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Hi Folks–similar to the Census (which we will use next assignment), we’re now going to get to know Texas’ economy, in more detail,as in how it’s measured for growth, or success. As in most aspects of life, there are different ways and usages for numbers, but some, like the Census, are just more important than others. For this assignment, we’re going to use the Gross State Product, which is part of the US Gross Domestic Product. I usually obtain these tables from the Texas Comptrollers website, as I have for 15 years, but the current officeholder, Susan Combs, is running for re-election, and was considering running for a higher office if the Texas Lieutenant Governor left office. Im saying this because Im VERY disappointed as a Texas resident, taxpayer and educator. The Comptrollers office is the state’s taxing, auditing, and revenue guardian. It is NOT an economic development forum–we have several associations–like the Chambers of Commerce, and other offices under the Governors control, that deal with these interests. Since President Obama has taken office, however, and Rick Perry and others caught up in political ambition, this office and it’s huge data base have simply become a political tool. This is a disgrace to the the families, students, taxpayers and consumers especially. Let’s now move to the data, which I had to find in the US Bureau of Economic Analysis, BEA, and compile for you.
Texas’ economy is huge, as you have hopefully come to know from Chapter 1, and the course in general. It’s the 2d largest in the US, and has done well over the past 3 years, since the financial collapse and recession. That’s a good thing. Let’s look at what the economy is, in all its wrinkles, by comparing the GSP from last year, to the previous, 2010.
In chapter 1 of the text, you’ll find Table 1–a breakdown of the Gross State Product over a 10 year span. For this assignment, you’re going to make comparisons between the data reported for 2011, by viewing this PDF file:
2011GSP
and compare to Table 1, in the column for 2010.
FOR ASSIGNMENT: Please go through and type the total for each 2010 sector, ie, Agriculture, Mining, etc., then type the total for each 2011 sector.
Also, you will see the 2011 file is much more detailed, it explains to us which subsectors exist, ie, the more specific industries–wood products, non-metallic, forestry, etc. Please list 2 subsectors for each sector, including 2 for durable goods and 2 for non-durable. Conclude with the overall sector that grew the most, in dollars.
Chapter 1
The Structure of the Lone Star State…
The economy of a social system is a broad, somewhat permanent reflection of the crossroads of people, geography and culture – thus it is part of the structure of the social system. Economic aspects of any society are huge “building blocks” of political relevance as well, because they convey much about that the government will respond to, be shaped by, and will decide. It’s not to say that any government can precisely manage an economy, or economic conditions, for that matter. However, one hallmark of American economic superiority has always been the responsiveness and adaptability by government, to accommodate and encourage growth.
What that means varies from era to era, and it should be no surprise to anyone that our state and national economies have drastically changed in the past two decades. Think of economies as you would populations – a teeming stew of individual abilities, diversities, and tendencies – acting in the aggregate. That’s how sociology, political science, and of course, how economics works to define, illustrate and conclude (even though often after the “fact” in historical terms). Regardless, all governments have a role in economic possibilities, and outcomes, often to the tune of the survivability and true sovereignty of the place itself.
Texas’ story is an exceptionally good example of the links between government and economy, in fact, one might view a study of Texas as a microcosm of America itself: the vast, diverse acreage and resources within; great wealth and great poverty; the human spirit of individualism, opportunity, and buck-wheat toughness. And in a cultural sense, all reflected in the trends of policy and politics.
At the onset of this chapter, and the following nine chapters, we will preview the essential elements feature – a simple block presenting the finite concepts – the essence – of each subtopic/institution/process. This is not an outline, but a tool that should assist you in organizing and retaining specifics about the chapter. Think of the essence as the core, the simplest denomination of the broader topic.
Genesis: The Land and Economy
Economic considerations stem from the natural characteristics of the place itself – the land mass, water, climate, soil, and treasures below. All are the “movers and shakers” of any society, because such are things people fight over, grow rich or poor from, travel vast distances to obtain and subsequently place the results at the foot of government. In other words, the demands and challenges for those in government are the result of the important economic factors which people are most concerned and affected by – and economic factors always revolve around the concept of scarcity.
Economic factors are the core elements of economic production and consumption – land (including buildings/homes), labor (employment) and capital (finance, machines, equipment). These elements are in demand, but there is never enough for everyone, everywhere, at any time. One may view the concept of demand as greed, but that’s not how economies work – there are markets, which accommodate demand. Thus, government, especially political government, is the broker for these vital and unstoppable exchanges. Typically, political governments determine, in the famous aphorism of political scientist Harold Lasswell, “who gets what, when, where and why”. Explaining how this happens will require the rest of this book. We will start first with that comes first naturally, the economic staples from the state’s vast territory.
Traditionally the state’s economic vitality revolved around one product, an economic staple, which is usually predetermined by the availability of the item, and the demand for it (this is known as natural advantage). If that product – wheat, cattle, steel, etc – sold profitably, the state or region experienced economic prosperity. Conversely, economic hardship was unavoidable when the production and marketability of that product was diminished or changed entirely.
Cotton was the product that drove southerners into the rich soils of East Texas. Endless rows of cotton plants pumped money into the state’s economy until the Civil War brought the industry to an eventual halt. Although cotton would continue to reap profit in Texas, the postwar economy would soon be bolstered an ever-increasing demand for beef – especially in the commercially viable North and mid-Atlantic markets. This presents economic diversity for those involved with the choices – what to use the land, labor and capital to produce, and which crop presents the best terms of trade.
Texas’ natural advantage – vast acreage and a ready supply of feed proved a worthy drawing card for the post Civil War economy. The cattle industry would become the state’s mainstay crop as millions of longhorn were driven to Midwestern stockyards. The culture of this industry, of course, became permanently marketable as well – cowboys, trail rides, risk; reward would only draw more of the same. Another crop – crude oil – would also present economic diversity and another wave of adventurers. Interestingly, the overall potential for wealth, based on the terms of trade, continued to rise in Texas. What set Texas apart from other states, however, is that the commercial production was based solely on natural advantages, as opposed to comparative advantages evident in industrial regions.
“Texas Oil”
At the century’s turn, the discovery of Spindletop in East Texas diverted the economic elites and adventurers to a new “frontier” of possibility in oil and natural gas. The extraction, refinery and marketing of these ready staples dominated Texas’ modern economy, until the oil bust of the 1980’s. The challenge continues at present, with choices again presenting themselves. At the start of 2008, Texas was the leading producer of wind-generated energy…more on that topic later in this chapter.
Since the bust of oil production in the early 1980’s, Texas has become a highly diversified economy. The economic factors of land, labor, and capital have been successfully adapted to the expansion of other markets, i.e., the transition from one primary economic mainstay to production many other different goods and services. What creates this comparative advantage? Typically, several aspects of a state or other definable region will prove beneficial to business and industry. These factors include a dynamic list headed by low taxes, viable infrastructure (roads, rail, ports, etc), availability of labor/workforce, office and warehouse space, and of course – financial capital to accommodate growth. Simply, producers have options and incentives here. The essentials of this chapter describe the changed economic landscape, and provide new insights about the evolving economy – the so-called New Economy -, which revolves around trends in high technology, digital innovation, and the benefits of research-driven competitive advantage.
TABLE 1.1
Year
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Total Gross
State Product
(2000 Dollars)
828.42
869.38
907.36
925.49
915.31
946.60
970.12
999.35
1,033.42
1,071.15
1,109.28
Goods
(2000 Dollars)
203.27
219.82
227.37
224.93
212.42
217.14
222.83
229.37
240.16
253.27
265.36
Agriculture
8.18
6.79
7.63
7.32
7.17
7.31
7.90
8.13
8.39
8.62
8.78
Mining
(Oil and Gas)
38.66
41.18
43.00
42.90
40.58
41.94
40.73
40.97
43.92
47.54
50.43
Construction
35.46
34.36
32.17
33.49
32.31
31.89
32.06
33.01
34.46
36.21
37.87
Manufacturing
120.97
137.49
144.56
141.22
132.37
136.01
142.14
147.25
153.39
160.90
168.27
Services
(2000 Dollars)
625.15
649.56
679.99
700.56
702.88
729.47
747.31
770.00
793.27
817.89
843.94
Trade,
Transportation
and Utilities
184.51
192.15
201.06
200.85
198.40
205.71
211.33
220.02
229.13
236.73
244.26
Wholesale
59.76
61.01
63.12
63.12
62.15
64.23
65.46
68.22
71.50
74.26
76.96
Retail
64.15
68.47
72.90
73.86
73.79
76.39
77.98
80.83
83.91
86.34
88.79
Transportation
and Utilties
60.59
62.67
65.04
63.87
62.46
65.09
67.89
70.96
73.72
76.13
78.51
Information
43.68
46.06
50.82
53.68
53.87
55.60
56.92
58.77
59.75
60.33
61.55
Financial
Activities
125.66
130.47
135.61
138.18
137.15
141.45
142.96
145.69
149.01
153.33
157.69
Professional and
Business Services
92.39
97.93
105.13
113.97
114.90
119.60
125.72
130.90
136.50
144.28
152.32
Educational and
Health Services
51.88
53.78
55.42
58.05
61.25
65.25
67.37
69.07
70.70
72.47
74.50
Leisure and
Hospitality
25.20
26.44
26.95
27.84
27.93
29.02
29.94
30.74
31.54
32.37
33.29
Other Services
17.16
17.32
17.60
17.85
17.80
18.31
18.48
19.08
19.43
19.69
19.92
Government
84.68
85.41
87.40
90.14
91.59
94.53
94.59
95.72
97.21
98.69
100.41
Total Gross
State Product
(Current Dollars)
982.07
1,070.29
1,148.59
1,223.48
1,227.44
1,286.12
1,339.93
1,399.62
1,471.23
1,553.49
1,638.28
Natural Advantage: Texas
Before the oil crisis of the early 1980’s, Texans could proudly boast that the state’s oil industry contained 30% of nations oil reserves, produced 30% of the nation’s domestic oil supply, comprised 28% of the nation’s refineries and employed close to 400,000 people. All this generated 6.7 billion in salaries, and accounted for 28% of the states revenues (from severance taxes only). The disposable income generated by oil & gas employment helped all sectors of the economy, including finance, construction, manufacturing, retail sales and services. Million of dollars contributed from major oil companies to the state’s public and private universities helped to fund petroleum-related business and scientific academic programs.
The euphoric economic highs of the 70’s and early 80’s came to a grinding halt when Texans saw the price of crude oil drop drastically and dangerously low in the mid 1980’s. Even more frustrating was the realization that the self-sufficient Texas oil baron now had to confront the powerful currents of globalization. The oil industry by the late 1980’s had become part of a fully integrated international market, controlled largely by a cartel called the Organization of Petroleum Exporting Countries (OPEC). Thirteen member nations comprise OPEC, including eights Arab countries, as well as Asian, African and Latin American nations. Despite extreme pressure from the U.S. and other importing nations, OPEC decided to drastically cut the per-barrel cost of crude oil. In the early 1980’s, the price of crude was at an all-time high of 51.02 per barrel, up from the 24.28 price during the 1979 Iranian Revolution. However, OPEC’s creative slicing drove the price down to $16.51 per barrel in 1986. A slight recovery was experienced in 1991, only to see the price fall to $11.90 in 1994.
The entire state economy was vise-gripped by the drastic slide in oil prices. “The Texas economy lost nearly 300,000 jobs in Natural resources and manufacturing between 1981 and 1987, with most of this loss occurring in the oil and gas industry. In 1986 alone, 80,000 nonagricultural jobs were lost.” Within a six-month period, unemployment went from single to double digits. The Gulf Coast area was extremely hard-hit by the depressed oil market. “In 1982, the oil industry provided one if five of all jobs in the Gulf Coast. In 1987, it accounted for only one in seven.”
Of course the depressed oil industry caused an adverse domino effect in every sector of the state’s economy. Many unemployed workers defaulted on mortgage and personal loans. Retail business suffered due to lack of demand. The construction industry declined as the number of new housing starts dropped drastically.
Insight Question: What is the difference between the economic problems caused by oil prices in the 1980’s, and problems facing Texas residents in the mid-2000’s (think Hurricanes Katrina and Rita). Are there similarities in the pronounced “spikes” of 2011?
Insight Question: What is the difference between the economic problems caused by oil prices in the 1980’s, and problems facing Texas residents in the mid-2000s?
Energy in Transition
Most Texans, and Americans in general, would agree that the business and consumption of energy has been in a transitional, or at least modified version of its former self. But where do we start the observation, to allow useful and relevant conclusions?
In 1999, crude oil prices bottomed out at just above $12 per barrel. At the same time, the US economy was soaring, due to massive changes in international trade, relative peace, and Internet-based “e-commerce”, resulting in the term “New Economy”. All economic trends place demand on state and local government to respond, either to insulate the negative impact, or to “accentuate the positive” So, in March 1999, the Texas Legislature moved to assist oil operations by repealing the severance tax on oil and gas, providing incentive for producers to reap profits. What a difference a few years would make!
The Bush Administration ushered in a made-to-order climate for energy as an economic priority, which grew increasingly prone to international political forces after the terror attacks in 2001, the invasion of Iraq in 2003, and the emergence of alliances between major oil producers Iran and Venezuela. Texas has obviously benefited from the vast amount of federal spending in support of the war in Iraq, but the effect on the oil & gas sector itself has not been significant, especially in terms of production. In fact, the mining sector overall has declined in state production, between 2005 and 2009 (see Table 1.1) Employment in this area has fluctuated, but remains lower than 1998 in numbers of jobs (see Table 1.2).
Regardless of the smaller role crude oil and refining plays in the state economy, Texas still leads all states in petroleum reserves and potential sources of renewable energy. In fact, “Texas crude oil reserves represent almost one-fourth of total U.S. oil reserves, and Texas natural gas reserves account for almost three-tenths of total U.S. natural gas reserves.” Additionally, Texas crude oil, concentrated in the Permian Basin of west Texas, continues to serve as the benchmark grade of domestic oil production, due to its’ “light consistency and low-sulfur content, the quality of WTI is considered to be high, and it yields a large fraction of gasoline when refined.
Additionally, off-shore drilling continues to prove immensely profitable, despite the huge cost of lives, ecology, and related industry in the Deepwater Horizon explosion and oil spill of 2010. Houston remains the headquarters for both Deepwater (and its vendors like Halliburton) as well as Diamond Offshore, and Pel-Tex Oil. The offshore engineering and concept is a force in itself: Diamond Offshore offers this feature on its website: http://www.diamondoffshore.com/ourCompany/ourcompany_offshoreVideo.php.
These companies (more than any other), including automotive empires, represent globalization in its enormous profile. British Petroleum (BP), Royal Dutch Shell, Exxon Mobil are among the leading Big Oil corporations that establish and contract with offshore companies, and are served by others, like Halliburton. At the same time, they operate in the boundaries of both U.S. and Texas, based on current definitions of territorial waters, and economic jurisdictions known as “contiguous zones.” For example, “in 1988, President Reagan extended the U.S.’s territorial sea to 12 miles. The states’ territory was left at the three mile mark. For historical reasons, Texas and Florida’s claims in the Gulf of Mexico are three marine leagues, which is about nine miles. … In 1999 President Clinton extended the U.S.’s contiguous zone from 12 to 24 miles.” http://www.straightdope.com/columns/read/2250/in-international-waters-are-you-beyond-the-reach-of-the-law Comment by Shelly: Insert Hyperlink to http://www.reagan.utexas.edu/archives/speeches/1988/122788b.htm
Comment by Shelly: Insert Hyperlink to http://supreme.justia.com/us/363/1/case.html
Comment by Shelly: Insert Hyperlink to http://oceanworld.tamu.edu/resources/oceanography-book/coastalzone.htm
Politically speaking, the majority Republican presence in both state and national elective offices, especially the U.S. House, has benefitted the oil industry in significantly. For example, in the midst of the oil spill disaster, Representative Joe Barton (R), then committee chair of the House Energy &Commerce Committee, formally apologized to British Petroleum for the sanctions (punitive damages) against it, brought by the Obama Administration.
The statement was made clearly to discredit the Federal role – especially a Democratic Administration – of enforcing the sovereignty of its geographic and economic well-being. Translated,
this particular federal government is interfering with international trade.
More will be said about the state-federal struggle in chapter 2 especially.
“Rep. Joe Barton Apologizes to BP for $20 Billion Claims Fund”
The New Gold Rush
As much as oil has been hailed as “black gold”, the past 3-4 years have seen a meteoric rise in the profitability of natural, and/or shale gas. Shale is “natural gas from shale formations. The shale acts as both the source and the reservoir for the natural gas” These gas deposits, found throughout the US, are obviously rich with a natural resource increasingly in demand as an alternative to refined oil, but requiring a controversial process called hydraulic fracturing, or “fracking.”
Energy API review states that older shale gas wells were vertical while more recent wells are primarily horizontal and need artificial stimulation, like hydraulic fracturing, to produce. Only shale formations with certain characteristics will produce gas. The most significant trend in US natural gas production is the rapid rise in production from shale formations. In large measure this is attributable to significant advances in the use of horizontal drilling and well stimulation technologies.
See http://www.api.org/policy/exploration/hydraulicfracturing/shale_gas.cfm.
The natural gas sub-sector continues to dominate the US market, also supplying around 25% of annual demand. With humble beginnings as a waste by-product of crude oil drilling, natural gas would eventually be distributed through converted oil pipelines, and now laces across the US. Today, “an expansive network of interstate natural gas pipelines extends from Texas, reaching consumption markets from coast to coast, including those in California, the Midwest, the East Coast, and New England. Texas has 10 natural gas market hubs located in both East and West Texas, more than any other State.”
In addition to oil & natural gas, Texas’ natural advantages include large deposits of bituminous and lignite coal, and the most highly proclaimed energy source, wind energy. In west Texas, especially Ft. Stockton to Midland, and up into the Texas Panhandle, “wind farm” turbines have decorated the landscape, where oil derricks used to dominate. Wind energy has many positives, but it requires, as other key renewables like solar power, a transmission system that has fully evolved.
Wind Energy Transmission Texas, a joint venture of international energy giants has a great resource base for the student of Texas renewable projects. Clear goals and responsibilities for establishing a network of transmission lines for wind energy were established during the Bush administration, but have foundered during the past few years, ie, the Obama administration. Why Why is thisthis outcome – a fairly easy question to ask, but difficult to answer in the chaotic political climate of 2010-11. The simplest and most important explanation is
the role of politics in business and industry
.
It is political adrenaline for conservatives to demonize any regulation or appearance of cooperation with Federal initiatives. Look over, for example, the list of factors the Wind Energy plan acknowledged at the outset, on this excerpt from 2009 Project Fact Sheet:
http://www.windenergyoftexas.com/sites/default/files/resources/Environmental_Cultural_Resources .
The quality of life, endangered species, and other environmental concerns have evaporated in the economic uncertainty and political division between Texas’ elective leaders and federal entities, especially the Environmental Protection Agency (EPA). What does this mean for innovation and enterprise in Texas? In short, a waiting game – for political outcomes in 2012, and economic currents to begin flowing on their own. For the student of this subject it’s important to marry up the economic concepts of natural, comparative and competitive advantage, within the context of this text – that is, how politics in many ways does dictate economic reality.
We will review the potential for alternative & renewable energy in the Emerging & High Technology section of this chapter, for now let’s continue to profile natural – advantage – what exists in surplus, and in large quantities – as in the state’s longest running staple: agriculture.
Table 1.1
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Agriculture
6.47
6.39
7.46
8.09
9.79
8.47
8.35
8.53
8.67
8.7
8.74
Mining
45.18
44.07
39.22
57.92
68.98
97.72
100.73
110
113.45
114.04
114.29
(Oil and Gas)
Construction
36.88
40.26
41.87
43.47
45.08
51.59
57.85
62.86
66.23
69.35
75.27
Manufacturing
92.98
92.27
94.46
93.16
118.84
127.44
139.79
148.09
154.91
161.38
168.85
Total Goods
181.51
183
183.01
202.64
242.69
285.21
306.72
329.48
343.26
353.46
367.15
(Current Dollars)
Wholesale
53.79
54.5
54
55.05
60
65.65
70.75
71.67
77.03
81.82
85.41
Retail
51.74
54.66
57.24
58.63
59.61
63.34
67.26
70.43
75.18
79.93
83.39
Transportation
50.25
51.63
53.48
57.07
60.21
63.51
67.86
71.67
77.11
81.12
85.59
and Utilties
Information
35.86
36.99
36.53
36.04
38.81
40.27
42.52
44.72
47.36
49.11
50.8
Financial
117.2
125.93
128.22
133.44
139.75
145.28
160.1
170.68
180
191.32
204.13
Activities
Professional and
73.21
82.2
83.94
88.72
95.56
105.83
117.21
127.37
137.91
150.71
163.61
Business Services
Educational and
42.36
46.8
51.38
54.76
59.04
63.17
67.22
70.68
75.31
80.26
85.27
Health Services
Leisure and
23.11
23.99
25.49
26.48
27.71
29.32
31.96
34.02
36.34
38.73
40.98
Hospitality
Other Services
17.6
18.11
18.68
19.64
19.91
20.7
21.99
22.99
24
25.39
27.02
Government
80.59
84.45
91.51
96.33
101.1
107.06
112.95
117.92
124.23
128.91
135.9
Total Services
545.71
579.25
600.47
626.17
661.71
704.13
760
805.19
854.47
907.3
962.08
(Current Dollars)
Total Gross Product
727.23
745.33
760.59
770.98
808.09
831.79
867.86
896.51
923.78
951.27
983.93
(CY2000 Dollars)
Total Gross Product
727.23
762.25
783.48
828.81
904.41
989.34
1066.71
1134.67
1197.73
1260.77
1329.23
(Current Dollars)
Agribusiness
Agribusiness, i.e., agriculture based on science, technology and economics, is still a major player in Texas’ economy. Again, the natural advantage of enormous acreage, climate (growing season, soil) and access to unlimited markets has kept Texas at or near the top of numerous crop productivity levels. Although the growth patterns are shifting, Texas still leads the nation in cotton production, cattle and calves, and total number of farms and ranches. In 2010, the state was third, after California and Iowa in total cash receipts, 19.2 billion dollars, up from 16.6 in 2006. Texas’ agronomic advantage is reflected in the success of livestock production, while the comparative advantage presents itself in other crops. The state Comptrollers “Rural Texas in Transition” report explains how a “landscape as vast and varied as Texas’ supports a variety of agricultural production.
The largest source of agricultural revenue in Texas comes from the sale of beef cattle. Texas produces about 20% of the nation’s beef cattle and ranks #1 in the country in the value of cattle raised. Other important livestock products include broilers (young chickens) and dairy products, followed by chicken eggs and hogs. Sheep and lambs and turkeys are also commercially raised in Texas. Texas raises more sheep and produces more mohair from angora goats than any other state.
The Panhandle produces the majority of the state’s wheat corn, cotton and beef. Texas’ top four agricultural counties in terms of sales – Castro, Deaf Smith, Parmer, and Erath counties – are home to major livestock operations. The poultry industry is concentrated primarily in east Texas. The Lufkin-Nacogdoches area supplies the vast majority of the state’s commercial timber. San Angelo is the center for Texas’ goat and sheep industry, while the Killeen-Temple-Waco (Stephenville) is the state’s largest milk producer. Coastal Texas is the state’s rice bowl, while South Texas is the citrus capital and largest vegetable producer.
Despite the variety of crops, cotton is still king in Texas. “Since 1880, Texas has led all states in cotton production in most years, and today the annual Texas cotton harvest amounts to approximately a third of total production in the U.S. The annual cotton crop has averaged 3.81 million bales since 1983.”
Cotton is Texas’ most valuable crop, generating 12% of the state’s total agricultural receipts and 32% of the nation’s cotton revenues. In fact, the state named cotton their official state fiber/fabric in 1997. Other important crops in this category are greenhouse and nursery products, corn for grain, hay (#1 among the states), and wheat. Texas is a leading (#5) producer of greenhouse and nursery products (flowers, ornamental shrubs, young trees).
Other major field crops in Texas are sorghum grain (#2 among the states), peanuts, rice (#6 among the states), and cane for sugar. The leading fruits produced in Texas are watermelons, grapefruits (official state fruit) and cantaloupes. Important Texas vegetables include onions (official state vegetable), potatoes, and cabbages. Texas is the #1 producer of cabbages among the states.
The economic impact of agriculture in Texas is vast, and often overlooked in its overall reach. That is, its web of related industry and of course, employment potential. Consider that “one in five Texans works in some form of agriculture. Agricultural commodities add about $14 billion to the states’ economy, making agriculture the second largest industry. For every dollar spent on agricultural commodities, more than three dollars are pumped into other sectors of the economy – generating $45 billion a year. 16 Additionally, agricultural research and development at Texas A & M University, along with its partnership Agricultural Extension Service program represents the cutting edge of progress and increased productivity – factors which are vital to this highly competitive industry.
Two years ago, the major challenge for agriculture was competition, the most common issue for this economic sector. Specifically, the shifting landscape of free market forces and even greater changes in international trade, along with the emergence of alternative fuel production –often referred to as simply ethanol Growers and ranchers could only be so fortunate in late 2011. After a solid year of drought, combined with th the worst heat index data in recorded times, Texas is, simply put, a disaster area.
Texas fires and drought cost farms $5.2 billion
Texas has been in drought for a year, with more than 3.6m acres burnt in wildfires since the fire season began in November. A record number of 38C days has dried grass and hay, leaving ranchers with no choice but to sell cows for slaughter.
Weekly auctions that usually sell 1,500 cows at this time of year are attracting 5,000 and even turning away potential sellers, underlining the cost of severe weather that Texas A&M University estimates has brought $5.2bn losses.
While Texas is the biggest drought victim, Oklahoma, New Mexico, Kansas, Georgia and Louisiana are also affected. “This is an all-time record for the driest, hottest summer on record in this area since 1895,’’ said Travis Miller, a professor in Texas A&M soil and crop sciences department.
High temperatures and no rain have devastated cotton – Texas’s biggest cash crop, with about 50 per cent of the US total. Of 7.1m acres planted this year, 3.4m acres have been abandoned. “Most of that never came up; it didn’t have enough rain to seed,’’ Mr Miller said.
The country will feel Texas’s pain in higher prices for cotton and sorghum, of which Texas is also the biggest US producer. The state is the country’s second largest producer of peanuts and grapefruit and the third-biggest producer of sugarcane, carrots, honeydew melons and oranges.
“It will have a ripple effect on the national economy,’’ said Bernard Weinstein, a business economics professor at Southern Methodist University.
The Federal Reserve Bank of Dallas’s latest survey noted that all 13 of the state’s regions were in drought. It commented: “Crop insurance claims are expected to be the major source of income for the 2011 crop year.”
Yet insurance is not expected to carry businesses for years. Brian Fuchs, a climatologist at the national drought mitigation centre at University of Nebraska-Lincoln, said indications are that La Niña climatic conditions, which have led to drought in 33 per cent of the US, might continue into 2012.
Bill Hyman, executive director of the Independent Cattlemen’s Association of Texas, has sold 40 per cent of his pasture cattle. Within 30 days he will sell half of what is left, and then will sell the rest. “My hay’s about out,’’ Mr Hyman said.
With supplies running up to $120 a bale – triple the normal price – and two of his three water sources already dry, it is too risky to continue: “When you run out of water, you’re done.’’
Many of his cattle had up to seven years of breeding time left. And what is fetching $500 today – given the buyer’s market – will easily cost $1,600 to replace when grazing conditions return to normal. “Other than to cry for you, I don’t know what else to say,’’ he said. Hope is low for government assistance because of the poor state of its finances.
Meat prices will rise with the loss of supply from the US biggest producer: Texas provides 16 per cent of the country’s beef cows, 37 per cent of its goats and 15 per cent of its sheep and lambs.
Beef prices, in particular, should rise, given that the second largest cattle-producing state is Oklahoma. But for Donnie Dippel, president of the Texas Agriculture Industries Association, the pain is felt now. “We’ve been selling cattle here or there,’’ he said. “We’re trying to keep a few heifers back so we don’t sell our factory. When you sell your factory, you’re through.’’
The competitiveness of agriculture has also been affected by the shifting landscape of free market forces and even greater changes in international trade and shifting labor markets. Two emerging trends need to be emphasized at the time of this writing, midway through 2007. The first is the confounded issue of immigration reform, which will likely remain unresolved for the next several years. The second is alternative fuel production which often is referred to as simply ethanol. What is so interesting about the topic is that, especially in Texas, ethanol-based gasoline isn’t an “oil & gas” issue as much as an agricultural one. Consider the following report, issued by the USDA Economic Research Service:
Expansion of the U.S. ethanol sector has large and far-reaching effects throughout the agricultural sector. The corn market is affected directly by the increase in ethanol production. Corn used to produce ethanol rises rapidly over the next several years and is expected to reach 4 billion bushels annually by 2010/11.
Other crops are affected as movements in relative prices trigger supply and demand adjustments. Effects are also seen in the livestock sector due to higher costs of feeding animals. And all of these changes have implications for farm income and retail food prices. Most of the adjustments in agriculture occur over the next several years, during the largest expected increase in ethanol production.
“Myth: Corn Ethanol is Great”
Direct Effects for Corn
As the ethanol industry absorbs a larger share of the corn crop, higher prices for corn will intensify demand competition among domestic industries and foreign buyers of feed grains. USDA’s 2007 long-term projections show average corn prices reaching $3.75 a bushel in the 2009/10 marketing year and then declining to $3.30 by 2016/17 as the ethanol expansion slows.
Livestock Production Reduced
Higher corn prices affect the livestock sector because of corn’s importance as an animal feed. In response to higher corn prices, red meat production declines and growth in poultry output slows in the United States, particularly during the next several years as ethanol production ramps up. Higher corn prices reduce the profitability of meat production, although the greater availability of distillers grains from dry-mill ethanol production partly offsets this effect…with reduced production, prices for meats at both the producer and retail level rise, and per capita consumption declines.
Agribusiness and related industries will always represent the nature of Texas, literally and figuratively, because the present and future trends will continue to reward this sector. Regardless of the challenges facing agribusiness – climate extremes, shifts in the labor market, and food safety – Texas is positioned to minimize the dangers and continue to maximize potential. The traditional economy has influenced responsive government and public-private partnerships that will keep the state in its position as a national and international leader in agriculture.
A Diversified Economy – The Comparative Advantage in Transition
Throughout the 1990’s, Texas’ economic potential continued to expand, by growth driven largely by the state’s rapidly increasing population. The North American Free Trade Agreement (Nafta) also shaped the changing economy. As Texas lost manufacturing jobs, the export/import sector, retail and wholesale trade increased, as finished goods move across borders. The same dynamic, along with population growth, and a high performing national economy set the stage for an explosion of service and service-related business. This section will detail how the changing nature of our economic demands and international political economy have required changes in measuring and classifying services. , and employment in general:
As the U.S. economy continues to reflect 21st century dynamics—changes in production, distribution, investment etc, more attention than ever is given to how the economy is measured. As national unemployment statistics have continued to show, the “job market” is not budging in overall demand—over 11 million Americans can’t find full time employment, for the 3rd year in a row In other words, despite slow but steady economic growth, (gross domestic product, or GDP)., the long-term unemployment quagmire has become the focal point. Texas’ current and projected employment trends shows the state economy in the same measurement, ie, the classic economic sectors, with employment data instead of production totals:
Texas Nonfarm Employment Statistics
Date
Total Nonfarm
Natural Resources & Mining
Con–
struction
Manufact–
uring
Trade, Transport–
ation & Utilities
Inform–
ation
Financial Activities
Professional & Business Services
Educational & Health Services
Leisure & Hospit–
ality
Other Services
Govern–
ment
Jun-11
10,588,600
242,700
590,700
830,200
2,092,100
187,000
627,900
1,323,000
1,425,100
1,035,900
365,500
1,868,500
Mar-11
10,524,200
231,300
597,200
821,600
2,075,900
187,100
622,700
1,314,300
1,417,900
1,029,200
368,300
1,858,700
Dec-10
10,444,700
217,200
597,100
812,200
2,062,200
192,800
620,800
1,290,600
1,406,600
1,019,000
365,400
1,860,800
Sep-10
10,361,600
211,100
565,900
812,600
2,056,400
193,800
620,800
1,284,100
1,393,600
1,011,800
361,100
1,850,400
Jun-10
10,368,600
207,000
564,700
810,900
2,053,800
196,200
622,600
1,273,300
1,387,500
1,003,600
360,100
1,888,900
Mar-10
10,275,000
198,700
564,200
809,400
2,040,000
196,100
623,400
1,258,900
1,376,000
1,000,400
359,400
1,848,500
Dec-09
10,209,000
191,800
564,200
805,800
2,028,800
198,700
622,900
1,238,600
1,362,000
999,100
359,300
1,837,800
Sep-09
10,220,600
191,800
578,500
817,400
2,043,000
200,300
623,800
1,231,300
1,349,400
1,002,300
359,000
1,823,800
Jun-09
10,291,800
197,700
597,800
832,700
2,057,500
204,100
626,600
1,249,000
1,334,500
1,007,000
360,900
1,824,000
Mar-09
10,403,500
216,600
624,100
867,500
2,086,400
209,300
633,000
1,272,500
1,315,200
1,009,800
362,100
1,807,000
Dec-08
10,574,500
234,200
660,500
904,200
2,122,800
213,400
641,600
1,316,300
1,308,100
1,011,900
364,400
1,797,100
Sep-08
10,607,400
235,500
673,200
920,800
2,138,700
215,600
646,600
1,336,500
1,292,600
998,900
362,800
1,786,200
The following feature is an excerpt from the Federal Reserve Bank in Dallas, which provides a succinct look at the status of Texas’ robust service sectors:
While agriculture and goods industries remain vital to the state’s economic health, the service sector today accounts for roughly 80 percent of jobs and 63 percent of output (Chart 1). Texas matches the U.S. in the share of employment in services. The state’s share of output in services is less than the nation’s 70 percent because of Texas’ importance as an energy producer and growing role in manufacturing.
Measured by employment or output, services are expanding faster in Texas than in the U.S. (Chart 2). The sector has emerged as the state’s leading engine of job creation. Since 1990, it has added more than 2.4 million jobs on net and more than doubled the pace of employment growth in goods-producing industries.
For Texas as well as the U.S., the increasing importance of services reflects a long-term evolution, driven by the capacity of free enterprise economies to reinvent themselves. Agriculture’s dominance faded with the rise of manufacturing, and today the factory era has given way to services. The transition shows the ability of businesses and workers to adapt to ever-changing circumstances, including rapid technological progress and an increasingly competitive world economy.
Sizing up Services
Truckers making deliveries, technicians maintaining Internet sites, brokers selling insurance, architects designing shopping centers, managers running businesses, nurses caring for patients, waiters serving diners – all these and many others are service jobs. To make sense of this sprawling sector, government agencies aggregate services into groups of related businesses. In 2003, they adopted the North American Industry Classification System (NAICS) to replace the Standard Industrial Classification (SIC). An important reason for the transition to NAICS was rapid growth in service industries that weren’t well defined under SIC codes. The NAICS information category, for example, includes communications, publishing and the online services that have emerged in the information-based economy.
Under NAICS, the service sector’s diverse members are grouped into seven private-industry categories and government. Texas’ share of employment in each of them is at or below the nations – with one notable exception. The state has 24.3 percent of its total employment in trade, transportation and utilities, compared with 22.9 percent for the U.S. as a whole. From 1990 through 2006 – a period that includes vigorous expansion, recession and recovery – each of Texas’ major service categories outperformed its U.S. counterpart in job growth (Chart 3).
Transportation Services
This category owes its importance to Texas’ strategic location on the Mexican border and in the center of the U.S. These attributes have spurred expansion of transportation networks, which have attracted firms in such industries as retail and wholesale trade, airlines, trucking, pipelines, rail and cargo transportation, and warehousing – all of which add to employment in this large sector.
Among the major transportation firms headquartered in Texas are Southwest Airlines, American Airlines, Continental Airlines and Burlington Northern Santa Fe Corp. The Port of Houston is the country’s second-busiest deepwater facility, and Dallas/Fort Worth International Airport ranks sixth in the world for passenger traffic and 27th in the world for cargo volume. Houston’s Bush Intercontinental Airport is the nation’s ninth busiest in passenger traffic. Fort Worth’s Alliance Airport, a purely industrial airport, is one of the country’s largest intermodal facilities.
“Dallas/Fort Worth International Airport – Texas”
Professional and Business Services
The state’s second-largest service category, with almost 15 percent of Texas jobs, is the top performer in job growth. Professional and business services include many knowledge-based positions in law, accounting, architecture, engineering, software design, management and consulting. The industry has added 655,900 jobs since 1990 – an average annual pace of 5.7 percent, more than a percentage point faster than the nation.
Professional and business services have played an important role in the state’s current expansion. Since the recovery began in July 2003, the industry has added over 228,000 jobs on net – more than any other – accounting for roughly 28 percent of the state’s private job gains. Employment has risen sharply for many professional services related to energy and construction, including architectural and engineering services and management, professional and scientific consulting. Employment in computer systems design has also been raising at a fast clip, likely the result of firms outsourcing software development.
Education and Health Services
The second-fastest-growing service category includes private university and education workers, training center employees, doctors, nurses, medical technicians and social workers. It has added 571,900 jobs since 1990. Health care dominates the category, with about 1.1 million jobs, or 88 percent of the total and roughly 12 percent of Texas private employment.
Health care demand is rising nationwide as the population ages and new technology changes the delivery of medical services. In Texas, the rapidly growing population is another driver for health care employment. The second-most-populous state, Texas has been adding residents twice as fast as the nation, in part because of migration. Along the Texas – Mexico border, health care-related jobs have been multiplying as many Mexicans cross the Rio Grande to meet their medical needs.
A key factor in the category’s growth has been the rise of ambulatory care – more commonly known as outpatient services. Managed care and new medical technologies helped reduce the average hospital stay nationally from 7.6 days in 1980 to 5.6 days in 2004. Visits to outpatient facilities have climbed. In Texas, employment in ambulatory care has increased a vibrant 8 percent a year on average since 1990, and the segment now makes up more than 50 percent of total health care jobs. Employment has also been steadily increasing at hospitals and nursing homes. As the Texas population grows and ages along with the baby boom generation, demand will continue for workers in these service areas.
Leisure and Hospitality Service Employment Increases
Texas boasts a wide range of attractions – the Alamo, Galveston and Padre islands, Space Center Houston, Big Bend National Park, the Fort Worth Stockyards, the State Capitol and the rolling Hill Country, to name just a few. Add in business travel and entertainment, and it makes for a healthy industry. The leisure and hospitality category – which includes hotels, eating and drinking establishments, and recreation services – makes up 11.4 percent of Texas’ economy and employs about as many workers as the state’s factories.
Most leisure and hospitality industries have been adding jobs at a steady pace each year. Since 1990, job growth has averaged 3.8 percent, outpacing the nation’s 2.7 percent. The lion’s share of leisure and hospitality employment is concentrated in food-service and drinking establishments, which make up almost 80 percent of the total. This segment continues to add workers at a moderate pace, though job growth has slowed from the 1990s’ pace.
Clearly, Texas’ economic transformation owes much to the unprecedented population growth in the 1990’s. It is obvious that the sheer volume of people, and their characteristics (especially age) have directly impacted the Education & Health sector.
By 2011, as with other sectors of the state economy, (with the exception of energy), the prolonged 2008 recession, economic downturn and more than any time recent history, political turmoil has taken its toll even on Texas’ high-performing service output. Similar to the manufacturing sector, new or different factors confound overall indicators.
The Business Dictionary onl
ine describes confounding as “Two or more quantities varying together in a manner that makes it logically impossible to separately identify their unique effects.
FEATURE: ASSESSING THE STATE’S BUSINESS CLIMATE
For months, journalists, activists, political and economic experts have posed the same notion, in some manner, that the national economy shows slow but steady growth, while the corporate environment racks up huge profits, and the finance sector retains record levels of cash holdings and other assets. Of course, these views are always stated in context of intractable unemployment. As depicted in the following survey response, vaguely stated concerns, a specific factor, and most of all, uncertainty continues to plague service employers in Texas:
Comments from Survey Respondents
These comments are from respondents’ completed surveys and have been edited for publication.
Air Transportation
–High fuel prices are a big deterrent to our business.
Professional, Scientific and Technical Services
–We think there will be a slight improvement in our business this fall and winter. We see some improvement in confidence in the business community thanks to energy, medical care, exports and transportation.
–The drought and heat are crippling individual spending and business activity.
–The building industry continues to tread water with little upward movement or positive growth.
–We looked at our actual numbers for the last three months and compared them with our sentiment and found that we were more pessimistic than the facts warranted. Now incentives and bonuses are being paid again (in lower amounts), and we have an adequate and well-trained workforce in place. If the last three months are a trend, we will be hiring again in the last part of the first quarter of 2012.
–The uncertainty in the capital markets has caused a malaise in the commercial real estate finance market. The general outlook for commercial real estate activity has recently become more negative.
–There still seems to be a lot of reluctance to move forward with projects. Our clients are very concerned about future economic growth. The constant threat of new taxes or regulations is wearing down the market.
Management of Companies and Enterprises
–We have not made new home loans because of some of the new rules and regulations. Some of these rules have actually kept us from renegotiating more favorable loan terms on some home loans that would have helped our customers.
–The federal government regulatory burden is hurting our ability to expand and create new jobs. Although the intentions are good, the unintended consequences offset any perceived benefit.
–Regulatory overreach continues to be the biggest obstacle for our business to gain any traction to expand or increase our employment numbers. Several customers over the past 12 months said that they need to expand their business and number of employees to meet demand but do not have a clear understanding of the current regulatory environment related to chemical handling in the agricultural industry.
Administrative and Support Services
–The upscale housing market has been strong but is now slowing a bit. The typical house pricing is about on par with 2006.
–Low interest rates are the biggest factor contributing to the growth in our business. With low rates, combined with a generally poor new housing market, the remodeling sector of the construction industry has flourished. While consumers today are still more cautious than they were in 2007, the trend is for consumers to enhance what they have rather than buy completely new. The inflationary pressures caused by increases in fuel prices are the biggest challenge we face today.
–Patient deductibles and copayments are increasing for many of our clients, and they are unable to make these payments prior to their procedure being done. This results in the procedure being rescheduled until the clients can pay.
Nursing and Residential Care Facilities
–Health insurance regulation changes made our carrier go up over 25 percent on our premiums when we renewed in August. The small 2 percent pay raise we were able to provide employees was negated by the increase in deductibles and the increased premiums for spouse and or dependents.
Food Services and Drinking Places
–Sales have slowed down from the previous month. There is one bright spot. Our dinner house concept is posting double-digit sales increases from a year ago. We are stilling clinging to the hope that six months from now there will be some improvement in the general economy. We have already received preliminary notice from our insurance broker that there is likely to be a very substantial increase in the cost of our employee health insurance when we renew Jan. 1, 2012.
–Sales were growing from 2000 to 2008. Sales took a 12 percent dip in 2010, and we are 12 to 15 percent down this year.
Merchant Wholesalers, Durable Goods
–We need to reduce federal regulations. The improved outlook for our business is not due to the improving economy, but because two of our major competitors went bankrupt.
–We are holding on, hoping the economy will improve. Input costs continue to rise, so we had to pass that increase to our customers.
Building Material and Garden Equipment and Supplies Dealers
–We are adding new equipment and new customers.
–Business activity is best described as fluctuating. Sales are great for a month or so and then very poor for a month or so. There is no steady flow of business.
NOTE: The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity. Data were collected September 13–21, and 229 Texas business executives responded to the survey. Firms are asked whether revenue, employment, prices, general business activity and other indicators increased, decreased or remained unchanged over the previous month.
The Service Sector responses above are a worthy indicator of the unusual amount of political influence presently affecting perceptions, to the net effect of pessimism, and doubt affecting a variety of economic behavior. Keep in mind that the comments submitted to the Texas Outlook Survey are from executives—not from consumers or employees. Some comments are vague reference to regulatory hurdles—a standard formula for discontent with a current administration.
Although little significant change has happened in most areas of interstate commerce, it’s considered fashionable in the past 2 years to blame the national government for limiting growth, even though executive level pay and benefits continue to improve. The comments also lack any reference to a specific regulation, many of which could or would be developed cooperatively, if the normal relationship between government agencies and business were allowed to proceed.
We will look at this perspective, known as demographics, later in this chapter, as it is impossible to understand economics without looking at the consumer and labor component. For now, let’s finish the discussion of economic production, by examining the other sectors of goods – construction and manufacturing, along with the fascinating emerging market sector – high-technology – which represents a nexus of both goods and services.
The Construction Industry
Economists often look at the activity in the construction industry to gauge the state of the entire economy. A depressed housing and commercial trend indicates a slow, sluggish economy as individuals and businesses alike are reluctant to invest in expansion activities. The Texas construction industry came to a near standstill during the oil crunch years, and the national recession dips of the mid 80’s and early 90’s. Jump started by lower interest rates and rapid population growth, 1992 figures finally indicated a pattern of steady recovery with a “22 percent increase in housing starts at an annualized rate of 70,000 houses in the first few months of 1993, residential permits were up another 15 percent for early 1993.”
In fact, “construction of large projects took off in 2006, including office buildings, condominiums, hospitals, hotels, schools and entertainment venues. Nonresidential contract values jumped 52 percent in 2006, their strongest growth since 1981 (see Chart 3). Unlike the 1980’s when growth-driven construction often led to overblown and unmanageable lending, Texas’ “most recent building boom took a quiet backseat to the house-price boom that occurred elsewhere in the country. While concerns grew that home prices along the coasts were soaring beyond fundamentals, inflation-adjusted median sales prices in Texas were relatively unchanged .As a result, some people were left with the impression that construction in the state also hadn’t accelerated…that wasn’t the case. Anecdotal reports suggest job growth could have been stronger with a more educated workforce.”
Manufactures Keep Pace
Following an extremely dismal future in the early 1990’s, manufacturing in Texas has made a remarkable recovery. Between 1991 and 2001, over 84,000 new manufacturing jobs were added in Texas, making it the fourth largest employment sector. By 2006, in fact, the manufacturing sector continued to out-perform the national average, adding 26,300 factory jobs, an increase of roughly 3%. Not surprisingly, manufacturing jobs have continued to increase similar to the state’s overall growth, around the metropolitan suburbs.
By 2011, as in the vast majority of states, manufacturing production continues to find spotty success, as global patterns including outsourcing jobs to India, Canada and other trade partners shifts actual employment. The Texas Manufacturing Survey provided this snapshot, for fall 2011:
Texas factory activity increased in September, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 1.1 to 5.9, suggesting growth picked up this month after stalling in August. Perceptions of general business conditions worsened in September. The general business activity index remained negative for the fifth month in a row and fell from –11.4 to –14.4; 10 percent of manufacturers perceived an increase in activity this month, while one quarter noted a decrease. The company outlook index fell from 7.2 in August to a near-zero reading in September. Still, the great majority of respondents said their outlooks were unchanged or improved from last month.
Consider that “a third of the state’s manufacturing jobs are in North Texas – 22 percent in the Dallas area and 11 percent in the Fort Worth area. Houston and its environs account for 24 percent. Austin and nearby Round Rock are at 6 percent, San Antonio at 5 percent.
Border counties have a below-average share of manufacturing jobs, most likely because of the proximity of less expensive production in Mexico. Only 14 Texas counties report no manufacturing at all. The state’s metropolitan areas differ in their industrial profiles. Dallas leads in primary metals, furniture, wood, paper, printing, food, textiles and nonmetallic mineral products, such as brick, glass and cement. Houston has half of the state’s petroleum and chemicals manufacturing jobs and roughly a third of the workers making fabricated metals, machinery and electrical equipment. Houston also leads the state in jobs for workers making beverages, with 27 percent. San Antonio has the next largest concentration – 16 percent.
Houston and Dallas are each home to slightly more than 20 percent of workers making rubber and plastics products. While Austin is one of the nation’s high-tech capitals, Dallas has Texas’ largest concentration of workers making computer and electronics products, with 43 percent of the state’s employment. Austin employs 26 percent of these workers. Fort Worth–Arlington leads the state in rolling out transportation equipment, with 36 percent of jobs. Dallas also is home to a good number of factory jobs making transportation equipment, with 21 percent.”
“Made in America; A Whitney Texas Manufacturing Company Show”
Insight Question: What does this statistical information have to do with state government? Aren’t the results achieved by the businesses and laborers alone?
The answer is subtle but constant – government at all levels contributes to overall conditions affecting economic growth and employment. Sometimes that means new jobs and opportunities; otherwise it can mean job losses and shrinking sectors. Two trends of the 1990’s have been greatly assisted or shaped by governments –
free trade agreements
and technological advancements. Texas manufacturing has benefited from both trends. Consider that “international exports underlie and increasing share of Texas manufacturing activity, and exports more than doubled during the 1990’s…Over the next decade, Texas exports will more than double again, reaching $200 billion in 2008. The Internet has allowed even the smallest businesses to expand their customer base, their hours and their geographic market.
The outlook for manufacturing is good overall, and it is very telling of current and future trends in the state’s economic expansion. In the next two sections we will examine two other aspects of economic growth that virtually guarantee the state’s vaunted position in production and exports. Emerging technologies (often called high-tech) and Industry Clustering are the engines of a competitive advantage, fueling growth in jobs and productivity, as well as inviting educational advancements, research % development, etc. The state government’s role is an absolute must in creating the best conditions achievable…and Texas is no “slouch” in this regard!
21st Century Trends
If you are reading this book, chances are you’re a college student – taking a course actually required by an act of the Texas Legislature. It’s no doubt as a student or anyone considering continuing education, the prospect of a challenging, well-paying career in some sort of technology-savvy field is alluring (and well advertised!). Culturally, we are very interested in anything technologically advanced – for function, achievement, or glamour for that matter! Economically and academically, let’s first sort out this topic by considering what IS high-tech, and where does it fit in across Texas? What types of jobs and employers are most invested? It is a fascinating subject from an academic standpoint, and one that involves government at every level.
It’s important to remind the student and observer that high-technology is not an economic sector itself, although it is possible to identify industries that produce primarily high-tech outputs.
The following abstract describes and defines an essential concept for emerging economic models, what has been casually referred to as the “New Economy” in political circles, but represents the best success stories around the US in the past decade:
Abstract from Robert D. Atkinson, PhD
The 2002 State New Economy Index: The Progressive Policy Institute, New Economy Project, June 2002.
The primary message of the PPI report is obvious – state and local government, and economic leaders must continue to refine, or actually change the way they perceive economic development. Knowledge jobs, quality of life factors and clustered economic development all work hand-in hand with high tech industry. Clustering occurs when companies in “a particular industry physically locate near each other. A cluster of companies can include competitors, suppliers, customers, and distributors”. 26 Thus, defense contractors, especially aerospace industries, and communications companies will continue to be propelled by high-tech innovation and clustering. A perfect example of industry cluster happened in San Antonio, with the transformation of Kelly Air Force Base into Kelly U.S.A. and then into the Port of San Antonio, as a major transportation hub. Also, the state-of-art Toyota truck plant, on the city’s southwest side, has ushered in competitive clustering of supporting industries. In short, technology companies thrive in areas where the supply of highly skilled specialists and innovative research are in abundance (think California Polytech, Stanford, and Massachusetts Institute of Technology) State and local governments are keenly in position to court and develop partnerships with research entities, often referred to as consortiums.
As a student in the second decade of the 21st Century, you are probably very conversant with smart technologies, smart phone apps, etc, that sort and plot information quickly and multidimensionally—as it happens so often, very old methods combine with such technology to direct and assist economic goals as well. I’m referring to the humble but essential map! We will use the powerful Geographic Information System (GIS) platform for a variety of topics in this course, starting here with the competitive, evolving economic patterns—clusters—as they depict employment in Texas
The Texas Workforce Solutions consort has made available the following map-based employment profile, generating industry profiles, local economics, and a wealth of other information:
http://www.texasindustryprofiles.com/apps/gis/clustersgis/
Texas, at the start of 2008, remains especially well-positioned to attract new or expanding high tech ventures. Although the state’s property taxes are amongst the highest in the United States, other tax incentives known as abatements are virtually guaranteed to new businesses. The low-cost availability of energy in Texas is a welcome drawing card, compared to cost factors for energy in other high-tech regions such as California and New England. Summarily the state has managed to cast a wider net, in terms of economic development incentives for technology industries, by funding the Emerging Technology Fund and other incentives in the 2007-08 state budget.
Previously, the definition of these industries was conservative, thus, calculating the number of new jobs, and tracking the performance of high-tech was unrealistically low. Fortunately, the Texas Legislature (with much encouragement from Texas Governor Rick Perry and other state leaders) approved the Emerging Technology Fund in 2005. This fund allocated close to 400 million dollars, for a variety of goals, and provided a more comprehensive framework and definition for high-tech development. Specifically, HB (House Bill) 1765 defines the scope of emerging tech as:
1. expediting innovation and commercialization of research;
2. attracting, creating, or expanding private sector entities that will promote a
3. substantial increase in high-quality jobs; and
4. increasing higher education applied technology research capabilities;
And the legislation defines emerging technologies as:
1. semiconductors;
2. information;
3. computer and software technology;
4. energy;
5. manufactured energy systems;
6. micro-electromechanical systems;
7. nanotechnology;
8. biotechnology;
9. medicine;
10. life sciences;
11. petroleum refining and chemical processes;
12. aerospace;
13. defense, and
14. other pursuits, as determined by the governor in consultation with the lieutenant governor and the speaker of the house of representatives.
The legislation is unique in several ways, which also help explain how trends in Texas’ politics benefits economic opportunity. First, the fund illustrates the concentration of economic planning in the Governors’ Office, a goal that Rick Perry quickly inherited after assuming the governorship in 2001. Next, note item 14, from the list above – that “other pursuits, as determined” – may qualify for funding from the ETF. This is indeed a wide mandate for the state’s Chief Executive to interpret. In chapter 9 of the text, Gov. Perry’s inroads to trade relations and other commerce will be featured. For now, the best we can note about the Emerging Tech Fund is the significant emphasis on education and its partner – research & development.
Specifically, the ETF is administered by the Governor’s Office, the Workforce Commission (TWC), the Education Agency (TEA) and the Higher Education Coordinating Board. For much of the 1990’s and into the current decade, a constant concern in attracting high-tech development has been a shortfall in the labor market – a situation true of the US overall. Of course, markets such as Austin and Dallas have been magnets for research & development and churning out qualified graduates into the labor pool; overall, however, Texas education system has lagged in this regard. The Emerging Tech Fund includes specific goals to encourage innovation by allocating fund as “for incentives for private or nonprofit entities to collaborate with public or private institutions of higher education in this state on emerging technology projects with a demonstrable economic benefit to this state.”
Interestingly, anAn interesting analysis of the ETF shows the distinction between it and the older Texas Enterprise Fund which authorized close to $300 million for stated goals such as the governor’s “deal-closing fund” (200 million), a provision to retain Austin’s International Sematech research consortium (40 million), and the balance for endowments to university technology & biotechnology research. The Enterprise Fund was approved and implemented in 2003, a year when the Texas Legislature found itself facing a 10 billion dollar budget deficit, which resulted in serious cuts to most public school employees both secondary and higher, and to the state government employees as well.
Regardless of definitions, high-tech obviously is not a typical economic sector, but one which infuses other sectors’ productivity – much like telephones and combustible engines infused earlier economies. The high-tech industry, much like the “new economy” itself, suffers in comparison as it tends to be regarded through the applications and measurements of the old economy. High-tech is the wild card of the new economy – it greatly enhances productivity, quality measurement, and changes estimates of profit, wealth and investment.
High Tech Industry and Emerging Technology
The Progressive Policy Institutes’ comprehensive “Technology and New Economy Project” contributes very useful suggestions and insight for state government to pursue. The following excerpt details eight key steps to development strategies in the New Economy, useful to government, students, and families. The report also touches on a related aspect of economic health – state budgets – always an item of great concern in Texas. Keep in mind that the state’s budget has undergone wild swings from a record $10 billion budget deficit in 2003, to a surplus of approximately 4 billion in 20077. , then back to an another record deficit, at the start of the 2011 legislature. The state budget itself will be a topic throughout this text and the course as well, but for now the staggering level of deficit hasn’t curtailed some key economic initiatives under the direct control of Gov. Rick Perry.. Spending wisely is the challenge for any government budget effort, to avoid the harmful effects of budget deficits. , and some employment/income generators have had a special status.
At the time of this draft, the Texas Governor’s record has been under great scrutiny, as a Republican candidate for the upcoming primary in 2012. This comes as a great asset to academic professionals, as attention and credibility begin to sharpen around the realities of political life here. As stated earlier in this chapter, the employment data involved in the so-called “Texas Miracle” isn’t quite what Perry book, “Fed Up”, and the claims on the Governor’s web site bear out. It is with a disclaimer, in fact, that some of the data posted on the state Comptrollers website is used in this etext. In short, it will take months before true data is available, if then, due to the incessant manipulation of official data, to help bolster a political campaign.
For the record, the current status of the Enterprise Fund:
The governor defended the cornerstone of his economic development efforts: the Enterprise Fund, the nation’s largest deal-closing fund for recruiting companies to Texas, and the Emerging Technology Fund, which gives money to tech startup companies.
“I can promise you, the 54,600 jobs that have been created and the $14 billion-plus worth of investment that has come out of the Enterprise Fund in the State of Texas, those people that have jobs today in the State of Texas, they are absolutely happy that we have got a program like that,” he said during the debate.
Not all those 54,600 jobs have been created yet. And some of those promised jobs might not be created for years — if ever — given Perry’s track record of amending job targets when a company falls behind.
“They are counting their chickens before they hatch,” said Andrew Wheat with Texans for Public Justice, a government watchdog group and frequent Perry critic. “They haven’t created 56,000 jobs; they’ve given money to create 56,000 jobs.”
Perry’s numbers come from his annual report to the Legislature.
Allison Castle, a Perry spokeswoman, said Thursday that Perry was using a figure from the jobs “committed” through the life of the contracts with the grant recipients.
She said more than 30,700 jobs had been created by the end of 2010. The Enterprise Fund, created in 2003, disbursed almost $363 million through the end of 2010.
Last fall, Texans for Public Justice issued its take on Perry’s record in its report, “Phantom Jobs: The Texas Enterprise Fund’s Broken Promises.”
It concluded that about two-thirds of the Enterprise Fund projects that faced job-creation targets by 2009 failed to deliver the jobs that they originally promised. Perry changed the agreement terms, giving the grant recipients more time to create the jobs, by amending the contracts for about one-fourth of the projects.
At the time, Perry blamed the recession for changing the job targets, but he continued changing targets as the recovery took hold in Texas. In response to the controversy over some of Perry’s contract amendments, the Legislature changed the law this year, requiring legislative leaders to approve the amendments. In some instances, however, the original language in the Enterprise Fund contracts allows recipients to count jobs they didn’t create.
The Wall Street Journal this week focused on a $50 million grant in 2005 that created the Texas A&M Institute for Genomic Medicine at Perry’s alma mater, Texas A&M University, and helped Lexicon Pharmaceuticals, a company backed by three Perry donors.
Although the institute has only 10 employees and Lexicon has reduced its Texas workforce from 290 to 220, Perry’s 2011 report to the Legislature claims that the two exceeded the 5,000 jobs they promised to create by 2015. The governor’s report credits almost 12,000 jobs to that Enterprise grant.
How?
The state is giving the institute credit for any biotechnology job created in Texas
.
Consider that “some of these shortfalls result from the economic slowdown, but sates are poorly positioned to respond. In spite of the good times of the 1990’s, virtually all sates ignored the advice of any sage financial planner to save for the future and instead focused their efforts on cutting taxes and expanding spending…collectively, if states are to grow their revenues, there’s only one way to do it: grow the incomes of their residents, who will then pay more in taxes.”
Economic Development Strategies for the New Economy –
Spring 2002NEXT WAVE
Previous editions of this text included the following strategic guide from the New Economy Project, in very brief:
Focus On The Quality, Not Just The Quantity Of Jobs:
For most states, the central focus of economic development should shift from adding new jobs to boosting incomes and creating better jobs for all of the state’s residents…to do this, states should replace, or at least supplement, the chief metric success used today – job creation – with a new one: income growth.
Know Your State’s Function In The Global Economy:
A state should develop an in-depth and ongoing understanding of its economy, including how the major economic sectors work and what these economic strengths and weaknesses are. Too often decision makers think they already know what’s going on (e.g., “everyone knows that we are strong in venture capital”) and skip this essential stage in the eagerness to “get on with it.” But this is a critical mistake. States should also not be afraid to take off the rose-colored glasses and examine their strengths and weaknesses, opportunities and threats. Too often states confuse economic development strategies with marketing documents, wanting to put forward their best face. But the best strategy is an honest one. Marketing the state’s strengths can come later. But there is another key step. After analysis, a state must organize to help translate its knowledge into action, at both the private and public sector levels.
Get Smart About Business Incentives
: While most states have added New Economy economic development policies in the last few years, many still maintain expensive and usually wasteful industrial recruitment and retention incentive programs. Collectively, states spend more than $15 billion annually on firm-specific incentives. Economic development incentives are seldom targeted to specific economic development goals, other than to “shoot anything that flies,” while “claiming anything that falls.” For example, several years ago, half the jobs created by companies in Minneapolis that got tax subsidies paid less than $8 per hour – surely not the route to raising incomes in the Twin Cities.
It’s not that incentives are a bad idea all the time, it’s that they mostly go to zero-sum activities. The lion’s share of incentives is spent to convince particular companies to stay put or to move in. They do nothing to encourage firms to boost training, R&D, or investment in new capital equipment, all things that would increase their productivity or innovative capability.
Co-invest in the Work Force Skills:
States need to adopt policies to ensure that American companies have the skilled workers they need to be productive, while simultaneously ensuring that American workers have the skills they need to navigate, adapt, and prosper in the New Economy. States can do several things to improve the skills of the workforce.
Co-invest in an Infrastructure for Innovation:
In an economy increasingly powered by technology and innovation, the ability of states to create an environment in which innovation thrives is critical to economic growth. But universities are not the only knowledge incubators; in fact, most knowledge is produced by companies. States need to foster strategies that enhance the ability of companies to produce and use knowledge.
Support Industry Clusters:
In regional economies, the whole is often greater than the sum of the parts. In other words, firms in related industries often cluster together in a particular region, allowing them to take advantage of common resources (e.g., a workforce trained in particular skills; technical institutes; a common supplier base). But clusters are important for another reason – in a knowledge-based economy, having knowledge is not enough; it must be shared, and in some regions clusters of firms that network and communicate are able to raise the overall knowledge levels that they can draw upon. Perhaps the best known cluster is California’s Silicon Valley, where a large agglomeration of high-tech firms makes it the world’s most vibrant technology region. But it’s not just Silicon Valley that has industry clusters, and many clusters do not consist of “high-tech” firms. As a result, states should reorient their economic development programs to support regional industrial clusters, both based on existing groups of firms but also around emerging clusters where the region has some initial capabilities (e.g., several firms and university research capabilities).
“Silicon Valley and the Culture of Entrepreneurship”
Boost Quality of Life:
Because a skilled workforce is now the most important factor of production, a region’s pool of skilled workers is a key factor determining success. In the old economy, workers used to move to be near jobs. In the New Economy, companies increasingly look to move to where knowledge workers live. Because they are in greater demand and have more ability to be particular about who they work for and where they work, knowledge workers often choose to live in places that provide a high quality of life in addition to a good job. Most states face a number of challenges in creating a great quality of life, with high amenities, low crime, and good transportation.
For many states, boosting mobility in the state’s crowded metropolitan areas is the most important task in improving quality of life. States like Washington, Georgia, California, Maryland, New York, and Massachusetts have major metropolitan areas that are near gridlock. Besides making life miserable for millions of commuters, road congestion severely reduces the economic attractiveness of a place. In spite of this, little has been done to solve road congestion. Between 1987 and 1998, while vehicle miles traveled on freeways or principal arteries in urban areas increased by 42 percent, lane miles increased only 16 percent (with almost all coming from reclassifying rural areas as urban). No wonder congestion has worsened.
Help More Regions Succeed in the New Economy
: In many states, the story of the 1990s was a common one: The state’s major metropolitan areas boomed, while other parts of the state, including rural regions and smaller cities dependent on traditional manufacturing, lagged behind. Such development patterns hurt state economies by raising costs in congested metro areas and unemployment rates in other areas. As a result, it’s incumbent upon states to develop and implement strategies that ensure that more regions thrive in the New Economy.
Abstract from Robert D. Atkinson, PhD
The 2002 State New Economy Index: The Progressive Policy Institute, New Economy Project, June 2002.
The primary message of the PPI report is obvious – state and local government, and economic leaders must continue to refine, or actually change the way they perceive economic development. Knowledge jobs, quality of life factors and clustered economic development all work hand-in hand with high tech industry. Clustering occurs when companies in “a particular industry physically locate near each other. A cluster of companies can include competitors, suppliers, customers, and distributors”. 26 Thus, defense contractors, especially aerospace industries, and communications companies will continue to be propelled by high-tech innovation and clustering. A perfect example of industry cluster happened in San Antonio, with the transformation of Kelly Air Force Base into Kelly U.S.A. and then into the Port of San Antonio, as a major transportation hub. Also, the state-of-art Toyota truck plant, on the city’s southwest side, has ushered in competitive clustering of supporting industries. In short, technology companies thrive in areas where the supply of highly skilled specialists and innovative research are in abundance (think California Polytech, Stanford, and Massachusetts Institute of Technology) State and local governments are keenly in position to court and develop partnerships with research entities, often referred to as consortiums.
Texas, at the start of 2008, remains especially well-positioned to attract new or expanding high tech ventures. Although the state’s property taxes are amongst the highest in the United States, other tax incentives known as abatements are virtually guaranteed to new businesses. The low-cost availability of energy in Texas is a welcome drawing card, compared to cost factors for energy in other high-tech regions such as California and New England. Summarily the state has managed to cast a wider net, in terms of economic development incentives for technology industries, by funding the Emerging Technology Fund and other incentives in the 2007-08 state budget.
Keys to the Future
A dynamic a readily available workforce is essential to business and economic development. Key industries do not want (or can’t) spend months or years training potential employees. A turnkey labor force is an absolute necessity. The state education system in making great progress in meeting the technological job training skills needed for a service-driven, high-tech job market. However, businesses seeking to relocate or small start-ups are increasingly focused on quality of life issues. Relocating employees requires good public schools systems, residential areas with affordable housing, public safety, libraries, parks, recreational facilities, and even less tangibles such as sustainable assets (alternative energy, public transit, and bike routes).
The factors of economic planning are obvious, as previously mentioned. Though the natural characteristics of the region dictate most of the wise or efficient economic decisions for governments, the same cannot be said for other aspects of public policy. The most important, and dynamic aspect of these decisions starts with the people (in socio-economic terms, the population). Just as the economy is measured by economic factors and indicators, the population is studied in terms of demographics, a statistical summary of the people, which is more than a bunch of numbers. Demographics allow government and other planners (businesses, and even the military) to study trends, in order to successfully create present-day and future public policy goals. For example, will there be enough single-family housing, and viable highway or mass transportation. How many elementary schools will accommodate projected growth, if the growth is in the segment of the population likely to have babies. Where are people moving to, or leaving from? The people, to paraphrase James Madison, are a great beast – the best we can do to measure it starts with the census data.
The People – Who is Texas, and who will be the Future?
Like economics, population trends reflect much about the political, social, and cultural features of a given region (recall the sections in the previous chapter that detail these). Typically, data used to develop and discuss population derives from the decennial United States Census, which is conducted nationally, every ten years. Regardless of the best efforts, the census is subject to an undercount ranging from 2-12% (for distinct categories of the population). As the name implies, the undercount is persons not counted, which really means groups (a cohort) of persons not counted. What sorts of groups, you may wonder. Anyone having filled out a census, or observed census results of some nature can attest to the categories – which define all of us in some way. Simply stated, the census questions form the basis for measuring a population, just as we measure the economy by looking at different categories.
Table 1.4: Percent Change in U.S. Population, 20050-200510
Insert the US map (http://2010.census.gov/2010census/data/) as TABLE 1.4
Total population, i.e., size, growth rates (including negative results) age, gender, race and ethnicity, and a variety of income measurements will provide governments, businesses and families a powerful source of insights and determinants. Imagine, for example, you have just graduated from college. You have interviewed for a variety of employment opportunities, but many are outside the area, or in other states. How will you base your decision? Or, after reading the previous section, you want to try your hand at e-commerce and start your own business. How will you know what to offer, or produce, and in what varieties? The answers start with using demographic data to base your decisions – even if it’s just picking a location you want to target.
Now imagine you are the government of 245 million state residents. Governments must also use demographics to determine a variety of complex and far-reaching decisions. Unlike individuals, however, governments must consider population data combined with other data, such as economic growth, labor/employment, education data, to determine demographic trends. In order to better serve governments and planners, The Census Bureau’s has devised the American Community Survey, to augment the base data, in an effort to better define how we live and other dimensions of socio-economic order in the 20010’s.
“How to Use Demographic & GIS Mapping with PolicyMap”
Trends are very important indicators for governments at all levels, basically because governments need to plan well, and well in advance, to better maintain the quality of life and other vital needs within their spheres of responsibility. Of course, government may not plan well, or, more accurately, see the risks relative to the costs. Often, the political culture of the governed adds to the lack of comprehensive planning and civic responsibility (again, reflect back to the discussion of culture in chapter 2). Unfortunately, trends and estimates often are evident only in assigning blame or merely accounting for things after the fact. Most often, efforts by individual elements (a city council, a public school Superintendent, a governor) to plan ahead, or prevent get scuttled by mainstream political hype. For example, Gov. Rick Perry’s coup at the start of the 2007 Legislature, to implement a mandatory vaccine for girls, as an effort to prevent genital herpes. One could argue Perry’s initiative was based on well-established demographics about the teen birth rate…regardless, the politics of public education, the state Legislature, and others put an abrupt halt to the measure.
For students and taxpayers alike, the main purpose of demographics is establishing and analyzing choices. We can use statistics to help us make choices, but for academic purposes, we should focus on how demographics are or aren’t part of the government’s choices. For now, let’s establish the individual categories of Texas’ population, and how of each of these related measurements affects government planning.
Growth or Stability?
Immigration, migration and natural population growth account for the state’s 27 percent increase during the 1990’s, and 13 percent increase from 2000 through mid-2006.* The US Census Bureau 2006 American Community Survey estimates the total population of Texas at 23,507,783. Natural population growth is the extent to which live births exceed deaths. According to the Vital Statistics Bureau of the Center for Disease Control (CDC), the preliminary estimate of total births in the U.S. for 2006 was 4,265,996, a 3 percent increase – or 127,647 more births than in 2005. As a result of the increases in the birth rates for women aged 15-44, the total fertility rate – an estimate of the average number of births that a group of women would have over their lifetimes – increased 2 percent in 2006 to 2,101 births per 1,000 women. This is the highest rate since 1971 and the first time since then that the rate was above replacement – the level at which a given generation can replace itself.” Texas is contributing to these totals, in some age groups, more than any other state. Table 1.5 illustrates Texas’ percentages of natural growth, leading all three categories amongst the most populous states.
Table 1.5
CDC Vital Statistics Bureau
Top 10 Most Populous States 20052009
State
Birth Rate
Fertility Rate
Teenage birth rate
California
15.2
71.3
38.836.6
Florida
12.7
65.6
42.439.0
Illinois
14.0
66.4
38.636.1
MichiganNorth Carolina
12.6
61.0
32.544.9
New Jersey
13.1
63.9
23.422.7
New York
12.8
60.3
26.524.4
Ohio
12.9
63.0
38.9
Pennsylvania
11.7
58.7
30.429.3
Texas
16.9
77.6
61.660.7
VirginiaGeorgia
13.8
65.1
34.433.6
Table 1.5
CDC Vital Statistics Bureau
Top 10 Most Populous States 2005
State
Birth Rate
Fertility Rate
Teenage birth rate
California
15.2
71.3
38.8
Florida
12.7
65.6
42.4
Illinois
14.0
66.4
38.6
Michigan
12.6
61.0
32.5
New Jersey
13.1
63.9
23.4
New York
12.8
60.3
26.5
Ohio
12.9
63.0
38.9
Pennsylvania
11.7
58.7
30.4
Texas
16.9
77.6
61.6
Virginia
13.8
65.1
34.4
(Birth rates are live births per 1,000 estimated population in each area; fertility rates are live births per 1,000 women aged 15-44 years estimated in each area; teenage birth rates are live births per 1,000 women aged 15-19)
Overall, only Utah, the nations’ youngest state, exceeds Texas’ birth rate. In terms of actual numbers, 386,000 babies were born in Texas, while California – with a population of 36.5 million, 13 million more than Texas – produced 550,000 newborns. Regardless of this emerging trend, Texas’ exponential growth still means that a lot of folks are migrating here – from other US states, and obviously from other countries. Observers should also bear in mind the factors of migration, and their influence on the undercount, while determining the actual conditions in states receiving migrants (more on migration later in this section).
Table 1.6
It’s no surprise then, that Texas passed New York as the second most populous state during the 1990’s. A useful exercise for students is to compare Tables 1.4 and 1.6. Observe the states with the highest rates of growth versus the total number of the population increase (1.6) Now look at the percentages on the map (1.4) You get a larger “view” of growth patterns, as well as the states losing ground. The western states are experiencing the greatest overall gains, but when one considers the small populations of these states (except CA and TX), the growth rate doesn’t seem as significant. It is, of course, especially given that the water supply is already strained in a number of these states, especially the top two growth states, Nevada and Arizona.
“Growth in Rockwall, Texas”
For these same reasons, Texas’ growth is a two-edged sword. The most significant point the tables indicate is that Texas growth rate is very high, and since it is already the 2nd most populous state, well, do the math as the saying goes! What this simply means is that a lot of folks are moving to Texas, and it’s happening very quickly. What is beneficial about this scenario? First off, the next Census will grant more U.S. Representatives in the Congress, in the Electoral College (the number of votes a presidential candidate gets if he or she wins the most votes in our state), and also in granting various federal grants and programs.
State and local governments gain revenues with growth. There are more sales and services to tax, more demand for consumer goods, more labor for businesses, more houses to build, more children to educate, and more highways for commuting. Hold on, you might think…don’t kids and roads “cost” the government a lot of money (as well as parents and taxpayers!) That’s correct – more people do cost government more revenues, but the returns on these expenses are many. In short, this is the challenge for government at the state, and especially local level…much more on this later! For now, keep in mind the culture notes from the previous chapter. Texas’ traditional, piecemeal, and minimalist approach to government has been experiencing the stress of exponential growth for over a decade. Teacher shortages, urban sprawl and gridlock, shifting inflation and economic growth, air quality, hazardous waste and environmental concerns form unprecedented challenges. Let’s now look at certain demographic measurements, such as age, race, and gender, and make some creative predictions.
The People
A population, as “a people” are referred to in the language of social science, truly forms the basis of all things economic and political. A population represents the essence of, and the greatest challenge facing a state’s public officials. It represents the “who” of political scientists Harold Lasswell’s explanation of political power: “who gets what, when, where and why.” In short, different sectors of the population have different “what’s, and “why’s, etc. Of course these implications are rooted in political culture, again from the previous chapter. Thus, let’s consider the “where” part of Lasswell’s equation, in terms of the distribution of Texas’ people.
According to the 2000 Decennial Census, 84.8 percent of Texas’ population lives in metropolitan areas. This is underscored by recent population growth trends – the state’s 27 metro areas accounted for over 91 percent of Texas population growth between 1990-2000. Growth in the state’s metropolitan statistical areas or MSA’s is not evenly distributed, however. It is concentrated in the largest cities and their surrounding suburbs, even whole counties. Dallas, Houston, San Antonio and Austin have all witnessed the growth trend known as exurbia. The Brookings Institute defines exurbs as “communities located on the urban fringe that have at least 20 percent of their workers commuting to jobs in an urbanized area, exhibit low housing density, and have relatively high population growth.”
The common denominator amongst exurbs is the combination of growth and employment, resulting in the need to commute. Other areas with significant growth, but not in the job market are the MSA’s located along the border with Mexico. McAllen, Brownsville and Laredo and the Lower Rio Grande Valley (generally referred to as “The Valley”) together added 235,000, between 2000 and 2006, making it the 4th highest growth area in Texas – behind Dallas-Ft. Worth-Arlington (837,424), Houston-Sugarland-Baytown (770,311) and Austin-Round Rock (269,457).
For government purposes, county-level data is also a very important demographic, since counties carry out much of the state’s administrative functions (more on this in chapter 10) Table 1.7 shows the growth patterns since the 2000 Census, for the ten most populous counties in Texas. The patterns described earlier (urban growth centers) are affirmed, but with greater clarity as county-level data illustrate migration to the suburbs adjacent to municipalities, and often the counties adjacent to the largest of Texas’ cities.
Insert interactive map as TABLE 1.6:
http://www2.census.gov/geo/maps/dc10_thematic/2010_Profile/2010_Profile_Map_Texas
Geographic area
Table 1.7–Population Estimates
Estimates
Base
Census 2000
July 1,
2006
July 1,
2005
July 1,
2004
July 1,
2003
July 1,
2002
July 1,
2001
July 1,
2000
April 1,
2000
April 1,
2000
United States
299,398,484
296,507,061
293,638,158
290,796,023
288,125,973
285,226,284
282,216,952
281,424,602
281,421,906
Texas
23,507,783
22,928,508
22,517,901
22,134,047
21,762,430
21,357,926
20,951,848
20,851,790
20,851,820
COUNTY
1
Harris County
3,886,207
3,762,844
3,695,348
3,634,744
3,571,841
3,490,589
3,415,527
3,400,554
3,400,578
2
Dallas County
2,345,815
2,308,527
2,290,710
2,282,284
2,276,489
2,264,243
2,225,945
2,218,843
2,218,899
3
Tarrant County
1,671,295
1,619,666
1,586,277
1,556,747
1,526,307
1,489,516
1,454,612
1,446,174
1,446,219
4
Bexar County
1,555,592
1,516,586
1,491,049
1,464,691
1,441,452
1,415,534
1,397,846
1,392,931
1,392,931
5
Travis County
921,006
889,542
869,359
854,283
846,602
843,203
819,899
812,299
812,280
6
El Paso County
736,310
721,183
712,481
702,281
694,078
687,915
681,572
679,622
679,622
7
Hidalgo County
700,634
678,652
657,394
635,533
613,400
591,578
574,095
569,463
569,463
8
Collin County
698,851
660,926
628,757
597,536
569,438
538,200
500,224
491,772
491,675
9
Denton County
584,238
554,994
531,054
510,292
488,311
463,681
438,869
432,966
432,976
10
Fort Bend County
493,187
466,231
444,141
421,352
399,901
377,223
359,079
354,471
354,452
Texas Future Population: Update 2011
Government and public policy, as well as business, industry and investment all tend to rely on “projections” or educated hypotheses, (or both) about future realities. Will the population shift, age more or live longer, develop new vital needs, migrate out, have more children, etc…it is obvious that growth is anticipated for generations to come. One need only observe changes, especially in the largest metro areas to conclude what the future of Texas will look like, at a minimum. Not surprisingly, growth and migration patterns are difficult to project, yet the importance of these efforts cannot be overstated. Planning (especially at the state level) is contingent on accurate estimates, thus it’s good sense to have a “plan B” or “C” for that matter.
To effectively project future population trends, the following study produced by The University of Texas at San Antonio uses county level data to account for the recent pas, and projected patterns of migration. In the UTSA study, the net migration assumptions made for three scenarios are derived from 1990-2000 patterns which have been altered relative to expected future population trends. This is done by systematically and uniformly altering the adjusted 1990-2000 net migration rates by age, sex and race/ethnicity. The fourth scenario uses 2000 to 2004 estimates of net migration with the 2004 population values being taken from the Texas State Data Center age, sex and race/ethnicity estimates.
The Zero Migration (0.0) Scenario
The zero scenario is a scenario which assumes that inmigration and outmigration are equal (i.e., net migration is zero) resulting in growth only through natural increase (the excess or deficit of births relative to deaths). This scenario is commonly used as a base in population projections and is useful in indicating what an area’s indigenous growth (growth due only to natural increase) will be over time. In general, this scenario produces the lowest population projection for counties with historical patterns of population growth through net inmigration and the highest population projection for counties with historical patterns of population decline through net outmigration.
The One-Half 1990-2000 Migration (0.5) Scenario
This scenario has been prepared as an approximate average of the zero (0.0) and 1990-2000 (1.0) scenarios. It assumes rates of net migration one-half of those of the 1990s. The reason for including this scenario is that many counties in the State are unlikely to continue to experience the overall levels of relative extensive growth of the 1990s. A scenario which projects rates of population growth that are approximately an average of the zero and the 1990 2000 scenarios is one that suggests slower than 1990-2000 but steady growth.
The 1990-2000 Migration (1.0) Scenario
The 1990-2000 scenario assumes that the trends in the age, sex and race/ethnicity net migration rates of the 1990s will characterize those occurring in the future of Texas. The 1990s was a period characterized by rapid growth. It is seen here as the high growth alternative because its overall total decade pattern is one of substantial growth (i.e., 22.8% for the 1990-2000 decade for the State). Because growth was so extensive during the 1990s it is likely to be unsustainable over time and thus this scenario is presented here as a high growth alternative. For counties that experienced net outmigration during the 1990s, this scenario produces continued decline.
The 2000-2007 Migration Scenario
The 2000-2007 projection scenario provides a scenario that takes into account post-2000 population trends. In the State overall and in some counties the post-2000 period has resulted in reduced levels of net migration. In other counties post-2000 net migration rates have been greater than those of the 1990s. Under this scenario the 2000-2007 age, sex and race/ethnicity specific migration rates are assumed to prevail from 2000 through 2040. This scenario allows those users who believe that the 2000-2007 period has produced fundamental long-term changes in population patterns to ascertain the likely future size and characteristics of the population.
The Zero Migration (0.0) Scenario
The zero scenario is a scenario, which assumes that immigration and outmigration are equal (i.e., net migration is zero) resulting in growth only through natural increase (the excess or deficit of births relative to deaths). This scenario is commonly used as a base in population projections and is useful in indicating what an area’s indigenous growth (growth due only to natural increase) will be over time. In general, this scenario produces the lowest population projection for counties with historical patterns of population growth through net immigration and the highest population projection for counties with historical patterns of population decline through net outmigration.
The One-Half 1990-2000 Migration (0.5) Scenario
This scenario has been prepared as an approximate average of the zero (0.0) and 1990-2000 (1.0) scenarios. It assumes rates of net migration one-half of those of the 1990s. The reason for including this scenario is that many counties in the State are unlikely to continue to experience the overall levels of relative extensive growth of the 1990s. A scenario which projects rates of population growth that are approximately an average of the zero and the 1990-2000 scenarios is one that suggests slower than 1990-2000 but steady growth.
The 1990-2000 Migration (1.0) Scenario
The 1990-2000 scenario assumes that the trends in the age, sex and race/ethnicity net migration rates of the 1990s will characterize those occurring in the future of Texas. The 1990s was a period characterized by rapid growth. It is seen here as the high growth alternative because its overall total decade pattern is one of substantial growth (i.e., 22.8% for the 1990-2000 decade for the State). Because growth was so extensive during the 1990s it is likely to be unsustainable over time and thus this scenario is presented here as a high growth alternative. For counties that experienced net outmigration during the 1990s, this scenario produces continued decline.
The 2000-2004 Migration Scenario
The 2000-2004 projection scenario provides a scenario that takes into account post-2000 population trends. In the State overall and in some counties the post-2000 period has resulted in reduced levels of net migration. In other counties post-2000 net migration rates have been greater than those of the 1990s. Under this scenario the 2000-2004 age, sex and race/ethnicity specific migration rates are assumed to prevail from 2000 through 2040. This scenario allows those users who believe that the 2000-2004 period has produced fundamental long-term changes in population patterns to ascertain the likely future size and characteristics of the population.
Even to the novice, it’s obvious that a lot of statistics are churned out by demographers and research entities. Often, it may seem like a case of too much information; furthermore, should Texans concern themselves with predictions of this nature? In other words, will race and ethnicity even matter that much as we forge ahead in our lives and careers? If only it weren’t for those troublesome numbers because, except for them, what differences are there anyway? Let’s move to an overall snapshot of Texas, in its current pose, and put the previous sections of this chapter together.
Trends: The New Texas Order
2010 U.S. Census Data–Texas
Estimate
Percent
U.S.
Percent
US
rank
Total population
25,145,561
20.6
308,745,538
9.7
Male
12,472,280
49.6
49.2%
+/-7,159
Female
12,673,286
50.4
50.8%
+/-7,159
Median age (years)
33.6
(X)
36.4
+/-0.1
Under 5 years
1,928,473
7.7
6.8%
+/-3,768
15 to 19 years
1,883,124
7.5
75.4%
+/-3,409
50 to 54 years
1,674,869
6.7
12.4%
+/-3,768
One race
24,466,560
97.3
98.0%
+/-15,720
White
17,701,552
70.4
73.9%
+/-47,857
39th
Black or African American
2,979,598
11.8
12.4%
+/-10,979
19th
American Indian and Alaska Native
170,972
0.7
0.8%
+/-6,501
23rd
Asian
964,596
3.8
4.4%
+/-6,461
15th
Native Hawaiian and Other Pacific Islander
21,656
0.1
0.1%
+/-2,865
9th
Some other race
2,628,186
10.5
6.3%
+/-46,784
3rd
Two or more races
679,000
2.7
2.0%
+/-15,720
17th
Hispanic or Latino (of any race)
9,460,921
37.6
14.8%
*****
American Community Survey
Economic Characteristics: 2009
Estimate
Percent
U.S.
Margin of Error
In labor force (population 16 years and over)
11,749,614
65.7
65.0%
+/-12,202
map
Mean travel time to work in minutes (workers 16 years and over)
24.7
(X)
25.2
+/-0.1
map
Median household income (in 2009 inflation-adjusted dollars)
48,199
(X)
51,425
+/-150
map
Median family income (in 2009 inflation-adjusted dollars)
56,650
(X)
62,363
+/-207
map
Per capita income (in 2009 inflation-adjusted dollars)
24,318
(X)
27,041
+/-72
Families below poverty level
(X)
13.2
9.9%
+/-0.1
Individuals below poverty level
(X)
16.8
13.5%
+/-0.1
map
In labor force (population 16 years and over)
11,617,834
65.6
65.0%
+/-24,827
38th
Mean travel time to work in minutes (workers 16 years and over)
24.6
(X)
25.0
+/-0.1
17th
Median household income (in 2006 inflation-adjusted dollars)
44,922
(X)
48,451
+/-287
37th
Median family income (in 2006 inflation-adjusted dollars)
52,355
(X)
58,526
+/-275
27th
Per capita income (in 2006 inflation-adjusted dollars)
22,501
(X)
25,267
+/-121
Individuals below poverty level
(X)
16.9
13.3
(X)
9th
Average household size
2.81
(X)
2.60
+/-0.01
map
Average family size
3.40
(X)
3.19
+/-0.01
Population 25 years and over
14,722,918
+/-2,707
High school graduate or higher
(X)
79.3
84.6%
(X)
map
Bachelor’s degree or higher
(X)
25.4
27.5%
(X)
map
Civilian veterans (civilian population 18 years and over)
1,621,077
9.5
10.1%
+/-7,624
map
Economic and population trends are entwined, as we have touched on numerous times in this chapter. The role of elected/appointed officials and key sectors of the business, health care, education and law enforcement community continues to turn on evolving realities of this huge state. Texas has always been affected by migration trends, as well as culture, technology and shifting global markets. Since 1996, the US Census Bureau has administered the American Community Survey, to capture the evolving nature of American society. Table 1.8 is a brief excerpt from the 2006 survey, regarding Texas:
Table 1.8
American Community Survey
(2006) Demographic Estimates–Texas
Estimate
Percent
U.S.
Margin of
error
US
rank
Total population
23,507,783
*****
Male
11,705,673
49.8
49.2%
+/-7,159
Female
11,802,110
50.2
50.8%
+/-7,159
Median age (years)
33.1
(X)
36.4
+/-0.1
Under 5 years
1,922,227
8.2
6.8%
+/-3,768
18 years and over
17,004,929
72.3
75.4%
+/-3,409
65 years and over
2,329,442
9.9
12.4%
+/-3,768
One race
23,091,163
98.2
98.0%
+/-15,720
White
16,405,937
69.8
73.9%
+/-47,857
39th
Black or African American
2,718,515
11.6
12.4%
+/-10,979
19th
American Indian and Alaska Native
111,511
0.5
0.8%
+/-6,501
23rd
Asian
787,208
3.3
4.4%
+/-6,461
15th
Native Hawaiian and Other Pacific Islander
14,047
0.1
0.1%
+/-2,865
9th
Some other race
3,053,945
13.0
6.3%
+/-46,784
3rd
Two or more races
416,620
1.8
2.0%
+/-15,720
17th
Hispanic or Latino (of any race)
8,385,118
35.7
14.8%
*****
Economic Characteristics
Estimate
Percent
U.S.
Margin of Error
In labor force (population 16 years and over)
11,617,834
65.6
65.0%
+/-24,827
38th
Mean travel time to work in minutes (workers 16 years and over)
24.6
(X)
25.0
+/-0.1
17th
Median household HYPERLINK “javascript:openGlossary(‘glossary_i.html” \l “income’)” \o “Opens glossary in new window”income (in 2006 inflation-adjusted dollars)
44,922
(X)
48,451
+/-287
37th
Median family income (in 2006 inflation-adjusted dollars)
52,355
(X)
58,526
+/-275
27th
Per capita income (in 2006 inflation-adjusted dollars)
22,501
(X)
25,267
+/-121
Individuals below poverty level
(X)
16.9
13.3
(X)
9th
The ACS also measures social characteristics, such as education levels, marital status and the number of military retirees. In short, the tables give clear indications of trends of the present. Another source of analysis (cited in the economic section of this chapter) is the Dallas Federal Reserve’s “Changing Face of Texas” social and demographic summary. The following depicts the combined influence of teen birth rates, economic forces, and education on incomes:
Although Texans’ incomes improved during the ’90s, succeeding years have seen a reversal of this phenomenon. According to 2003 data, the Texas poverty rate rose to 16.3 percent and Texas nominal per capita income fell to 93 percent ($29,372) of the U.S. average ($31,632) as the Texas economy slumped into the recession that started in 2001 and lasted until mid-2003. The state’s higher concentration of high-tech and transportation industries, which were the hardest hit, intensified the recession’s impact. Hence, these industries shed a substantial number of high-paying jobs, pushing down the state’s per capita income more so than the U.S. average. Also, Texas’ recovery from the recession has been unusually weak.
Among ethnic groups, Hispanics are undoubtedly the largest segment in poverty in Texas. In 1999, more than 1.6 million (25.4 percent) Hispanics in Texas were poor. Their median household income was $29,873, far below the Texas average of $39,927. This is an alarming number, given the importance of this segment to Texas’ future. Blacks had the second-highest poverty rate (23.4 percent) with a median income less than that of Hispanics. Anglos fared best, with the lowest poverty rate (7.8 percent) and the highest median household income ($47,162 in 1999) in Texas.
The disparity among ethnicities when it comes to income and poverty is not surprising. Natives (predominantly Anglo) are far more likely to have a high school diploma and some college education than immigrants (predominantly Hispanic). Less-educated individuals tend to be lower-skilled workers employed in low-paying jobs. In addition, because the non- Anglo population in Texas is far younger than the Anglo population, a large percentage of non-Anglos are in their early earning years, have scant work experience and thus are more likely to have lower incomes.
Another emerging trend, impacting productivity, health care costs, and vital statistics is obesity. By the 21st century’s 2nd decade, national and regional data (or just look around, for an informal estimate) have revealed the extent to which Americans, especially children, have become morbidly obese.
NOTE: Dorland’s Medical Dictionary defines morbid obesity the condition of weighing two or more times the ideal weight; so called because it is associated with many serious and life-threatening disorders.
The Texas State Data Center, located at UT at San Antonio, published a report summarizing the situation in Texas, and providing demographics that encompass the key measures already described in this chapter. Thus, its fitting that we are able to bring together elements of the economy (both positive and negative) and the people of Texas, in one issue area. Here are the key findings of the 2009 study:
Key findings about the obesity epidemic in Texas
1. Adult obesity rates have been increasing at an alarming rate in Texas. The increase has occurred across the board for all ethnic groups and all ages. There are especially dramatic increases among young adults, for whom obesity rates increases from 10 percent to more than 20 percent in just 7 years. These increases are of tremendous concern. If people in their 20s are already overweight or obese, the rates for this cohort may be staggering in 20 years, when the current generation of persons in their 20s reaches their 40s.
2. Demographic changes in the state’s population alone will increase obesity rates. The Texas population is aging and is changing in ethnic makeup. Body weight increases throughout the lifespan, so as the state’s population gets older, it will get heavier. The majority of obese persons are currently Anglos, while obesity are higher for African Americans and for Latinos. Those most likely to be obese, the older population and the Latino population, are the fastest growing populations in the state, accounting for most of the projected change.
3. Obesity rates are highest in the border and rural counties. These counties are more likely to have very low rates of insurance coverage, and low physician-to-population ratios. The projections show that these same counties are leading the state to higher levels of obesity.
TABLE 1.7 Projections of increasing numbers of Obese Persons, with demographic changes, “life course” increases in obesity, and continued increases in obesity among young adults
2005-2007 2010 2020 2030 2040
Anglo
2,135,060
2,153,606
2,283,584
2,612,806
2,907,721
African American
733,185
793,317
972,391
1,156,828
1,428,194
Latino
1,762,235
2,207,965
3,607,205
5,969,222
9,407,802
Other
146,326
183,468
360,149
598,319
912,822
Total
4,776,806
5,338,356
7,223,329
10,337,175
14,656,539
Source: Office of the State Demographer projections, using 2000-2004 migration scenario population projections
In conclusion, the intertwined forces of culture, economy and people have revealed the constant challenge for state government, in the most diverse of settings. In order to allow Texas’ growth and future to reflect a more equitable distribution of wealth, political power and quality of life, the present-day population must quickly and emphatically “arm itself” the investment and development of its whole, not of its parts. Fortunately, for this represents evolution of the state’s entire modus operandi, the challenges of supplying energy, environmental considerations, and security may pave the way for greater cooperation and change.
The formulation and implementation of public policy will be discussed in detail later in the text, for now it is most important to recognize that as, and where the population grows and diversifies, more competing demands must be accommodated by various levels of government and the agents. The operative were is competition, in its market and economic usage, as an element of dynamics and innovation. Forward-looking governments often use business models or trends to improve its ability to respond – and that is the best indication we have, for education overall is a strong force in creating the competitive advantage.
In conclusion, the intertwined forces of culture, economy and people have revealed the constant challenge for state government, in the most diverse of settings. In order to allow Texas’ growth and future to reflect a more equitable distribution of wealth, political power and quality of life, the present-day population must quickly and emphatically “arm itself” the investment and development of its whole, not of its parts. Fortunately, for this represents evolution of the state’s entire modus operandi, the challenges of supplying energy, environmental considerations, and security may pave the way for greater cooperation and change.
The formulation and implementation of public policy will be discussed in detail later in the text, for now it is most important to recognize that as, and where the population grows and diversifies, more competing demands must be accommodated by various levels of government and the agents. The operative were is competition, in its market and economic usage, as an element of dynamics and innovation. Forward-looking governments often use business models or trends to improve its ability to respond – and that is the best indication we have, for education overall is a strong force in creating the competitive advantage.
References
Curtis S. Dubay and Chris Atkins, “State Business Tax Climate Index” (Fourth Edition), The Tax Foundation Washington, D.C. 2006
George N. Greene, “The Oil & Gas Industry in Texas, The Texas Heritage, Ben Procter and Archie P. McDonald, eds. Forum Press, 1980
Gerry Riposa, Texas Energy Policy: Texas Tea is Still the Favorite Drink, Texas Public Policy, Gerry Riposa ed., Kendall Hunt Pub. Do., 1987
Kenneth Maldenka and Kim Quaile Hill, Texas Government: Politics and Economics, 2d ed, Brooks/Cole Pub. Co., 1989
Martin t. Katzman and Patricia J. Osborn, “Energy Policy,” Texas at the Crossroads: People, Politics and Policy, Texas A & M University Press, 1987
Sam Fletcher, “Industry Retains Primary Position in City’s Fortunes,” The Houston Post, May 1, 1994
TR Ferenbach, Texas Mythology: Now and Forever,” Texas Myths, Robert F. O’Connor, ed. Texas A & M University Press, 1986
Sheila McNulty “Texas fires and drought cost farms $5.2 billion” http://www.ft.com/intl/cms/s/0/479a5254-d722-11e0-bc73-00144feabdc0.html
Featured Links
http://factfinder.census.gov/servlet/ACSSAFFFacts?_event=Search&geo_id=&_geoContext=&_street=&_county=&_cityTown=&_state=04000US48&_zip=&_lang=en&_sse=on&pctxt=fph&pgsl=010
http://www.cdc.gov/nchs/pressroom/07newsreleases/teenbirth.htm
http://www.census.gov
http://www.dallasfed.org/research/swe/2007/swe0703b.cfm
http://www.ers.usda.gov/StateFacts/TX.htm
www.ieeeusa.org/volunteers/committees/cwpc/Oct05/files/11.2-Texas_briefing
www.window.state.tx.us/specialrpt/energy/pdf/96-1266-1-EnergyExecSummary
http://mo.statesman.com/news/texas-politics/perry-cites-texas-jobs-but-his-figures-include-1912851.html
http://txsdc.utsa.edu/Data/TPEPP/Projections/2008/Methodology.aspx
http://www2.census.gov/geo/maps/dc10_thematic/2010_Profile/2010_Profile_Map_Texas
http://2010.census.gov/2010census/data/
http://www.straightdope.com/columns/read/2250/in-international-waters-are-you-beyond-the-reach-of-the-law Comment by Shelly: Insert Hyperlink to http://www.straightdope.com/columns/read/2250/in-international-waters-are-you-beyond-the-reach-of-the-law
