I recently was asked by the House Select Committee on Economic Competitiveness to offer a perspective on some of the issues affecting Texas’ future performance. The committee’s purpose was to address “principles that … should guide the state’s pursuit of long-term economic growth.”
I am pleased members of the Legislature are thinking in these terms, as it is essential to long-term prosperity.
I focused primarily on three issues that could, if not handled appropriately, result in notable and lasting damage. While one relates to ongoing changes in the Texas population, the other two are choices that, if made, would be self-inflicted wounds. One of the reasons I chose these topics is because the ability to affect them in a meaningful way lies squarely with the Legislature. These are unlike trade, immigration and other concerns that, while vitally important, lie more in the hands of the folks in Washington.
My first area of concern is ongoing shifts in the Texas population and the resulting policy challenges. Despite Texas’ positive attributes and expectations, areas with better-educated workers are achieving superior performance, and long-term success will require continuing improvement in labor characteristics.
As I have noted before, Texas’ demographic patterns are favorable in that large numbers of young people will be entering the workforce at a time the baby boomers are retiring, and there are likely to be tight labor market conditions across of the country. The demographic trends are challenging, however, because much of the growth is concentrated in groups that have historically experienced relatively low levels of educational attainment. If these potential employees fail to receive proper training, this population increase could quickly transform from an asset to a liability.
In the absence of appropriate and aggressive efforts to enhance education, a vicious cycle will ensue. A less attractive and less employable workforce will simultaneously diminish the ability of the state to attract and retain desirable industry and increase demands on the social service system. As a result, fiscal revenues will be lower and needs higher. The future of the Texas economy is defined by the future of the Texas workforce. Meeting this challenge is imperative.
A second concern is potential economic harms of discriminatory social legislation such as the “bathroom bill” that was extensively considered in recent legislative sessions. Regardless of their stated purpose, controversial laws that are perceived to be discriminatory can reduce travel and tourism. A location with any law that has the potential to reduce attendees, for example, can cause professionals who organize conferences and events to avoid that location. Also, scheduling an event in a location with such a law can be interpreted as support for the policy, and some organizations will choose to avoid the appearance.
If the Legislature passes a law viewed as discriminatory against lesbian, gay, bisexual, or transgender people, it is likely some meetings and events would be canceled and some leisure travelers will avoid the state. The resulting reduction in travel and tourism would involve substantial economic costs, which we recently estimated to include the loss of over 35,600 full-time equivalent jobs, a loss that could be expected to rise to almost 59,600 jobs over time. State and local governments would also lose substantial revenue, with annual losses of $176.4 million in state revenue and $84.3 million in local fiscal resources, and rising to $295.2 million and $141.1 million, respectively, over time. I should note these numbers exclude major sports events, concerts, and similar large attractions and don’t even begin to address the potential effects on corporate locations, retentions, and expansions.
Growing an economy and encouraging prosperity is difficult work, and the last thing Texas needs is to shoot itself in the foot over social policy. Any such legislation has the potential to be perceived in a negative light by the kinds of high-value businesses and individuals the state would like to attract from an economic perspective.
A third concern is maintaining economic development programs. The most important key to success in economic development is creating an environment where companies want to locate. This is achieved through a favorable tax and regulatory climate, a fair and predictable judicial system, excellent education and training at all levels, infrastructure that can sustain a growing economy and a desirable quality of life. No incentive program will attract firms to an area that cannot meet their basic needs and provide a viable platform to thrive, but areas without competitive economic development programs are often shut out of the site selection process entirely.
In an ideal world such tools might not be needed, but the fact of the matter is that other states and nations are offering them, and Texas must do so as well if we want to remain competitive.
Texas has a lot of things going for it — a large and growing workforce, abundant natural resources, a central location, a competitive cost of living and excellent incentive programs. We’re improving infrastructure, adding top-tier research facilities and medical schools, and emerging as a center for desirable corporate locations and expansions.
But the state economy is not invulnerable, and optimal growth is not guaranteed. Texas faces intense competition. The future performance of the state economy depends on getting the fundamentals right, prudently using incentives to stay competitive and avoiding actions such as discriminatory social policy that can damage the business environment.
— M. Ray Perryman, president and CEO of The Perryman Group in Waco, is a regular contributor to the Saturday Forum.