Texas economy

Texas economy challenges abortion policy with trade rewards

If Texas is a test of how socially conservative American states will fare economically in the post-Roe world, then they will hold up very well.

More than a year after passing the nation’s most restrictive abortion law, Texas has the most Fortune 500 corporate headquarters of any state. In the latest sign of the Lone Star State’s enduring appeal, Chevron Corp. announced plans to relocate workers to Houston just hours after the U.S. Supreme Court struck down Roe v. Wade.

Other southern and mountain states have attracted Americans in recent years, a trend that has accelerated during the pandemic and spurred growth in cities in Florida, Arizona, Idaho and Utah. These states, led by Republican governors, are now all trying to further restrict abortion, if not outright ban it.

“There will no doubt be people who won’t come to Texas or other southern states because of these policies, but, by and large, these things are determined by dollars and cents,” said Brandon Rottinghaus, professor of political science. at the University of Houston. “Businesses more or less get what they want from Texas, which is low taxes, modest regulation, and the freedom to influence their own destiny.”

For decades, Texas has focused on being a business-friendly state. Its population boom has propelled it to the second largest economy after California, and it is among the fastest growing in the past 20 years. None of the restrictive laws passed by the state legislature and signed by Republican Gov. Greg Abbott threaten its prosperity for the foreseeable future.

Even Austin, long a liberal stronghold, hasn’t experienced a brain drain.

The economic risk is long term. Some state politicians, emboldened by a conservative Supreme Court, are already talking about punishing companies that fund employee travel out of state for procedures. Reproductive rights advocates have warned that in vitro fertilization treatments could also be targeted. This would slowly reduce the influx of people and businesses willing to settle in these places.

For now, low corporate taxes and plenty of incentives outweigh concerns about politics, reproductive rights and deepening inequality.

Texans, whether newcomers or natives, are unlikely to leave. The state is the “stickiest” in the United States, retaining more of its population than any other, according to a study by Pia Orrenius of the Dallas Federal Reserve and Madeline Zavodny of the University of North Florida.

“Very few people are leaving Texas, largely because of the abundant economic opportunity,” the economists wrote, adding that the state has an above-average rate of business formation.

A low cost of living and plenty of space don’t hurt either. Chevron specifically cited falling housing prices in its offer to relocate employees from California, where the median home price is more than double that of Texas.

Diversified economy

The relentless focus on growth has helped diversify the state’s economy beyond energy.

The Metroplex, home to Dallas and Forth Worth, has seen an influx of financial services firms. Houston, once primarily an oil town, is home to the largest pediatric and oncology hospitals in the world. Austin, the capital of Texas, has become a major technology center – Tesla Inc. and Oracle Corp. are among the latest high-profile arrivals.

Although many transplants in Texas have come from more left-leaning places like California and New York, they have proven to be more conservative than expected. Newcomers voted for Republican Ted Cruz in his 2018 Senate re-election at a higher rate than those born in the state, according to a CNN exit poll.

But Roe’s downfall could eventually become a deterrent.

Cutting access to health care can pose problems for companies recruiting talent in the state, according to Shea Cuthbertson, president-elect of Austin Women in Technology, a nonprofit networking organization. State laws will add a financial burden to employers offering travel for care — something startups can ill afford, she said.

“The bottom line is that restrictive health policies are significantly harming people and will negatively impact the tech sector in Texas,” Cuthbertson said via email. “Ultimately, it will take away from diversity of thought, innovation and equity in the workplace.”

The appeal of states like Texas could erode over time, according to Mark Zandi, chief economist at Moody’s Analytics.

“Roe’s overthrow may also have many smaller, but important, hard-to-see economic consequences,” Zandi said. Colleges in states that ban abortion might see fewer applicants from the rest of the country and the world, which tend to be more socially liberal, he said.

Growing inequalities

Economists say the bans will disproportionately hurt low-income groups and minorities.

Professionals working for giants like JPMorgan Chase & Co. or Walt Disney Co. will have travel expenses covered if they need out-of-state abortions, at least until what states are trying to ban this practice. But the majority of women living in states with severe restrictions or bans don’t work for companies that offer this benefit — and Medicaid in most states doesn’t cover abortion.

Research shows that women forced to carry a child to term are four times more likely to live below the poverty line even years after birth. They tend to have lower salaries later in life. About 40% of Texas residents are Hispanic, and the state has one of the largest median income gaps between white and Hispanic residents.

“There will be a negative macroeconomic effect,” said Sarah Miller, assistant professor of business economics and public policy at the University of Michigan’s Ross School of Business.

Miller was among more than 150 economists who submitted an amicus brief to the Supreme Court arguing to uphold Roe v. Wade, saying that access to reproductive care has a positive effect on women’s overall lives.

“It’s going to increase inequality – we’re already seeing that,” she said.