Go South, Young Man

Texas Adds Over 700,000 Jobs

The line was “Go West, Young Man” — and it was true for a long time. That’s where the money and the jobs were: California. Well, it hasn’t been true for a long time. Over the last 10 years Texas has added 732,800 private sector jobs, including over a quarter of a million in the last 12 months alone. The Golden State has managed to lose over 600,000 private-sector jobs over the same period.

Winners and Losers

Private-sector job growth, aside from Texas, has been greatest in Arizona, Utah, North Dakota, Washington, and Virginia. But none of the states has managed to even top 100,000 new jobs over the 10 years from 2001 through 2011. The worst losses, outside of California, have been in Michigan (619,000), Ohio (460,000), and Illinois (363,000).

The Golden State was once a powerhouse for job creation, home to world-leading companies like Google and Oracle. But now Chief Executive magazine has ranked California the worst state to do business in for the last seven years. No prizes for guessing which state is ranked #1 for the same period.

California has the second-highest taxes in America (and again, Texas has the second lowest). California burdens businesses with highly restrictive regulations, has bloated government payrolls, public-sector unions that have been promised absurd levels of benefits, and a government that is positively hostile to private-sector employers. Texas has no state income tax; in 2009 California was issuing IOUs in lieu of refunds to taxpayers. Small wonder that every year about 100,000 more people leave the state than come in (legal residents, that is). Texas gains 150,000 new (legal) residents every year.

Texas is the polar opposite, rated by the 550 CEOs voting in the Chief Executive survey as having the highest labor market flexibility, weak unions, and a small government. The state gets low marks on its education system but California’s schools were labeled “A lesson in mediocrity” by The Economist magazine.

Home of The Unemployed

For some time, the early 1990s through 2005, the conventional wisdom held that places like California (and New York) had the winning formula: they were home to the best talent in America, if not the world … the so-called “Creative Class,” subject of so much writing by University of Toronto Urban Studies Professor Richard Florida. The basic premise being that a state that had trendy, happening places would attract the talent necessary to build great companies and create lots of high-paying new jobs.
This was always near-complete nonsense but it sounded good. Then the Internet bubble burst in 2001 and boring places like Oklahoma City did better at creating jobs in a sustainable way than cool places like San Francisco. That was because the fundamentals never changed — being home to lots of talent can’t offset the burden of high taxes and restrictive legislation, especially when the taxes are largely going to pay for public-sector pensions and benefits, not education or job creation. Talent follows business, not the other way around. By 2010 Texas was home to more Fortune 500 companies than California (64 vs. 51) and has unemployment of 8% versus near 12% — fully 3% above the national average — in California.

The Winning Formula

Writing in The Washington Examiner, Michael Barone puts it this way: “if you take a previously prosperous and creative state and subject it to high taxes and intrusive regulations, it loses 5% of its private sector jobs; if you take a previously somewhat less prosperous and creative state and govern it with low taxes and light regulation, it gains 9% more jobs, even as the nation’s economy is suffering.”

Article Continues Below

The states that are adding jobs — Arizona, Utah, North Dakota — all follow the Texas formula to a large degree: low taxes and a business-friendly environment. But this is a lesson that’s not easily learned, as demonstrated by the recent antics of the California legislature. The Business Roundtable estimates that the state’s new carbon emissions law will result in over half-a-million jobs foregone this year as businesses choose to locate elsewhere.

Need further proof that Texas is where the action is now? TNT is bringing back Dallas.

Raghav Singh, director of analytics at Korn Ferry Futurestep, has developed and launched multiple software products and held leadership positions at several major recruiting technology vendors. His career has included work as a consultant on enterprise HR systems and as a recruiting and HRIT leader at several Fortune 500 companies. Opinions expressed here are his own.

Topics

22 Comments on “Go South, Young Man

  1. It needs to be known that all these folks coming into Texas has made the state more crowded, not more prosperous, other than competing offers and cost which will eventually blow up just like it did in California. TX also has a budget crisis going on right now, letting go of secondary school teachers, a property tax that is 2.2% of the housing cost, a state that is still living in the dark ages with the way they do public service, like the simple things of obtaining a drivers license. People with money but no emotional intelligence. Honestly it is the folks coming from out of state that are making TX a better state, more diverse, more accountable, more policy. But there is still a lot of cronyism and money being given to friends and companies at the expense of the infrastructure – lack of roads, lack of services, you name it. TX is not that great, far from it.

  2. Been in California all my Life… Surfing in the morning, Snow Boarding in the afternoon, wake boarding in the evening, then watching the sun set on the glorious Pacific ocean is irreplaceable… TOP performing people (companies) can choose to live/work, wherever they want… You don’t have to follow the “herd”, unless you don’t have the desire for greatness in your life.

    As usual, GREAT article Raghav!

    Best to ALL, Brian-

  3. Was taking to my neighbor (across the street) yesterday. His California employer couldn’t take the hostile California business climate anymore and is moving to Texas. Interestingly, they told him this the day he started the job — they withheld it during the whole interview process. Fortunately he’s convincing them to work remotely out of California. So I guess he has the best of both worlds – he’s living in CA, but working for a company that can stay viable in Texas.

  4. I know that data says bad things about California but here in San Francisco Bay Area, what I’m experience is nothing akin to the state characterized by Raghav. It sure doesn’t feel business unfriendly and I’m not hearing about companies moving to Texas. The market for educated, skilled talent in this area is on fire. It is super competitive and there are great jobs here, particularly for tech-related people, but for lots of others too. I’d also recommend the Bay Area as a relocation destination!

  5. Hi Raghav,

    You’ve done it once again…an article well worth reading. In fact an article that ought to be compulsory reading material for every member of the United States Congress, once a day every day until the facts of this piece penetrate the minds of those “fine” representatives of our country.

    Thank you!

  6. We tend to forget or overlook the fact that the majority of jobs are not in the knowledge economy or of the professional type. Over 60% of all workers work in service, manufacturing, or other non-farm employment. While at any time there may be demand for knowledge workers in a city like San Francisco, that represents a small proportion of the total. Since 2000 California has lot 1.1 million manufacturing and service jobs, while Texas has gained almost 700,000. Interestingly, despite the scale of losses in California, Government employment has stayed steady at about 2.4 million.

  7. I’d be interested in what types of jobs are being created in these states. Are they well-paid, well-benefitted jobs?
    Is anybody creating jobs like this in substantial numbers?

    Cheers,

    Keith

  8. It’s hard to defend California, so I won’t. That state has done too many things wrong, as is well known with or without this article. That jobs are moving to Texas is not news either. But that, as usual, is not the whole story. We live in a county and a world, not a single state. We need consistency and quality and the Texas formula is, sorry, not sustainable. Texas has the projected 8th worst state budget deficit in the country, measured as deficit as % of budget; California is worse, number 6. But Texas cannot or will not increase government revenues. The state’s economy is going to implode one day – like Ireland, to cite a parallel – because low taxes, low services and insufficient funding of basic civilized services like good schools and medical care do not long-term stability make. Enjoy unrealistic “prosperity” while you can Texas; California did.

  9. Raghav, enjoyed reading this article and Texas has a formula that is working for them….I have seen many jobs leave the US to lower cost countries in the industry that I am in. But recetnly I have seen a growth in business opportunities to our north-Canada. Would be interested to see your insight in this region. Thanks!

  10. I’m not from Texas, but got here as fast as I could. Comparing Texas to other states and cities I have lived in, the place is great – lower cost of living, good schools, great outdoors activities and centralized.

    Texas at the same time faces the same problems every other state in the Union faces: budget cuts, immigration, debt, taxes, poor city works, etc. But the positives are that it has a lot of upside opportunity as the state has a strong overall economy.

    I will add that a lot of people are simply coming to TX because they hear it is great and get here and have a hard time finding a job. It’s tough every where these days so don’t role the dice on moving to Texas and thinking everything is roses here.

  11. Thanks, Bryan. This was very interesting: an expected $27 G state deficit. Even with a $9.4 G rainy day fund, wonder what Gov. Perry and the Legislature will cut? Doubt it will be prisons or roads…. They sure won’t raise taxes.

  12. Absolutely right, Keith. Texan policies on low business taxes – or, anyway, incentives to create jobs – can be very good things. But social services need to be adequate and paid for and Texas shows no inclination to do that properly. Handouts from Washington won’t continue. The right policies, or the closest approximation, are practiced in more and more countries, and they don’t mirror Texas or California.

  13. A year ago my company relocated me to San Francisco from Houston for another job opportunity. The first thing I realized when I got here was that the cost of living is not higher, it’s absurdly higher. When they charge you almost $600 here to register a car you have been registering in Texas for $71, then you have to think again if moving here was a smart financial choice (and this is just one small example). Also, when your spouse has a PhD in Biochemistry with a successful career and can’t find a job for 11 months then there is something not right about moving to California. This is not a relocation destination right now unless you are either young and don’t care yet about building a serious life, or if you are rich. San Francisco is a great city to visit and we love it, we just love building our future more and we are now considering moving back to Texas. You can run all the numbers you want and do all the analyses you can but until you live the Texas/California experience yourself you just don’t have an idea

  14. @ Paul: Thanks. Here is what various countries take and spend as a percentage of GDP. The US is way down if you include just federal spending (with a 12.0% of GDP budget deficit!), but pretty high if you include state, local, and federal spending. Below that is how we spend it, and below that one is how much sates and local governments spend, by state:

    …………………………………………………..

    Government spending as a percentage of GDP
    Public spending / GDP in EuropeThis is a list of countries by government spending as a percentage of gross domestic product (GDP) for the listed countries, according to the 2011 Index of Economic Freedom[9] by The Heritage Foundation and The Wall Street Journal. Tax revenue is included for comparison.

    Country Tax burden % GDP Govt. expend. % GDP
    Timor-Leste[11] 480.0 doubtful? 97.0
    Lesotho 63.1 51.2
    Denmark 49.0 51.8
    Sweden 47.9 52.5
    Belgium 46.5 50.0
    France 44.6 52.8
    Finland 43.2 49.5
    Italy 43.1 48.8
    Austria 42.9 49.0
    Norway 42.1 40.2
    Cuba 41.2 78.1
    Germany 40.6 43.7
    Hungary 40.5 49.2
    Iceland 40.1 57.8
    United States 40.0 (Federal, State Local) 38.9 (Federal Only- doesn’t include3state and local)
    Netherlands 39.8 45.9
    Cyprus 39.2 42.6
    Kiribati[10] 39.0 114.6
    United Kingdom 38.9 47.3
    Portugal 37.7 46.1
    Ukraine 37.7 47.3
    Bosnia and Herzegovina 37.6 50.3
    Slovenia 37.6 44.3
    Luxembourg 36.5 37.2
    Serbia 36.3 44.0
    Czech Republic 36.2 42.9
    Malta 36.0 44.8
    Swaziland 36.0 33.7
    Greece 35.1 46.8
    Poland 34.9 43.3
    New Zealand 34.5 41.1
    Brazil 34.4 41.0
    Russia 34.1 34.1
    Spain 33.9 41.1
    Israel 33.5 42.9
    Moldova 33.4 41.6
    Bulgaria 33.3 37.3
    Barbados 32.9 41.3
    Estonia 32.3 39.9
    Canada 32.2 39.7
    Zimbabwe 31.7 97.8
    Australia 30.8 34.3
    Ireland 30.8 42.0
    Mongolia 30.8 41.0
    Lithuania 30.6 37.4
    Belarus 30.4 49.6
    Dominica 30.4 42.5
    Botswana 30.2 40.2
    Montenegro 30.0 48.8
    Switzerland 29.4 32.0
    Slovakia 29.3 34.8
    Latvia 29.1 38.5
    Liberia 28.6 33.4
    Bolivia 28.5 34.8
    Romania 28.5 37.6
    Japan 28.3 37.1
    Macedonia 28.3 34.5
    Seychelles 28.1 39.8
    Kazakhstan 27.7 26.8
    Saint Lucia 27.5 30.9
    Morocco 26.9 29.1
    United States 26.9 38.9 (Federal Only)
    Papua New Guinea 26.6 35.0
    South Korea 26.6 30.0
    Argentina 26.1 24.7
    Jamaica 26.0 34.3
    Macau 25.9 14.9
    South Africa 25.7 27.4
    Tonga 25.7 29.9
    Saint Vincent and the Grenadines 25.6 34.1
    Georgia 24.9 36.4
    Namibia 24.8 29.0
    Albania 24.3 32.3
    Solomon Islands 24.1 47.3
    Vietnam 23.6 28.8
    Turkey 23.5 23.4
    Croatia 23.3 40.7
    Kyrgyzstan 23.3 29.3
    Samoa 23.0 32.7
    Belize 22.7 28.2
    Djibouti 22.7 40.6
    Tunisia 22.4 27.3
    Turkmenistan 21.8 12.3
    Fiji 21.1 25.0
    Suriname 21.1 25.6
    Maldives 21.0 63.1
    Kenya 20.9 30.1
    Cape Verde 20.6 31.1
    Ghana 20.6 42.4
    Guyana 20.2 48.6
    Vanuatu 19.7 26.4
    Uzbekistan 19.6 31.1
    Trinidad and Tobago 19.4 28.4
    Colombia 19.3 26.5
    Gambia 19.2 26.0
    Mauritius 19.0 25.8
    Tajikistan 18.7 27.5
    Chile 18.6 21.1
    India 18.6 27.2
    Cameroon 18.5 18.5
    Jordan 18.3 36.1
    Senegal 18.3 26.6
    Burundi 18.0 40.0
    China 18.0 20.8
    Nicaragua 18.0 25.0
    Uruguay 17.9 28.0
    Azerbaijan 17.7 31.1
    Zambia 17.5 24.6
    Benin 17.2 23.0
    Armenia 16.8 21.8
    Bahamas 16.8 20.9
    Lebanon 16.6 34.2
    Malawi 16.5 38.0
    Honduras 16.3 21.8
    Togo 16.3 19.5
    São Tomé and Príncipe 16.1 32.9
    Ecuador 16.0 40.8
    Peru 16.0 17.3
    Thailand 16.0 17.7
    Costa Rica 15.6 20.9
    Egypt 15.4 34.0
    Malaysia 15.3 26.3
    Côte d’Ivoire 15.2 19.7
    Dominican Republic 15.0 19.1
    Mali 15.0 21.2
    Tanzania 14.8 25.5
    Guinea 14.7 17.4
    Mozambique 14.2 28.0
    Singapore 14.2 17.0
    Philippines 14.1 17.3
    Venezuela 13.6 34.0
    Rwanda 13.5 26.7
    Mauritania 13.4 29.5
    Indonesia 13.3 19.2
    Sri Lanka 13.3 22.6
    Democratic Republic of the Congo 13.1 22.7
    El Salvador 13.0 20.0
    Hong Kong 13.0 18.6
    Madagascar 12.9 18.5
    Taiwan 12.9 18.5
    Laos 12.5 18.2
    Burkina Faso 12.1 21.6
    Uganda 11.9 17.8
    Paraguay 11.8 14.8
    Federated States of Micronesia 11.5 62.3
    Niger 11.4 23.8
    Guatemala 11.3 13.7
    Comoros 10.8 27.2
    Sierra Leone 10.8 21.0
    Panama 10.6 19.5
    Cambodia 10.5 13.9
    Nepal 10.4 19.7
    Haiti 10.3 18.2
    Guinea-Bissau 10.2 38.8
    Pakistan 10.2 19.3
    Syria 10.2 22.1
    Ethiopia 9.9 19.4
    Gabon 9.9 20.1
    Bhutan 9.0 34.6
    Bangladesh 8.8 15.9
    Mexico 8.2 23.7
    Algeria 8.0 35.4
    Central African Republic 7.9 15.5
    Yemen 7.3 43.0
    Saudi Arabia 6.6 29.1
    Angola 6.1 41.6
    Iran 6.1 28.3
    Nigeria 5.9 30.0
    Chad 5.3 22.1
    Congo 5.3 26.0
    Qatar 4.9 27.0
    Bahrain 4.8 25.7
    Libya 3.4 43.0
    Burma 3.0 8.0
    Oman 3.0 32.6
    United Arab Emirates 1.8 26.4
    Kuwait 1.5 31.8
    Equatorial Guinea 0.9 25.5

    ==============================

    United States Federal, State,
    and Local Government Spending
    Fiscal Year 2010 [3]
    Function Amount
    (billion) Percent
    GDP
    Overall government spending
    Federal, State, Local $5,798.8 39.97
    Spending by major government function
    Pensions $939.2 6.47
    Health Care $1028.8 7.09
    Education $887.3 6.12
    Defense $848.1 5.85
    Welfare $727.3 5.01
    Interest $296.3 2.04

    ==========================================

    State State Spending Local Spending State and Local Spending Combined
    Delaware 9.48% 4.99% 14.47% more
    Virginia 6.81% 8.14% 14.95% more
    Connecticut 8.70% 6.74% 15.44% more
    Texas 6.60% 9.00% 15.60% more
    South Dakota 8.52% 7.27% 15.79% more
    District of Columbia 4.07% 11.79% 15.87% more
    Colorado 6.60% 9.66% 16.26% more
    Nevada 5.82% 10.60% 16.42% more
    New Hampshire 8.82% 7.89% 16.71% more
    North Carolina 8.06% 9.20% 17.26% more
    Maryland 8.88% 8.49% 17.36% more
    Minnesota 7.36% 10.00% 17.36% more
    Georgia 7.23% 10.28% 17.51% more
    Illinois 7.63% 10.08% 17.71% more
    Kansas 8.29% 9.88% 18.17% more
    Missouri 8.72% 9.47% 18.18% more
    Indiana 8.27% 9.91% 18.19% more
    Louisiana 9.69% 8.58% 18.27% more
    Iowa 8.97% 9.32% 18.29% more
    Massachusetts 9.95% 8.37% 18.32% more
    Oklahoma 10.34% 8.17% 18.52% more
    North Dakota 10.76% 7.81% 18.57% more
    New Jersey 9.90% 8.73% 18.63% more
    Arizona 7.58% 11.10% 18.68% more
    Arkansas 10.58% 8.35% 18.92% more
    All states combined 8.64% 10.46% 19.10% more
    Idaho 10.06% 9.13% 19.19% more
    Utah 10.12% 9.11% 19.23% more
    Hawaii 15.30% 3.98% 19.29% more
    Florida 7.47% 12.14% 19.61% more
    Washington 9.19% 10.45% 19.65% more
    Tennessee 7.97% 11.71% 19.68% more
    California 7.79% 12.48% 20.27% more
    Wisconsin 9.58% 10.69% 20.28% more
    Nebraska 7.64% 12.78% 20.42% more
    Oregon 10.25% 10.18% 20.43% more
    Wyoming 9.34% 11.13% 20.46% more
    Pennsylvania 10.23% 10.29% 20.52% more
    Rhode Island 12.59% 8.06% 20.65% more
    Kentucky 12.77% 8.14% 20.91% more
    Montana 12.75% 8.29% 21.05% more
    Michigan 9.47% 11.65% 21.12% more
    Ohio 10.44% 10.86% 21.30% more
    Alabama 10.66% 11.32% 21.97% more
    Maine 13.93% 8.05% 21.98% more
    West Virginia 14.11% 8.29% 22.41% more
    Vermont 14.36% 8.85% 23.21% more
    New York 9.47% 13.84% 23.31% more
    South Carolina 13.19% 10.12% 23.32% more
    New Mexico 14.61% 9.89% 24.50% more
    Mississippi 13.87% 11.89% 25.76% more
    Alaska 19.30% 8.94% 28.24% more

  15. I have lived in Austin for over 20 years and I have loved it for the whole time. But I have to say it has really not what it once was. It is so crowded here you cannot get into a restaurant or a theater to go to the movies on a Friday or Saturday night, and it is really crowded all the other times. The movies are sold out and the restaurants have such a long wait as to be impractical.

    It takes one hour to drive what normally takes 15 minutes (We never had this kind of traffic 10 years ago) if you go at the wrong time.

    If you want to go to Hamiton’s pool to swim, you had better get there in the early morning or you will be sitting in your car waiting for someone else to leave before you can get in. And I mean you will be in a line of cars waiting for people to leave.

    And the music scene isn’t what it was either. SRV and Philip Antone passed and things just aren’t what they were, I am saddened to say. SXSW used to be something we all used to enjoy. I think you would be hard pressed to find many locals at this event anymore. It is a complete mass of people. A wrist band does not ensure your entry into a venue, and you probably will not get a parking space anywhere near where you want to be. It is not fun. We don’t go.

    The people on LinkedIn saying there are “lots of jobs here” are Realtors trying to make a buck. You can’t blame them for trying, but it it sad that they are misleading everyone. There aren’t a lot of jobs here. What there are a lot of is a lot of people who will work for cheap to live here (including a lot of very qualified, highly educated people from the local university) and so entry salaries are deflated.

    Also, there are a lot of applicants for every opening. We were hiring at my company and you would not believe the mass of inquiries that came in.

    It is sad, Austin was the city that the most people moved to last year in the U.S., but they are shutting down our schools for lack of $$. Where are all of the tax dollars from all of the people that moved here?

    You just have to wonder at these articles they keep publishing about how great it is here. I wonder if it is just horrible in other places…? I hope not!

    Don’t get me wrong! I was born and raised in Texas and I love it here. But it is hard to deal with the crowds that have surfaced in recent years when I can remember how it used to be.

  16. There’s the rub: how do you keep pleasant places nice, livable, and not too crowded or expensive?

    Do lots of well-educated young folks go to TX cities like Houston, DFW, San Antonio from other parts of the country as the do to Austin?

Leave a Comment

Your email address will not be published. Required fields are marked *