Texas: The Model State for Job Creation


Take all the jobs that the private sector has created in the past two years, and then pick out every third job – that job was created in Texas. This is a startling statistic, but several news outlets have picked up on the fact that Texas has been responsible for an enormous amount of job creation since the financial system fell into ruin.

This is making some people wonder if Texas could serve as a model for our nation more broadly as we struggle to create jobs. There are a lot of skeptics, but the case is pretty strong for thinking about the low regulation and rock-bottom low spending in Texas as a path to job growth.

The data is pretty strong. A senior economist at the federal reserve bank in Dallas says: “Since the severe oil-shock recession and banking crisis of the mid-1980s, Texas economic growth has consistently exceeded that of the nation. Jobs were added at a faster annual rate in Texas than in the U.S. in all but two years since 1990. On average, Texas jobs have grown at about 2% annually over the past 20 years compared with about 1% for the U.S. Significantly, the rapid employment increase didn’t come at the expense of income growth. Real GDP per capita expansion of about 1.5% per year kept pace with the nation during this period.”

Those are some pretty incontrovertible facts, so objections are not usually aimed at these results, but at their causes.

Some say that Texas benefits from geographic and demographic factors like its oil reserves and immigrant labor. To the first, I concede there is no substitute to having oil in the ground, but it is clearly not the only reason for Texas' success. And to the second, I don't see why this prevents Texas from being a good model for our nation. We can, as a country, open our borders more broadly, both to cheap labor from Mexico and to skilled labor from abroad.

The more serious charge is that the jobs that are being created in Texas are low skill and low pay and that the state's income distribution is very unequal. On top of this, education and health care are poorly financed.

Here I have to concede a little ground. I don't think we could get by on budgeting such little money for things like healthcare and education, but it's important to keep things in perspective. When we look at Texas, we can see that when it comes to creating jobs, it does really seem to be the private sector that creates them when it's “left alone” to create them. Our default position should be to remove barriers to trade and to tax less, but that doesn't mean we don't make exceptions for the important things like healthcare and education.

But what about inequality? First, pretend Texas was only creating low-paying jobs – would it be preferable to just not have created those jobs? That is the alternative that the national economic system is handing us. Besides, Texas isn't only creating low-paying jobs, more than half of the created jobs pay more than minimum wage. Besides, when reading statistics that show that Texans make less money, it's important to remember that they pay less taxes and face very low costs of living.

Could Texas be a model for our country? Some commentators are quick to jump all over Texas' flaws, and it has many, but it's important to still see the lesson. Our presumption should be in favor of restoring freedom and flexibility to the private sector and to spend when the government is needed. The data from Texas is just too striking to not draw that weak lesson.

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