Property Rights, Texas Model, and Employment

The Washington Post literally starts off its excellent article on the success of Texas in job creation with these words:

“Underestimate Texas at your own peril.”

Indeed. You can ask General Santa Anna, for example. Anyhow…

The Washington Post report focused on a recent study by two researchers at the Federal Reserve Bank of Dallas. What they found is that Texas led the nation in job growth from 2000 to 2013, but even more importantly, Texas created jobs at all pay levels.

“Texas has also created more ‘good’ than ‘bad’ jobs,” they write. “Jobs in the top half of the wage distribution experienced disproportionate growth. The two upper wage quartiles were responsible for 55 percent of net new jobs. A similar pie chart cannot be made for the rest of the U.S., which lost jobs in the lower-middle quartile over the period.”

How dominant was Texas in job creation? Look at this graph:

Chart-1

Of course, we’re proud of what our state has achieved in the past dozen years. But there was an important fact in the story that more people need to understand.

A Key Pillar of Success

It seems that the reporters at the Washington Post couldn’t help but get in a dig at the success of Texas:

You might be inclined to think that the Lone Star state is bad at creating good jobs. It is, after all, second only to Idaho in the proportion of its population earning the federal minimum wage or less, according to the Labor Department. And it has the ninth-highest Gini coefficient, a measure of income inequality. So it’s only natural to assume that the state is bad at adding good jobs, right? Wrong.

As we noted above, Texas does have a larger share of its population earning the federal minimum wage or less than any state but Idaho, but it helps that things are cheap.

“A low minimum wage and plenty of low-skilled workers ensure that Texas will have a high share of minimum wage jobs,” the researchers write. “On the other hand, a relatively low cost of living in Texas ensures that workers’ earnings here will go further than in other large states.”

And why is the cost of living so much lower in Texas than elsewhere?

CPI breakdown

The largest component of the CPI (Consumer Price Index), or cost of living, is housing. The chart at the left shows the composition of the CPI in 2009.

Workers’ earnings go further in Texas than in other large states in large part because good housing — whether renting or buying — is affordable here. And lower cost of property filters down through all other categories, as businesses have lower cost of operations in Texas. If rent for your restaurant is cheaper, then you can afford to charge less for food.

The same mechanic is in place for all of the other categories, even Transportation.

This is one reason why we fight so hard for property rights, whether of homeowners, businesses, or landlords. It is one key reason why we stand for rational government policies on economic development and housing. Because fair, objective, rational decisions that respect private property rights of Texans lead to economic growth and jobs across the spectrum. Not just the low-wage jobs, but the good jobs that everyone wants.

The other main reason why we fight, of course, is that it’s simply the right thing to do. Property rights are civil rights. The two are inseparable.

The authors of the study tell us that while Texas has been successful, there are threats on the horizon:

“Texas has produced hundreds of thousands of well-paying jobs across most industries since 2000, making Texas the top destination for domestic migrants since 2006,” the researchers note. But broad trends, such as globalization, technological change and slowing educational attainment threaten its success. If the state wants to maintain the economic climate that enabled such (relatively) equitable job growth, it would be wise to institute policies now, such as investing in higher education, that boost economic opportunities, the authors argue.

We agree, but we would point out that along with policies such as investing in education, it would be extremely wise to understand the role that housing and property rights play in economic opportunities. Higher education, as important as it is, is not the reason why Texas was the top destination for domestic migrants since 2006.

Jobs, and lower cost of living — which directly means better housing at more affordable prices — are the reasons. Let’s make sure that we protect the foundation of our economic success as we continue to work to improve the environment for all Texans, old and new and coming-soon.

-VFT

 

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