The Texas Legislature is in the process of considering several measures affecting the future of Texas’ economic development. A review of the state’s economic strengths might be helpful in that regard.
The Lone Star State has many characteristics that shape its economic development agenda. Among those with profound influence on economic performance are the unique patterns in the state’s population. More than four million residents (over 22%) have been added over the last decade. Both natural expansion (births exceeding deaths) and in-migration contributed to this rise, and the trend (at a somewhat lower rate) is projected to continue well into the future.
The state has the youngest population in average age of the 10 most populous states, with its birthrates, average family size, and average household size all well above national norms. The demographic changes in Texas reflect in large measure the rapidly growing relative importance of the Hispanic population, particularly in South Texas and the border region.
The unique patterns in the Texas population have a profound influence on economic performance. On the one hand, a continuation of current disparity in education and earnings among ethnic groups leaves the state with daunting challenges and the prospect of declining living standards and per capita incomes. On the other hand, a young and growing labor force can be an enormous asset in attracting new activity, particularly as the aging “baby boom” generation begins to retire and a shortage of skilled and experienced workers persists. This situation can be vied as “good news” or “bad news”—a challenge or an opportunity—but it definitely shapes the proper direction of policy. Overall, the availability of people to contribute to the economy is clearly positive; equipping them to do so effectively is a necessity.
Other strengths of the Texas economy include its location, climate, heritage, infrastructure, favorable costs in several categories, concentration of production in areas likely to foster growth and diversity, and endowments of key resources and assets.
The state is situated in the Sun Belt and in the central part of the country with access to all parts of the US and key markets in Europe and Asia. The extensive border with Mexico and location along major highway corridors also benefit business conditions in Texas.
Rail access across the US is also available (more than 12,000 miles of track), with international air service from eight airports and numerous other excellent facilities. Dallas/Fort Worth International Airport is among the busiest in the country, and Fort Worth Alliance Airport is the first such facility to be designed exclusively as a business airport; it has been a source of enormous economic expansion since it opened in late 1989. The state has 13 deep water ports, as well as other seaports and linkage to the Gulf Intercoastal Waterway. The Port of Houston is the nation’s busiest port.
In addition, Texas has advantages related to some important elements of cost. Housing and real estate are less expensive than in many competing markets, as are wage rates and construction, transportation, and power costs. Although rankings vary across individual categories and states are different depending on the specific needs of each sector, Texas is generally competitive with regard to basic operating costs.
The state is also blessed with a wealth of natural resources. For much of its history, the economic focus was on natural resources such as rich deposits of oil and gas, fertile agricultural land, and wide-open spaces for livestock. Today, resources include science and engineering programs at major universities, research capacity, major medical facilities, and a large high-tech output and employment base.
Texas gained in excess of 150,000 high-tech jobs in the 1990s and created more total net new employment than any state in the country. The number of high-tech workers now exceeds 500,000 (despite recent layoffs) and the Lone Star State boasts such prominent facilities as Sematech, the Johnson Space Center, and highly acclaimed public and private research institutions in many emerging fields. Texas enjoys multi-billion dollar annual levels of research and development activity, a major technology incubator, and effective technology transfer mechanisms.
All of these factors have contributed notably to the positive economic performance of the state in recent years and bode well for the future. Lawmakers should keep these in mind as they craft, debate, and pass laws shaping the future economic development directions of the state.