Wednesday, July 6, 2011

Texas, the jobs engine? Or Texas, the jobs-laundering engine?

An op-ed piece last weekend in the LA Times, called “Texas, the jobs engine?”, by Rick Wartzman, executive director of the Drucker Institute at Claremont Graduate University, begins:

For the last few weeks, I've been unable to get a startling statistic out of my head: Since the recession officially ended, Texas has created more than 4 of every 10 new jobs in America.

That's right, Texas: the reddest of red states, home to gun lovers and school textbooks that openly question whether the Founding Fathers intended for the separation of church and state. I am no ideologue. Still, whenever I get political, I tend to tilt reflexively to the left, making the jobs figure a bit disconcerting at first.

But there's no escaping it. The number is real. Which means that if you care about putting people back to work at a time when nearly 14 million in this country are unemployed, maybe Texas has something to teach us.

Wartzman goes on to say that according to the Dallas Fed, Texas, which he says accounts for about 8% of the nation’s economy, generated 43% of the net new jobs in the U.S. from June 2009 through May 2011. He then notes that aspects of Texas’s boom cannot be optionally replicated in other states. The booming energy industry and the high export demand for commodities such as beef and cotton.

He then cites some longstanding government policies—both conservative and liberal ones. Conservative: Low tax rates, the downside of which, he notes, is a smaller safety net, and “right-to-work” laws, resulting in Texas’s tying Mississippi as the states with the biggest percentage of workers paid at or below the minimum wage. Liberal: Strict lending guidelines enacted in the wake of the S&L crisis of the 1980s that require Texas financial institutions “to keep larger capital reserves and take on fewer problem mortgages than were seen elsewhere in the country,” and which spared the state from the real estate boom and bust that hit most of the rest of the country. And beginning 25 years ago, the state began significantly increasing its education funding and therefore the quality of its workforce.

Then the pay-off paragraph, so to speak:

At the same time — and this, of course, is the tough part for those on the left to swallow — it is clear that the state's limits on taxes, regulations and lawsuits are contributing to the job machine. "The most important thing I think that's happened to us is tort reform," Fisher, the Dallas Fed president, has said. He added that when John Deere and other companies have decided to hire in Texas, they've been largely driven by steps the state has taken to cap non-economic damages in medical malpractice suits and to make it harder to bring product liability and class-action cases.

Okay. Are these folks claiming that the companies that are hiring in Texas decided to hire because of Texas’s low tax rates and its “tort reform” law? Or are they saying that these companies needed to hire more workers, and chose to expand in Texas rather than in, say, California or Michigan or Ohio, because of Texas’s low taxes and tort reform?

Setting aside for a moment the fact that Texas’s tort laws have no effect on lawsuits for injuries from their products in other states—injured plaintiffs can sue in the state where they purchased and used the product and were injured by it, and it’s that state’s tort laws that apply—and that physicians apparently aren’t flooding the Texas landscape by moving there from other states, what these people actually are saying is that Texas , as the lowest-common-denominator state for pro-business laws, is attracting businesses from other states and is spurring hiring there that otherwise would occur in another state.

Fine. But if the issue regarding job losses and job growth is an aggregate one for the country as a whole, rather than which states lost the most jobs to lower-common-denominator states, then why praise Texas as a national jobs creator? It’s not, at least not as a result of its government policies. The claim to the contrary is like saying that South Dakota and North Carolina “created” all those credit-card-company jobs in recent decades, as if those jobs wouldn’t have been created, albeit disbursed more throughout the country, if those two states hadn’t enacted such credit-card-company-friendly laws.

So when Rick Perry rolls out his presidential primary campaign and starts lauding all those Texas job gains, remember to ask what states those jobs otherwise would be in were it not for Texas’s chamber-of-commerce legislature’s largesse of recent years. I’m sure y’all will.

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UPDATE- July 9: Merrill Goozner has a terrific in-depth deconstruction of the so-called Texas Miracle at TheFiscalTimes, at http://www.thefiscaltimes.com/Articles/2011/07/08/Perrys-Texas-Miracle-Less-Than-Meets-the-Eye.aspx?p=1. It was posted yesterday.

1 comment:

  1. I don't see the problem....

    When companies have decided to expand the next choice is always the question "Where?" They decide which state to move to based upon need, demand, local taxes, availability of workers, natural resources of the state etc. You're never going to see a significant expansion of the agriculture industry in say, New York, or an expansion of the Movie Industry in say North Dakota. But you will see companies moving their headquarters to New York and an expansion of the wind farm industry in North Dakota. Which means the states do need competition to coax new jobs to their state; which in turn benefits the local population. You're correct on the point that some of these jobs were not technically newly "created" but coaxed to Texas.

    BUT and I repeat BUT, that is ignoring the main factor that rebuffs your argument (and you conveniently ignore), those jobs that were "coaxed" to Texas by their business friendly laws created other jobs by the mere fact of population expansion. Higher population leads to a necessity of new housing, grocery stores, doctors etc. It's no coincidence that Texas has business friendly laws and low taxes and at the same time had a population growth of 20.6% from 2000 to 2010 (compared to a national average of 9.7%) And you can't deny that that large of an expansion leads to actual job creation. New jobs, that weren't there before, created to support a higher population.

    So to argue that business friendly laws and competition between states (aka "job coaxing") doesn't lead to actual true job creation on a national level is ignorant of all the facts.

    Oh and the number of Direct Patient Care Physicians per 100,000 people in Texas grew from 156 in 2000 to 162 in 2010. A 4% increase, not large agreed, but it is expanding. This also necessitates, when compared to the large population growth over the previous decade, a desperate need of physicians (aka "New Jobs"!!) And to imply Texas doesn't have doctors "flooding the Texas landscape" obviously hasn't seen the Texas Medical Center recently.

    -K

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