INNOVATION, EDS & MEDS IS OUR FUTURE
By Jim Russell
Towards the end of March 2015, the United States Census Bureau published the latest population estimates for metro areas and counties. A demographer at West Virginia University expressed surprise at the data decline for Ohio County in the Marcellus Shale region, “It’s puzzling, because the natural gas industry is growing in the area.”
When the energy industry booms, we expect the population numbers to follow suit. The same goes for a bust. With oil prices so low, will migrants stop coming to Texas? The housing market in Calgary, Alberta has already gone soft. Logically, the same trend should seize Houston. The ironic situation in West Virginia suggests that the link between the energy markets and population change is not as straightforward as many believe.
Those same recent Census estimates tell the tale of the Texas migration miracle. For 2010-2014, Houston, Dallas, and Austin (in that order) were the top three for net domestic migration. Some have suggested, notably economist Paul Krugman, that the oil and gas industry is driving the trend. Broadly considered, domestic migration should be an indicator of economic health. We move where the jobs are. More indicative of conventional wisdom, we move away from where the jobs aren’t.
If we move away from where the jobs aren’t, New York City is an economic disaster area. Over the same time period (2010-2014) when everyone was moving to Texas, the NYC metro area lost over 500,000 people to domestic migration. However, the Big Apple consistently exports more people than it imports. Good times or bad, everyone flees New York.
Domestic migration patterns tend to be persistent because people are risk averse. Most reside in the same state where they were born. For those who do relocate, the distance is usually short. Few migrations cover long distances and cross state borders. However, these risk takers follow the beaten path. Where many have tread, many more will migrate long after the main attraction is gone.
Referencing historic Census data, much of the country (particularly the Rust Belt) was moving to California during 1955-1960. From 1995-2000, a great exodus out of California was in full swing. A substantial number landed in Texas. Right now, say 2010-2015, Texas looks like the domestic migration magnet that was California 1955-1960. Expect that to persist until economic success pushes Texans to other states seeking opportunity and a better quality of life (e.g. cheaper housing).
California’s and New York City’s chronic out-migration stems from economic dynamism, not decline. Furthermore, the booms and busts have little impact on established patterns thanks to diverse employment. One sector may struggle while others flourish. People still come seeking work despite the drawbacks such as a high cost of living. New York is where one goes to be the best. No one notices all the leavers because immigrants continue to the boost the population.
Immigrants act just like long-distance domestic migrants, following friends and families into established destinations. Gateway cities such as Los Angeles are more enduring than the hotspots luring the native born. So an oil bust would have even less influence on international migration than on domestic. You go to Houston because you know someone living there. The job concerns are secondary, at least on the local scale. The goal is to get to the United States, not Houston, Texas.
Houston is not just a gateway city. It is America’s premier attraction. Indeed, immigrants toil in the oil and gas industry. Health care is also important. From a recent article in the Houston Chronicle:
“About two-thirds of Houston’s Filipinos, many who work in the medical industry, had at least a bachelor’s degree, second only to Indians. Filipinos also have the highest median income of all nationalities, about $95,000 annually, compared to $61,000 for U.S.-born workers in Houston.”
Houston isn’t all oil and gas. Home to the University of Texas M.D. Anderson Cancer Center, the city is a world class medical cluster. In fact, few other places can boast such a tradable strength. On the short list of competitors to the Cancer Center are Johns Hopkins in Baltimore, Maryland; Mayo Clinic in Rochester, Minnesota; and the Cleveland Clinic in Ohio. State of the art research supports unique services that patients will fly in from around the world and pay a premium to receive. In this sense, Houston (as well as Baltimore, Rochester, and Cleveland) exports health care.
Most of the United States offers non-tradable health care. One has to live there to receive the service. Thus, local wages define what patrons can afford. For this kind of medical services, cutting costs is paramount. Which means hospitals can’t raise wages much (if at all) to attract scarce talent. Workers rarely move long distances for low wages.
On the other hand, tradable health care can offer much higher wages for top-tier talent. People migrate for tradable, divergent jobs. To the extent that Texas continues to offer such employment, the rationale for moving to the state remains in place.
Eds and meds, not oil and gas, is drawing highly educated Filipinos to Texas. Houston is much more than its legacy industries. It is a frontier for the current round of economic restructuring sweeping the nation. Instead of technologies making production more efficient, knowledge makes labor more productive and able to work later in life. For an era of demographic decline, such innovations are critical to maintaining economic growth. Such innovations will continue to draw migrants to the Lone Star State, despite the stiff headwinds of low oil prices.
Jim Russell is an economic geographer and the founder of Globalburgh, a company that studies the relationship between migration and economic development. Jim is a past speaker at a Texas CEO Enlightened Speaker Series event, and author of the blog post, Burgh Diaspora.