A tale of two states

California has a delightful climate and beautiful scenery.  As a result, rich people like me want to live there, despite its poor governance.  But for the working class, it’s an entirely different story.  Here’s an interesting piece on the Latinos in Texas by Joel Kotkin and Wendall Cox:

Much of this rapid demographic shift stems from, again, Texas’s opportunity urbanism. Though many of the newcomers—along with “Tejanos,” native Texas Latinos—are poor and often not well educated, they’re much better off economically than their counterparts in New York, Los Angeles, or Miami. Texas’s vibrant industrial and construction sectors, in particular, have provided abundant jobs for Latinos. In 2015, unemployment among Texas’s Hispanic population reached just 4.9 percent, the lowest for Latinos in the country—California’s rate tops 7 percent—and below the national average of 5.3 percent.

Texas Latinos show an entrepreneurial streak. In a recent survey of the 150 best cities for Latino business owners, Texas accounted for 17 of the top 50 locations; Boston, New York, L.A., and San Francisco were all in the bottom third of the ranking. In a census measurement, San Antonio and Houston boasted far larger shares of Latino-owned firms than did heavily Hispanic L.A.

In Texas, Hispanics are becoming homeowners, a traditional means of entering the middle class. In New York, barely a quarter of Latino households own their own homes, while in Los Angeles, 38 percent do. In Houston, by contrast, 52 percent of Hispanic households own homes, and in San Antonio, it’s 57 percent—matching the Latino homeownership rate for Texas as a whole. That’s well above the 46 percent national rate for Hispanics—and above the rate for all California households. (The same encouraging pattern exists for Texas’s African-Americans.)

California and Texas, the nation’s most populous states, are often compared. Both have large Latino populations, for instance, but make no mistake: Texas’s, especially in large urban areas, is doing much better, and not just economically. Texas public schools could certainly be improved, but according to the 2015 National Assessment of Educational Progress—a high-quality assessment—Texas fourth- and eighth-graders scored equal to or better than California kids, including Hispanics, in math and reading. In Texas, the educational gap between Hispanics and white non-Hispanics was equal to or lower than it was in California in all cases.

Though California, with 12 percent of the American population, has more than 35 percent of the nation’s Temporary Assistance for Needy Families welfare caseload—with Latinos constituting nearly half the adult rolls in the state—Texas, with under 9 percent of the country’s population, has less than 1 percent of the national welfare caseload. Further, according to the 2014 American Community Survey, Texas Hispanics had a significantly lower rate of out-of-wedlock births and a higher marriage rate than California Hispanics.

In California, Latino politics increasingly revolves around ethnic identity and lobbying for government subsidies and benefits. In Texas, the goal is upward mobility through work. “There is more of an accommodationist spirit here,” says Rodrigo Saenz, an expert on Latino demographics and politics at the University of Texas at San Antonio, where the student body is 50 percent Hispanic. It’s obvious which model best encourages economic opportunity.

So California takes in millions of Hispanic immigrants and gives them welfare. Texas takes in millions of Hispanic immigrants and gives them jobs.  (Fun fact, both California and Texas are exactly 37.6% Hispanic–only New Mexico is higher.)

Critics of the Texas model made three points.  First it was propped up by the oil industry.  That might once have been true, but is no longer the case. Indeed Texas continues to draw in migrants from all over the country, despite the oil bust. Second, that it is simply a “sunbelt” story.  That’s false, the good Sunbelt climate is in the southeast and southwest.  The other (hot and humid) south central states do not show the fast population growth that we see in Texas.

The third argument is that some of the social indicators are not so hot.  But people who look more closely at the data generally find that various educational and income statistics in Texas are quite good, if you control for ethnicity and cost of living.  (Non-Hispanic whites in Texas are a minority, a much lower share of the population than in most other states, which explains why average incomes in Texas are not all that high.  But adjusted for cost of living, they are above lots of other states that have lower percentages of blacks and Hispanics.  That’s pretty impressive.)

So I encourage people to move to Texas, if you can’t afford California.

PS.  And yes, zoning reforms in California would really help.



25 Responses to “A tale of two states”

  1. Gravatar of Ray Lopez Ray Lopez
    9. October 2016 at 09:00

    @Sumner: “As a result, rich people like me want to live there, despite its poor governance.” – what’s your net worth? I brag about my net worth since I’m anonymous…you’re braver than I am.

  2. Gravatar of ssumner ssumner
    9. October 2016 at 09:22

    I’m in the top 1% of the global wealth distribution–maybe the top 0.25%.

    In other words, I’m middle class by Newton MA standards.

  3. Gravatar of E. Harding E. Harding
    9. October 2016 at 10:30

    Newton, MA:

    14640 Clinton votes.

    8489 Sanders votes.

    2197 Trump votes.

    1785 Kasich votes.

    1602 Rubio votes.

    443 Cruz votes.

    Collin County, Texas:

    46094 Cruz votes.

    29772 Trump votes.

    27082 Rubio votes.

    23591 Clinton votes.

    16082 Sanders votes.

    6893 Kasich votes.

    Carson also got some votes, but I don’t think anyone cares how many.

  4. Gravatar of Jill Jill
    9. October 2016 at 10:47

    Move to Texas, only if you can take the heat and humidity, which is quite high there, and if you are a Red Tribe person. Austin isn’t Red Tribe, but everywhere else in Texas is. They do have a low cost of living.

    I have relatives who moved to Texas from California, couldn’t stand it, and moved back to California. Even though the Cali cost of living is higher and living wage employment is harder to find, most people who love living in Cali would probably hate living in Texas. But if you’ve never lived in either, moving to Texas wouldn’t be so bad perhaps, as you wouldn’t know what you’re missing.

    Dallas has the highest rate of suicide attempts among major U.S. cities. Worse than Seattle (depressing cloudy weather and cold people) and Salt Lake City (probably not so great for many people who don’t fit into an exact mold of what is expected) even.

  5. Gravatar of ssumner ssumner
    9. October 2016 at 13:45

    Jill, You said:

    “Austin isn’t Red Tribe, but everywhere else in Texas is.”

    Not even close. Right now Hillary’s only about 5% to 10% behind. Urban Texas tends to be Democratic, suburban and rural is very Republican. There are plenty of places in Texas where “blues” would feel comfortable living.

  6. Gravatar of Jill Jill
    9. October 2016 at 14:26

    I checked. Am surprised. You are right. There are 3 other cities besides Austin– Dallas, Houston, and San Antonio — that voted Democratic in 2012. So there are indeed 4 cities in Texas where a blue tribe person could live.

    The whole nation tends to be blue in cities, red in suburban and rural areas– regardless of whether the state is overall red or blue. A state being red overall apparently just means that the population in that state is predominantly rural.

  7. Gravatar of B Cole B Cole
    9. October 2016 at 15:43

    Scott Sumner: you have called for abolishing the minimum wage, front and center.

    Why no call for abolishing property zoning?

    A PS on undefined “zoning reforms?”

  8. Gravatar of BC BC
    9. October 2016 at 16:41

    1) Did Texas have a wave of anti-immigration politics in the 90s like California did? Both states have obviously experienced a boom in Hispanic immigration. I wonder why Texas moved right while California moved left. Could the leftward move in California have been the result of some sort of backlash against the anti-immigrant policies of the 90s. Before that, California was actually a reliably Republican state, as described in this article [http://www.the-american-interest.com/2016/10/06/how-the-golden-state-became-the-intellectual-capital-of-trumps-gop/] (HT: Tyler Cowen).

    2) What is the state with the most pro-market economic policies that has a decent climate? I know Florida has no income taxes; I’m not sure about regulation. (Florida can also be quite hot and humid in the summer.)

  9. Gravatar of Jill Jill
    9. October 2016 at 16:53

    Western Washington, West of Seattle on the Olympic Peninsula, has the best climate anywhere. Seattle itself is so cloudy (causing depression from Seasonal Affective Disorder) that it has the 2nd highest suicide attempt rate of major cities– tied with Dallas for that honor. So Seattle’s climate is bad unless you don’t have any vulnerability to S.A. D. But most people have at least some.

    But some of the places like Sequim are nice and have more sun, because they are in a “rain shadow.” And you never burn or freeze.

    Washington has no personal income tax. I would imagine it’s good for businesses too, as MSFT is here and many other companies. Some people work in Seattle and then vacation in Hawaii or Arizona every winter.

  10. Gravatar of Jill Jill
    9. October 2016 at 16:54

    You need to be introverted to live in Seattle though. Social people have a rough time. Asperger’s people do well.

  11. Gravatar of Don Don
    9. October 2016 at 16:58

    Does “becoming homeowners, a traditional means of entering the middle class” imply causality? Or is it just correlation? It seems more like a milestone than a method of climbing the social ladder to me.

    Texas has another difference from California, admissions to top schools (UT, TAMU) are based on a “top 10%” rule. This provides a broad opportunity for kids in low-income schools. This could be considered a magnet for enterprising families. Low taxes, low regulation, and cheap land/utilities–it all adds up.

  12. Gravatar of ssumner ssumner
    9. October 2016 at 19:35

    Ben, Yes, abolish zoning laws.

    BC, You asked:

    “Did Texas have a wave of anti-immigration politics in the 90s like California did?”

    No, and I wonder why not.

  13. Gravatar of Ray Lopez Ray Lopez
    9. October 2016 at 21:45

    OT- @ssumner- Professor, can you do a IS-LM diagram on why NGDP is better than either interest rate targeting or money supply targeting? Chap. 24 of Mishkin’s textbook “The Economics of Money, Banking” is a template. He shows why, given an assumption of either an unstable LM or IS curve, that either interest rate targeting or money supply targeting is preferred, respectively. Can you do the same with NGDP?

  14. Gravatar of Brian Donohue Brian Donohue
    10. October 2016 at 05:20

    Excellent post.

  15. Gravatar of Dan W. Dan W.
    10. October 2016 at 07:20

    I wonder if an important factor was that California felt the golden era of California was too good too last but the people were desperate to hold onto it. The attempt to use strong measures to penalize illegal immigration is evidence of this reactionary mood. But so is Prop-13 and the zoning laws and the nimbyism that pervades the state.

    Meanwhile Texas provides such a wide open area of land to accommodate a growing population (where no one area is superior to another) that support for reactionary laws has not gained critical mass. Texas may in fact illustrate the Jeffersonian ideal that as long as there is sufficient land and freedom to accommodate “yeomen farmers” the people will be content to support Republicanism and not degenerate to political factionalism.

  16. Gravatar of Randomize Randomize
    10. October 2016 at 10:08

    The different costs of living make this a messy compaison. It should surprise no one that low earners do better in cheaper areas.

  17. Gravatar of Steve Steve
    10. October 2016 at 10:09

    Highly zoned towns are almost perfectly correlated to highly green towns.

    Both are the result of a romanticized notion of sustainable, historic, unchanging, safe, walkable communities. Ones where the immigrant labor comes in by zero-emission public transport, but retreats at night to communities that are out-of-sight, out-of-mind, and out-of-school-district.

  18. Gravatar of Steve Steve
    10. October 2016 at 10:17

    Case in point: Texas has huge, ghastly, and cheap concrete highway overpasses that facilitate millions of workers.

    A similar project in Boston would be $20 billion for 2 miles of tunnel, all so that guests at the Boston Harbor Hotel can have zero-emissions commutes, walking to the Federal Reserve building without traffic whipping by overhead. It makes the city nice for millionaires, but doesn’t help provide housing, employment access, or residential diversity.

  19. Gravatar of Floccina Floccina
    10. October 2016 at 11:49

    This is amusing, the people in California try to keep the riffraff out of their cities by reducing building, keeping the rents high, but then the government subsidies rents.

  20. Gravatar of Benny Lava Benny Lava
    10. October 2016 at 11:52

    Didn’t Yglesias destroy the idea that high rates of home ownership correlates with prosperity almost a decade ago?

    Anyways Wendell Cox is a reliable cherry picker of data and motivated reasoning.

  21. Gravatar of JMCSF JMCSF
    10. October 2016 at 12:26

    Obviously if you are wealthy California is the life (maybe New York, depends on taste). I’ve lived in both.

    I wonder what percent of the additional cost of living in California is from housing costs (from poor zoning) vs other factors like taxes, etc.

    Obviously, you can say that all the costs come from poor governance if you consider poor and/or antiquated zoning to be poor governance.

  22. Gravatar of Steve Steve
    10. October 2016 at 22:44

    Dan W. nailed it, with the best comment on this thread. Areas with vast expanses of non-differentiated land are the ones best suited to the Jeffersonian ideal.

    I’ve recently visited both California and Texas. I have to say, Texas *felt* more diverse than California, with Latinos employed in office parks, Latinos and blacks sharing restaurants with whites, and generally friendlier people. In California, the high-rent areas are mostly white people and Asian moguls, and the rich fight for exclusive beach access (and keeping the riffraff off the beach areas).

    I was also struck by the number of single-family homes in close proximity to urban cores in California. It seems that changing zoning is, by itself, insufficient. You also need to convince people to sell their single families to build mid-rise apartment blocks, but that takes time and has external costs for the neighbors. Plus new apartments have to be worth the sunk costs of demolishing existing single families. That’s a burdensome hurdle.

    The problem with a lot of cities is the infrastructure was sized for certain populations. Metro Boston, maybe one or two million and that’s it. California is close to capacity too, without incurring large costs to demolish and rebuild. Texas has significant room to grow, simply because infrastructure was overbuilt in the beginning, with huge open spaces and huge right-of-ways. Texas in a lot of ways is the Libertarian Republic that California was 30-50 years ago. It won’t last, but it’s probably got a few decades to run.

  23. Gravatar of Lorenzo from Oz Lorenzo from Oz
    11. October 2016 at 00:31

    Flat land lacks positional goods. Hills and coasts have positional goods in land. Positional goods in land encourage restrictive zoning to protect said positional goods.


  24. Gravatar of Major.Freedom Major.Freedom
    11. October 2016 at 17:56

    Texas cannot be good because it doesn’t have a central bank.

  25. Gravatar of ssumner ssumner
    13. October 2016 at 07:39

    Floccina, That is funny.

    Steve, Metro Boston has more than 4 million, and can easily take in many more. I do agree with many of your other impressions, however.

    Lorenzo, That’s right.

Leave a Reply