobs some pundits keep talking about?  They are not in the four big metropolitan areas, but instead are found in rural areas and smaller communities, many of which have been poor since before the US annexed Texas.  This is hardly unique, however, as there are poor rural areas and declining small cities in upstate New York, downstate Illinois, interior California, etc.  I am unaware of any state that has solved this disparity.  In fact, other high wage metro areas are not located far from much lower wage, economically depressed cities in their own states, e.g. San Francisco ($59,820 avg. wage) vs. Fresno ($41,100) and Merced ($39,080) or New York City ($55,080) vs. Buffalo ($42,010) and Binghamton ($41,260). 

I think another important point is how the direction of Texas wages is up and has, for decades, been slowly but surely closing in on national averages.  There is something disingenuous about comparing the higher average wage levels in declining northern small cities with traditionally poor, but upcoming Texas cities.  Rochester was the birthplace of Kodak.  Buffalo was a very prosperous port and manufacturing city.  Carrier invented air conditioning in Syracuse.  The somewhat higher residual wages in some of these Rust Belt cities do not go as far due to taxes and living costs and their long term unemployment and wage trends are typically not at all promising.  Would you rather build your future in Buffalo or San Antonio? 

Another factor in Texas wages is the unfortunate fact that racial minority groups are lower-income in America.  Whites are a minority in Texas.  I should emphasize I do not believe there are any innate differences, simply differences in culture, role models, difficulties with English as a second language, etc.  Metro San Antonio is majority Latino.  High wage metro Houston is 41% Latino.  It would appear the Texas economy is doing something right for many Hispanics in these cities.  Many of the below average wage areas in the Rio Valley are almost exclusively Latino, such as Hidalgo County, home of McAllen ($32,470 avg. wage), which is 91% Latino, and Webb County, home of Laredo ($33,580 avg. wage), which is 96% Latino.

In conclusion, the data shows Texas job growth far exceeded the nation in 2001-2010 and the Texas job growth was concentrated in metropolitan areas with above average wages.  This disproves the claims Texas is simply creating low wage jobs.  There are low wage jobs in Texas, many in South Texas agriculture have been there in more or less the same form for centuries, but it takes some clever mental jujitsu to look at the actual record of Texas and not see the huge growth in population and in jobs in above average wage cities. 

Texas Longhorn logo.svg

[1] Data sources: 2001 US and Texas employment data:

http://www.bls.gov/oes/2001/oes_00al.htm and http://www.bls.gov/oes/2001/oes_tx.htm#b00-0000; 2010 US and Texas employment data:  Texas $42,220, US average $44,410

http://www.bls.gov/oes/current/oes_tx.htm#00-0000 and http://www.bls.gov/oes/current/oes_nat.htm#00-0000

 2001 MSA employment data:

http://www.bls.gov/oes/2001/oes_0640.htm#otherlinks, 2010 MSA employment data: http://www.bls.gov/oes/current/oes_32900.htm#00-0000, 2000 & 2010 Census data by MSA: http://en.wikipedia.org/wiki/List_of_United_States_metropolitan_areas and State Census data: http://www.census.gov/popfinder/

[2] http://seattletimes.nwsource.com/html/opinion/2015919308_krugman16.html

[3] http://www.christianpost.com/news/dallas-fed-ceo-defends-texas-job-growth-warns-politicians-over-criticism-of-bernanke-54419/