econscius

Posts Tagged ‘Job Creation’

How Does Utah Get 6.0% Unemployment?

In Economy, Job Creation, Unemployment, Utah on August 19, 2012 at 1:09 pm

In this time of economic stagnation and perpetual high unemployment, it is useful to look at the handful of states adding jobs and providing lower-than-average jobless rates.  Utah continues to be successful.

Utah’s 6.0% unemployment rate compares to California 10.7%, tourism-dependent Nevada’s 12.0% and Illinois 8.9% [1]  Utah was the third-fastest growing state in the decade ended 2010. [2]

The state offers good jobs.  Utah has the 14th highest median household income of the 50 states, ranking ahead of New York State and Illinois. [5]

Employers like Utah.  Its 5% corporate income tax is 1.6 points below the national average.  The Wall Street Journal points out that tax rate has been unchanged over the past 15 years, whereas New Jersey has revamped its tax code four times since 2000. [3]  Employers prefer planning with confidence in steady regulations and tax rates. 

The state is considered business friendly.  “Barriers to business creation are minimal,” as Utah ranked fourth amongst states in Pacific Research Institute’s most recent US Economic Freedom Index (from 2008). [3]

The economic growth and state-level fiscal sanity is even more impressive given Utah is the nation’s youngest state with the nation’s highest fertility rate. [4]  One quarter of youth are minority. [3]  Large numbers of young children cost the schools and require other infrastructure but are future taxpayers.

Did Utah embark on a spending binge to battle the economic turn-down in 2008?  No.  Utah cut its budget with state-agency budgets sliced an average 19%, totaling $2 billion cut in the first two years of the downturn. [3]  The economy buzzed along.

[1] http://bls.gov/lau/ July 2012 data, retrieved 8/19/12.

[2] http://www.utah.gov/governor/news_media/article.html?article=3963

[3] A nice full-length Utah story is behind the pay-wall at the WSJ: http://online.wsj.com/article/SB10000872396390444405804577559582223445656.html

[4] http://www.ksl.com/?nid=148&sid=13186729

[5] http://en.wikipedia.org/wiki/Household_income_in_the_United_States, 2009 data, retrieved 8/19/12. 

Pictures from Wikipedia Commons.

You Built Your Business, President Obama Did Not

In Economy, Political Rhetoric, President Obama on July 16, 2012 at 9:23 pm

Sorry, Mr. President, but you’re wrong. 

If you have a business, you built it.  It’s yours, not Barrack Obama’s.  You’re the one who quit your comfortable day job to take on a dream.  It was your 401(k) savings you dipped into for the start-up.  It was your credit card that purchased office supplies.  You’re the one who had trouble sleeping at night when you signed for the lease, knowing you needed to sell like crazy to justify the risk.   You’re the one who sped to the bank before it closed to deposit a receivable check you personally picked up.  It is you who sent a check to the state to incorporate. 

It is you who learned QuickBooks and how to do payroll.  You learned about liability insurance and key man policies and a million other tidbits of business you never imagined you’d have to.  You’re the one who reassured your spouse you weren’t insane when the economy took a downward trend or you lost your big customer.

You’re the one who gets up at 4AM and leaves last in the evening.  You’re the one who signs personally for your bank loans.  You’re the one who signs the tax returns.  It is you who negotiates with salespeople of your vendors.  You work so hard because your day seems to be filled with meetings, meetings and more meetings.  You’re the one who deals with the angriest customers when things go wrong.  You’re the one who does the thankless jobs – like interviewing or firing people when times are tough.  It’s your drive and vision that pushed each new product.

You’re the one who has to be a rock.  When customers or employees scream and swear, you’re the one who has to settle things down.  You’ll get sued if you don’t, after all, you’re the supposed ‘deep pocket’.  When times are tough, you cheer up the staff.  When times are good, you dampen overenthusiasm, lest it put the firm in a bad spot later.

You’re the one who had trouble sleeping at night when you contemplated adding a second location or moving to a larger facility.  There were no guarantees.  You’re the one who had to testify in court about the frivolous lawsuit.  Even though the judge tossed it, your insurance rates went up, anyway. 

You’re the one who gave back to your community as you succeeded.  You sponsored a little league team, you organized fundraisers and gave more and more to local charities.  You volunteered for Junior Achievement and you offered leftover food from your restaurant to a homeless shelter.  As your company grew, more and more people in your community asked for your advice.  They started recommending you get involved.  You didn’t have the time, but you ran for school board or village board, anyway.  You paid a fortune in taxes, not only income but real estate and sales taxes for your business.

No matter what politicians say, you are the bedrock of the American economy and society, too. 

President Obama revealed perhaps more than intended of his feelings toward entreprenuers and successful people in general.  Ironically, most successful people are quick to extend credit to people who’ve helped them along the way, be it parents, mentors, teachers, spouses and the like. 

But, Apple and Hewlett-Packard didn’t become great companies because of the workmen who build the garages they started in. [1]  They became industry leaders by the endless hard work, drive and brilliance of Steve Wozniak, Steve Jobs, Bill Hewlett and David Packard.  Millions of American business owners toil away in far less glamorous surroundings, though the dry cleaner, cleaning service and local restaurant are all crucial to local economies.

I reprint Obama’s remarks at length below, sourced from whitehouse.gov:

They know they didn’t — look, if you’ve been successful, you didn’t get there on your own.  You didn’t get there on your own.  I’m always struck by people who think, well, it must be because I was just so smart.  There are a lot of smart people out there.  It must be because I worked harder than everybody else.  Let me tell you something — there are a whole bunch of hardworking people out there.  (Applause.)

If you were successful, somebody along the line gave you some help.  There was a great teacher somewhere in your life.  Somebody helped to create this unbelievable American system that we have that allowed you to thrive.  Somebody invested in roads and bridges.  If you’ve got a business — you didn’t build that.  Somebody else made that happen.  The Internet didn’t get invented on its own.  Government research created the Internet so that all the companies could make money off the Internet. [2]

[1] Early Apple computers really were made in Steve Job’s parent’s garage in Los Altos, CA.   http://cicorp.com/apple/garage/index.htm

[2] Note he is even wrong about the internet, which was created by the Defense Dept. for national security purposes, not “so companies… could make money”.  The internet is nothing without private telecomm, too (phone lines, switches, routers, etc.)  Many years after the invention of the internet, smart entrepreneurs figured out ways to make the internet useful to consumers and thus, make money. http://www.whitehouse.gov/the-press-office/2012/07/13/remarks-president-campaign-event-roanoke-virginia?utm_source=wh.gov&utm_medium=shorturl&utm_campaign=shorturl

Pictures (Steve Jobs’ parent’s garage and early HP & Apple logos) from Wikipedia Commons.

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.

Obama Jobs Solution: Suing Employers For A Job?

In Economy, Job Creation, Lawsuits, Obama Administration, President Obama, Unemployment on September 27, 2011 at 8:07 pm

The “Jobs” Bill that President Obama sent to Congress “includes a provision that would allow unsuccessful job applicants to sue if they think a company of 15 more employees denied them a job because they were unemployed.” [1]

While I understand the frustration of the unemployed, the President’s idea is likely to be counterproductive and lead to even less hiring of the unemployed.

Lawrence Lorber, a labor law specialist who represents employers, said Mr. Obama’s  proposal “opens another avenue of employment litigation and nuisance lawsuits.” [1]  Most employers are small and do not have lawyers on staff to defend against these lawsuits.  Even larger companies with a slew of in-house legal counsel have no desire to be sued over matters that are difficult to disprove.

Why would an employer discriminate against the unemployed?

(1) It is an open secret in the business world many employers formally downsize under-performing employees in order to avoid law suits.  A downsizing of just one person in a large company may actually be a polite way of firing an underperformer.  Most workers are the member of some protected class (female, racial minority, veteran, over age 45, etc.).  If the underperforming employee has not made themselves easy to fire (e.g. by repeatedly skipping work), it can be difficult to prove in Court the subjective judgments that a particular employee’s work is mediocre or worse.  Defending a wrongful termination case is something many companies try to avoid.  Even when the company wins, it racks up legal expenses.  Many companies feel it is better to pay a small severance package and let the employee be downsized “not for cause” rather than terminated “for cause” at the risk of a lawsuit.

This open secret is one reason employers have long preferred to hire someone employed at another company rather than someone who is unemployed.  

(2) Employers think other companies let go of underperformers first and hold on to top performers.  The thinking is that, when XYZ Company lets 10% of its workforce go, it probably is mostly letting go of its 10% least desirable employees.  

(3) Lastly, companies feel that people who are out of the workforce for extended periods of time, such as two or three years, may lose some of their work-related skills.

Are these beliefs always correct?  No, though they surely are at least partly accurate some of the time.  In a normal job market, these biases against the unemployed are not a big deal.  Does every employer feel this way?  Undoubtedly no. 

Unemployment surely is always a disadvantage, but America has traditionally had enough jobs to go round so that most any able-bodied unemployed person would, sooner or later, find something.    In today’s bad job market, the already existent bias against the unemployed is a bigger issue for the unemployed because there are so few jobs available. 

There are other small biases that exist in hiring: in favor of the tall, in favor of the attractive and in favor of people with degrees from prestigious universities.  Studies have shown taller people earn more [2] and more attractive people earn more [3].  These facts add insult to injury to men because studies also show women prefer taller and wealthier men; attractiveness is universally desired in a mate.  But, I would not recommend a federal statute banning discrimination on account of height; how does one even begin to measure such discrimination in a real world situation?  Would it not open to the door to frivolous lawsuits?

 

What would happen if the President’s bill passes and the unemployed are allowed to sue employers for discrimination?  Would the long-term unemployed now quickly find jobs?   I think the answer is no

Let’s think ahead and assume President Obama’s bill becomes law.  It is not clear that employers who are predisposed against the unemployed would be any more likely to actually hire the unemployed.  There are myriad reasons an employer can give (“doesn’t fit our culture”) for passing over an applicant.

But, the new law would make it far more risky to interview the unemployed.  Any unemployed person who applies for a job but is not hired would have legal standing to try to file a lawsuit against the employer.  The safest bet for an employer hoping to avoid these lawsuits would be to try not to interview the unemployed in the first place.  How might they do that?  Obvious options would be to employ recruiters who cold call people already employed elsewhere, look to internal (already employed) candidates, outsource to another country, or automate rather than hire anyone at all.

I know this is cold comfort to the long-term unemployed, but the idea of forcing employers to hire the long-term unemployed through lawsuits will backfire and make it even tougher for the unemployed to get interviewed and may result in fewer new jobs.  A much better idea to actually accomplish that goal would   be a carrot, rather than the stick:  a tax credit for hiring the long-term unemployed.

Unfortunately, this is another example of President Obama- who has no experience whatsoever in private business – proposing something that would actually be counterproductive.   The continuous flow of proposed high taxes, new regulations and laws such as this one creating a new protected discrimination class of unemployed people are exactly what is making American business skittish to hire at all.  The private sector creates jobs, not the government through new laws allowing for more lawsuits.

As always, comments are welcome.

[1] http://news.yahoo.com/blogs/lookout/obama-proposes-letting-jobless-sue-discrimination-191042168.html

[2] http://www.sciencedaily.com/releases/2009/07/090710092226.htm

[3] http://money.cnn.com/2005/04/08/news/funny/beautiful_money/

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/

High Lone Star Wages

In Uncategorized on July 27, 2011 at 5:20 am

The Texas economy is in the news lately.  Today’s USA Today pointed out:

“From June 2009 to June 2011 the state added 262,000 jobs, or half the USA’s 524,000 payroll gains” [1]

Additionally, Texas gained an astonishing 4.3 million new residents during the past decade.  The possible Presidential candidacy of Governor Rick Perry may focus on the Texas economy.  As a result, some Democrats are talking down the Texas economy. 

The common put-down is essentially, yes, Texas added a lot of jobs but they are low-wage or minimum wage “bad” jobs.  People then debate if low wage jobs are better than no jobs.  But let us take a step back and ask if it is even true that Texas is “low wage”? 

It is true Texas is a right-to-work state with a pro-business reputation, but it is not particularly low wage.  In fact, average Texas wages are ranked 14th highest in the nation, ahead of traditional high-wage industrial states like Ohio, Minnesota and Michigan.  The $876 average weekly wage in Texas is only 4% below the $916 average in my home state, historically wealthy Illinois. [2]

Texas is a geographically large state, so the next logical question is: even if Texas is overall high wage, are some counties low wage?  The answer is yes.  Texas has 254 counties but only 18 are above the national income average.  There are many small, rural counties with low wages, especially in West Texas and along the Mexican border.  This split holds nationally on a smaller scale, too, as the BLS reports 2/3 of all American counties are below average [3] which tells you the 1/3 that are above average income counties are also the most populous. 

The 18 above average income Texas counties include most of the more populous counties and those with the bulk of the employment and population growth in the past decade.  These include Harris & Brazoria (Houston), Bexar (San Antonio), Travis (Austin), and Dallas, Tarrant & Denton Counties (Dallas-Fort Worth). [3]  It is worth noting more than half of Texas’ 25.1 million people live in these four metro areas of Houston, San Antonio, Austin, and DFW.  When a company like BP North America or Phillips Petroleum relocates to Houston, Comerica Bank relocates to Dallas, LegalZoom relocates to Austin, or Caterpillar and Toyota open major new plants in San Antonio, they are moving to counties with higher than average wages.  Note they are not moving to the lowest wage Texas counties like Webb or Hidalgo.  

Thus, the glib statement companies move to Texas for low wages does not make a lot of sense given that Texas has the 14th highest wages and the booming Texas metros have higher than national averages.  You may notice the new Texas jobs are not moving to the lowest wage states.  Why go to Austin if wages are much lower in Mississippi?  Clearly Texas cities offer more than just low wages.  Where the four big Texas cities may be cost competitive, despite higher average wages, is in direct comparison to the highest wage cities such as San Francisco or Los Angeles.  Texas also has no income tax and lower real estate costs.  Austin has an educated workforce, high quality of life and a concentration of IT talent that make it a logical choice for a California technology company to relocate to. 

USA Today cites an example rationale behind a corporate relocation, demonstrating it is not just about labor costs:

“Jeff Ruiz, head of Medtronic’s Texas operations, says the company was drawn by labor costs that are “significantly lower” than those in Los Angeles and a large, high-quality workforce. Ruiz also points to more affordable real estate and the lack of a state corporate tax, though he says the latter was a minor factor. The company, which also received $14 million in incentives from the state — a figure Ruiz says was comparable with other offers — chose San Antonio from among more than 900 U.S. cities it evaluated.” [1]

Clearly, Texas has been doing something right for many years.  It has energy, yet that is not a full explanation because oil and gas are most significant to Houston and not particularly important for the other big metros.  It was never inevitable the US oil energy companies’ R&D and HQ operations would migrate to Houston when many other states like California had plenty of oil.  Texas also shares a border with Mexico, but so do California, Arizona and New Mexico, yet Texas appears to have better cultivated its border trade.  Rather than launching unsupported attacks on Texas in order to harm Rick Perry’s political chances, the more interesting question is to what extent did Perry cause this explosion of high wage Texas jobs with specific new policies or did he mostly continue pro-business policies that had been in place for decades?

 Flag-map of Texas.svg

[1] http://www.usatoday.com/money/economy/2011-07-25-texas-a-magnet-for-jobs_n.htm

[2] pg. 8 of http://bls.gov/ro6/fax/qcew_tx.pdf

[3] http://bls.gov/ro6/fax/qcew_tx.pdf