Executive Summary March 2017

By Ani Turner, Altarum Institute The Business Case for Expanding Opportunity and Equity in Texas: Race, Income, and Economic Growth

Changing Composition of Texas Working Age Population 2015 2050

54% 43% 39% Educational achievement past high school would increase state earnings by more than already lags behind employer demand. 50 percent, or $335 billion, increasing Texas 26% Businesses in Texas import more than economic output by nearly $2 trillion – an 90,000 people with a post-secondary increase that is more than the current GDP of 7 12% 10% 9% education each year from outside the state. Canada, Australia, Korea, Spain, or Mexico. 6% By 2020, 62 percent of jobs in Texas are Higher earnings mean more spending on expected to require some post-secondary goods and services. A $182 billion increase 8 White Black Hispanic Other education. Today, 61 percent of White, 52 in earnings would mean about $18 billion percent of Black, and 37 percent of more in food purchases, $5 billion in apparel Hispanic adults in Texas have some and services, $24 billion in cars, gas, and The Texas working age 9 With low taxes and costs of living, educational attainment, fewer employment post-secondary education. As Hispanics transportation expenses, and $7.4 billion in population (age 18-64) is 13 a friendly business climate,1 and ample opportunities, and less financial security become a larger share of the workforce, the entertainment. By 2050, closing earnings projected to grow by 6.8 land and natural resources, the Texas than the average White child.4 As today’s shortfall in educational credentials will gaps would be associated with $34 billion million people, a growth economy has been growing faster than the children of color become the majority adult increase unless these achievement more in food, $9 billion in apparel and of more than 40 percent, national average for the past four decades. population, their life outcomes will define gaps are closed. services, $45 billion in transportation, and and is expected to shift A growing population that is younger and the way the Texas workforce, customer Finally, earnings are a good summary $13.6 billion more in entertainment spending. from predominantly White more diverse than the national average is a base, neighborhoods, and communities measure of gaps because they reflect the Earnings also bring in more tax revenues and to predominantly Hispanic. tremendous potential asset for continued evolve. The economic stakes, along with combined effect of many areas where there decrease the need for social services economic vitality in the decades ahead. opportunities for significant gains, are high. are disparities, including education, health, spending, improving the fiscal outlook for the However, the youngest and fastest-growing As we show in this brief, even a modest employment opportunities, and incarceration state. In 2015, closing earnings gaps would acceleration in improvements in life rates. The average Hispanic person in Texas mean nearly $14 billion more in state and groups in Texas, those that will dominate the 14 workforce in the near future, are also those outcomes for these groups represents earns half what his or her White counterpart local tax revenues. By 2050, the additional that are currently furthest behind in billions of dollars in additional earnings, earns, while Blacks on average earn about $335 billion in earnings would generate more tax revenues, and purchasing power 40 percent less and Asians earn about 20 than $25 billion in additional state and local education, health, earnings, and financial 10 assets.2 The ability of businesses and the in the state. percent less. Median net worth, which tax revenues. overall economy of Texas to grow depends affects the ability to respond to unexpected Examples of current gaps in expenses or to invest in a home, education, Which path into the future? on accelerating progress in closing today’s Texans have a significant opportunity to gaps in educational achievement and opportunity and life outcomes or business, ranges from $91,000 for 11 improve educational outcomes and support a earnings potential for these groups. One-third of Hispanic and Black children Whites to $28,000 for Hispanics. in Texas today live in poverty, compared to vital economy long into the future. Beyond By 2050, Texas is projected to grow Examples of potential economic earnings, higher education is associated with from about 27 million people to more than 11 percent of White and 12 percent of 5 gains from closing gaps better health, longer life, less likelihood of 3 Asian children. Hispanic and Black 40 million people. Virtually all of this Closing gaps in education and health being incarcerated, and more volunteering, growth comes from people of color, mostly children are also more likely to live in Research reduce the current gaps in earnings. If the charitable donations, and civic involvement.15 Supported by: people of Hispanic origins. The Texas neighborhoods of concentrated poverty. Hispanic and Black adults are less likely to average person of color in Texas achieved Groups around the state are already working age population (age 18-64) is the average earnings of their White implementing policies and programs that are projected to grow by 6.8 million people, a be homeowners and more likely to be incarcerated than their White counterparts. counterparts at each age group, total successfully reducing educational gaps and growth of more than 40 percent, and to shift Texas earnings would increase by about improving life outcomes.16 Supporting and from predominantly White to predominantly High school graduation rates have improved in Texas in recent years, but gaps one-third, or about $182 billion in 2015. investing in these initiatives as individuals, Hispanic. The corresponding increase in the state’s employers, and communities is not only the The average Hispanic or Black child in remain – 93 percent of White, 95 percent of Asian, 84 percent of Black, and 86 total economic output would be $420 right thing to do, it can create a stronger and Texas today is more likely to be born into an 12 6 billion. By 2050, closing earnings gaps more prosperous Texas for all. environment leading to poorer health, lower percent of Hispanic students graduate. The opinions expressed in this report are those of the author(s) and do not necessarily reflect the views of Greater Texas Foundation. GreaterTexasFoundation.org/altarum.org 1 Executive Summary March 2017

1 Texas ranks in the top 10 in the Tax Percent of Workforce with Some Post Secondary Education Foundation's State Business Tax Climate Index, has ranked either 1st or 2nd in the 10 years of 62% CNBC's Top States for Business ranking, and Employer demand in 2020 consistently ranks 1st in the Best and Worst State Rankings in Chief Executive magazine’s annual Hispanics 37% survey. 2 Murdock, Steve H. and Michael E. Cline, Mary Blacks 52% Zey, P. Wilner Jeanty, Deborah Perez, Changing Texas: Implications of Addressing or Ignoring the Texas Challenge, Texas A&M University Press, Whites 61% 2014. 3 Texas Demographic Center, Texas Population Projections Program, 2014 Population Educational achievement past high school would increase state earnings by more than Projections by Age, Sex, and Race/Ethnicity, 2010-2050, middle series (assumes in-state already lags behind employer demand. 50 percent, or $335 billion, increasing Texas migration continues at only half the pace seen Businesses in Texas import more than economic output by nearly $2 trillion – an from 2000 to 2010). http://osd.texas.gov/Data/TPEPP/Projections 90,000 people with a post-secondary increase that is more than the current GDP of 4 Center for Public Policy Priorities, Texas Kids 7 education each year from outside the state. Canada, Australia, Korea, Spain, or Mexico. Count Project, State of Texas Children 2016: By 2020, 62 percent of jobs in Texas are Higher earnings mean more spending on Race and Equity, May 2016. 5 Annie E. Casey Foundation KIDS COUNT Data expected to require some post-secondary goods and services. A $182 billion increase Center, http://datacenter.kidscount.org/. education.8 Today, 61 percent of White, 52 in earnings would mean about $18 billion Accessed May 9, 2016. percent of Black, and 37 percent of more in food purchases, $5 billion in apparel 6 Four-Year Regulatory Adjusted Cohort Graduation Rate, School Year Hispanic adults in Texas have some and services, $24 billion in cars, gas, and 2013-14.Washington, DC: U.S. Department of post-secondary education.9 As Hispanics transportation expenses, and $7.4 billion in Education, 2015. become a larger share of the workforce, the entertainment.13 By 2050, closing earnings 7 Hunt, Woody L, Chairman, Higher Education Strategic Planning Committee, “The Future of shortfall in educational credentials will gaps would be associated with $34 billion Higher Education in Texas” presentation slide increase unless these achievement more in food, $9 billion in apparel and 18. Cites 2011-2013 U.S. Census Bureau American Community Survey data. gaps are closed. services, $45 billion in transportation, and 8 Carnevale, Anthony P., Nicole Smith, and Jeff Finally, earnings are a good summary $13.6 billion more in entertainment spending. Strohl, “Recovery: Job Growth and Education measure of gaps because they reflect the Earnings also bring in more tax revenues and Requirements through 2020, State Report,” Georgetown University Public Policy Institute, combined effect of many areas where there decrease the need for social services Center on Education and the Workforce, are disparities, including education, health, spending, improving the fiscal outlook for the June 2013. 9 Murdock, Steve H. and Michael E. Cline, Mary employment opportunities, and incarceration state. In 2015, closing earnings gaps would Zey, P. Wilner Jeanty, Deborah Perez, Changing rates. The average Hispanic person in Texas mean nearly $14 billion more in state and Texas: Implications of Addressing or Ignoring the 14 Texas Challenge, Texas A&M University Press, earns half what his or her White counterpart local tax revenues. By 2050, the additional 2014, Table 4.9, page 54. earns, while Blacks on average earn about $335 billion in earnings would generate more 10 PolicyLink/PERE National Equity Atlas, 40 percent less and Asians earn about 20 than $25 billion in additional state and local economic indicators for Texas, 10 http://nationalequityatlas.org/indicators percent less. Median net worth, which tax revenues. accessed March 21, 2016. affects the ability to respond to unexpected 11 Corporation for Enterprise Development, expenses or to invest in a home, education, Which path into the future? Assets & Opportunity Scorecard, Texans have a significant opportunity to http://scorecard.assetsandopportunity.org/latest or business, ranges from $91,000 for /state/tx Accessed May 29, 2016. In 2011 Whites to $28,000 for Hispanics.11 improve educational outcomes and support a dollars, calculated by Haveman Economic vital economy long into the future. Beyond Consulting using the Survey of Income and Program Participation. Examples of potential economic earnings, higher education is associated with 12 Author’s calculations based on current gains from closing gaps better health, longer life, less likelihood of earnings gaps, middle series population projections from the Texas Demographic Closing gaps in education and health being incarcerated, and more volunteering, Center, and GDP projections from the Texas 15 reduce the current gaps in earnings. If the charitable donations, and civic involvement. Comptroller of Public Accounts Fall 2015-16 average person of color in Texas achieved Groups around the state are already Texas Economic Forecast. 13 Bureau of Labor Statistics Consumer the average earnings of their White implementing policies and programs that are Expenditure Survey. counterparts at each age group, total successfully reducing educational gaps and 14 The Tax Foundation estimates Texas collects Texas earnings would increase by about improving life outcomes.16 Supporting and 7.6 percent of income in state and local taxes. http://taxfoundation.org/state-tax-climate/texas one-third, or about $182 billion in 2015. investing in these initiatives as individuals, 15 Trostel, Philip for the Lumina Foundation, It’s The corresponding increase in the state’s employers, and communities is not only the Not Just the Money: The Benefits of College total economic output would be $520 right thing to do, it can create a stronger and Education to Individuals and Society. 16 12 Turner A, Beaudin-Seiler, B, “Programs for billion. By 2050, closing earnings gaps more prosperous Texas for all. Expanding Opportunity and Equity in Texas,” March 2017.

GreaterTexasFoundation.org/altarum.org 2