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NRO’s eye on debt and deficits . . . by Kevin D. Williamson.

Paul Krugman Is Still Wrong about Texas



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Paul Krugman continues his campaign to discredit the economic success of Texas, and, as usual, he is none too particular about the facts. Let’s allow Professor K. to lay out his case:

[Texas] has, for many decades, had much faster population growth than the rest of America — about twice as fast since 1990. Several factors underlie this rapid population growth: a high birth rate, immigration from Mexico, and inward migration of Americans from other states, who are attracted to Texas by its warm weather and low cost of living, low housing costs in particular.

. . . But what does population growth have to do with job growth? Well, the high rate of population growth translates into above-average job growth through a couple of channels. Many of the people moving to Texas — retirees in search of warm winters, middle-class Mexicans in search of a safer life — bring purchasing power that leads to greater local employment. At the same time, the rapid growth in the Texas work force keeps wages low — almost 10 percent of Texan workers earn the minimum wage or less, well above the national average — and these low wages give corporations an incentive to move production to the Lone Star State.

What, indeed, does population growth have to do with job growth? Professor Krugman is half correct here — but intentionally only half correct: A booming population leads to growth in jobs. But there is another half to that equation: A booming economy, and the jobs that go with it, leads to population growth. Texas has added millions of people and millions of jobs in the past decade; New York, and many other struggling states, added virtually none of either. And it is not about the weather or other non-economic factors: People are not leaving California for Texas because Houston has a more pleasant climate (try it in August), or leaving New York because of the superior cultural amenities to be found in Nacogdoches and Lubbock. People are moving from the collapsing states into the expanding states because there is work to be had, and opportunity. I’ll set aside, for the moment, these “middle-class Mexicans” immigrating to Texas other than to note that “middle-class” does not broadly comport with the data we have on the economic characteristics of Mexican immigrants. To say the least.

Krugman points out that New York and Massachusetts both have lower unemployment rates than does Texas, and he goes on to parrot the “McJobs” myth: Sure, Texas has lots of jobs, but they’re crappy jobs at low wages. (My summary.) Or, as Professor Krugman puts it, “low wages give corporations an incentive to move production to the Lone Star State.” Are wages low in Texas? There is one question one must always ask when dealing with Paul Krugman’s statements of fact, at least when he’s writing in the New York Times: Is this true? Since he cites New York and Massachusetts, let’s do some comparison shopping between relevant U.S. metros: Harris County (that’s Houston and environs to you), Kings County (Brooklyn), and Suffolk County (Boston).

Houston, like Brooklyn and Boston, is a mixed bag: wealthy enclaves, immigrant communities rich and poor, students, government workers — your usual big urban confluence. In Harris County, the median household income is $50,577. In Brooklyn, it is $42,932, and in Suffolk County (which includes Boston and some nearby communities) it was $53,751. So, Boston has a median household income about 6 percent higher than Houston’s, while Brooklyn’s is about 15 percent lower than Houston’s.

Brooklyn is not the poorest part of New York, by a long shot (the Bronx is), and, looking at those income numbers above, you may think of something Professor Krugman mentions but does not really take properly into account: New York and Boston have a significantly higher cost of living than does Houston, or the rest of Texas. Even though Houston has a higher median income than does Brooklyn, and nearly equals that of Boston, comparing money wages does not tell us anything like the whole story: $50,000 a year in Houston is a very different thing from $50,000 a year in Boston or Brooklyn.

How different? Let’s look at the data: In spite of the fact that Texas did not have a housing crash like the rest of the country, housing remains quite inexpensive there. The typical owner-occupied home in Brooklyn costs well over a half-million dollars. In Suffolk County it’s nearly $400,000. In Houston? A whopping $130,100. Put another way: In Houston, the median household income is 39 percent of the cost of a typical house. In Brooklyn, the median household income is 8 percent of the cost of the median home, and in Boston it’s only 14 percent. When it comes to homeownership, $1 in earnings in Houston is worth a lot more than $1 in Brooklyn or Boston. But even that doesn’t really tell the story, because the typical house in Houston doesn’t look much like the typical house in Brooklyn: Some 64 percent of the homes in Houston are single-family units, i.e., houses. In Brooklyn, 85 percent are multi-family units, i.e. apartments and condos.

Professor Krugman knows that these variables are significant when comparing real standards of living, but he takes scant account of them. That is misleading, and he knows it is misleading.

Likewise, he knows that the rest of the picture is much more complicated than is his claim: “By the way, one in four Texans lacks health insurance, the highest proportion in the nation, thanks largely to the state’s small-government approach.” Is small government really the reason a relatively large number of Texans lack health insurance? Or might there be another explanation?

Houston, as it turns out, is a less white place than Boston (no surprise) and also less white than Brooklyn. All three cities have large foreign-born populations, but Houston is unusual in one regard: It is 41 percent Hispanic, many of those Hispanics are immigrants, and many of those immigrants are illegals. Texas is home to 1.77 million illegal immigrants; New York is home to about one-fourth that number, according to the Department of Homeland Security, and Massachusetts doesn’t make the top-25 list. Despite Professor Krugman’s invocation of “middle-class Mexicans” moving to Texas, the great majority of Mexican and Latin American immigrants to Texas are far from middle class. The fact is that, in the words of a Fed study, “Mexican immigrants are highly occupationally clustered (disproportionately work in distinctive “very low wage” occupations).” Nationally, Hispanic households’ median income is barely more than half that of non-Hispanic whites. And low-wage occupations also tend to be low-benefit occupations, meaning no health insurance. (That is, incidentally, one more good reason to break the link between employment and health insurance.) 

Further, some 28 percent of Texans are 18 years old or younger, higher than either New York or Massachusetts. Younger people are more likely to work in low-wage/low-benefit jobs, less likely to have health insurance — and less likely to need it.

The issues of immigration and age also touch on Professor Krugman’s point about the number of minimum-wage workers in Texas vs. other states. The Bureau of Labor Statistics, which seems to be his source for this claim, puts the average hourly wage in Texas at 90 percent of the national average, which suggests that wages are not wildly out of line in Texas compared with other states. (And, again, it is important to keep those cost-of-living differences in mind.) In general, I’m skeptical of this particular BLS data, because it is based on questionnaire responses, rather than some firmer source of data such as tax returns. People may not know their actual wages in some cases (you’d be surprised), and in many more cases might not be inclined to tell the truth about it when the government is on the other end of the line.

Interestingly, the BLS results find that, nationwide, the number of people being paid less than minimum wage — i.e., those being paid an illegal wage — was 40 percent higher than those being paid the minimum wage. What sort of workers are likely to earn minimum wage or less than minimum wage? Disproportionately, teenagers and illegal immigrants. You will not be surprised to learn that just as Texas has many times as many illegals as New York or Massachusetts, and it also has significantly more 16-to-19-year-old workers than either state.

Another important fact that escapes Krugman: The fact that a large number of workers make minimum wage, combined with a young and immigrant-heavy population and millions of new jobs, may very well mean that teens and others who otherwise would not be working at all have found employment. That is a sign of economic strength, not of stagnation. New York and Massachusetts would be better off with millions of new minimum-wage workers — if that meant millions fewer unemployed people.

All of this is too obvious for Paul Krugman to have overlooked it. And I expect he didn’t. I believe that he is presenting willfully incomplete and misleading information to the public, and using his academic credentials to prop up his shoddy journalism.

ADDENDUM:

Also, Professor Krugman owes his readers a correction, having written: “almost 10 percent of Texan workers earn the minimum wage or less, well above the national average.” Unless I am mistaken, that is an undeniable factual error: The number of Texas workers earning minimum wage is about half that, just over 5 percent. The number of hourly workers earning minimum wage in Texas is nearly 10 percent, but hourly workers are, in Texas as everywhere, generally paid less than salaries workers. But hourly workers are only about 56 percent of the Texas work force. Can we get a correction, New York Times

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism,published by Regnery. You can buy an autographed copy through National Review Online here.


Tags: General Shenanigans , Intellectual Malpractice , Paul Krugman , Unemployment


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