Texas' Middle Class and the Opportunity Crisis

7/31/2019 Texas' Middle Class and the Opportunity Crisis

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exas middle class didnt just happen. Like much o America in the post-war

period, exas inrastructurerom its schools to its highways to its public

universitieswere built and sustained by public policy and public support. In ad-

dition, the states large natural oil resources helped spur job creation throughout

the 20th century. Unlike other regions in the nation, unions have not histori-

cally played a vital role in propelling exan workers into the middle class. As a

result, the earnings gap between high school and college graduates in exas is

much larger than in some other parts o the country where non-college-educated

workers were able to negotiate decent wages, health insurance, and retirement

benefts through a union. With ew unionized jobs, Texans have relied on higher

educationand the public systems and policies that make a college education a-

ordableto provide economic mobility. Smart investments in public education

in the 1980s and 1990s gave rise to a wave o rst-generation college students.

Obstacles tO GrOwinG and

strenGtheninG texas Middle

class

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T h e A m e r i c A n D r e A m is about working hard in return or decent wages, economic stability,

and being able to provide a better lie or your kids. But the kinds o jobs that can provide a solid

middle-class lie in return or hard work are in short supply in exas. Unemployment is still high,

earnings have been stagnant or a decade, and many workers lack health insurance and retirement

savings to protect them nancially during a serious illness or when they can no longer work.

c o n n e c T w i T h D mo s AT : www.deMOs.OrG

f o l l o w u s AT : @ de M Os _Or G

F ac e b OOk . c OM /de M Os i de as ac t i On

k e e p On t Op OF t h e l at e s t t r e nds and analy s i s

F r OM d M Os at Ou r ne w b lOG , p Oli c y s h Op . ne t

This is a brieng paper in

Dmos Future Middle Class

series and is co-published withCenterforPublicPolicy

Priorities

Under At tAckteX AS' Middlecl ASS And the

opportUnit y criSiS


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u n D e r AT T Ac k : T ex As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s

page 2 of 11

Going orward, exas aces a number o challenges to building and sustaining a strong middle class. Work-

ers at all levels o education have aced stagnant or declining wages over the last decade. One reason is that

job growth has been strongest in the service industry and other sectors where wages are low and employee

benets are limited or non-existent. Across the economy, exas employers are much less likely than those

in many other states to provide their workers with health insurance. Rising out-o-pocket costs and skimpy

plans mean that a amily illness can lead to substantial costs and medical debt. And as employers replace

traditional pensions with 401(k)-type plans, or oer no retirement plan at all, middle-class workers cannot

count on a secure retirement.

At the same time, it has become more costly to raise a amily. Now that a majority o mothers are employed,

amilies must pay or child care. High-quality care or preschoolers is expensive, yet parents ace these costs

early in their working years when their earnings are low. Housing is also more expensive relative to household

income than it was decades ago. Te need or most working parents to have their own vehicle and the high

price o gas urther strain middle-class amily budgets. And because amilies struggle just to cover everyday

expenses, it is hard or them to save and protect themselves in the event o a job loss or other amily crisis.

Challenges to the uture o exas middle class can be seen most clearly in the economic prospects or the

states young people. Today many young workers are earning the same or less than their parents did a genera-

tion ago, dashing hopes or economic mobility. Although a our-year college degree improves job prospects

and lietime earnings, skyrocketing college costs, especially since exas tuition deregulation in 2003, are

making it hard or all but the most auent students to stay in school and graduate. exas college graduates

have high levels o student debt while their earnings have allen over the past decade. Young workers are

increasingly less likely to have access to health insurance and retirement benets through their employers,

with the most dramatic changes occurring in recent years.

Te unraveling o the social compact predated the Great Recession, but the economic crisis hastened itsdemise. Not only did the state lose 320,000 jobs because o the Great Recession, but the economic eects o

those lost jobs reverberated to all corners o the state, particularly the already-strained nances o the state

government. We estimate that the jobs lost rom the recession have reduced state sales tax revenues by over

$540 million, on top o other revenue losses rom the recession, putting thousands more middle-class jobs

at risk. o put this in perspective, that lost revenue could have paid the salaries o over 4,700 teachers or

nearly 3,900 nurses. Recent budget cuts, in response to the Great Recession, will create much more middle-

class job loss.

Now is the time or employers, workers, and policymakers to come together once again to rebuild pathways

to the middle class, create good jobs with air pay and decent benets, and ensure that prosperity is broadly

shared in the next generation.


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u n D e r AT T Ac k : T e x As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s

page 3 of 11

eaRNINgS

Over the last 20 years, earnings or exas workers (ages 18-64) have grown modestly. Ater increasing in the

late 1990s during the economic boom, real median earnings have remained relatively at. Despite the Great

Recession, exas median earnings peaked

in 2009 at $33,280, although last year they

ell to $31,620, roughly where they were a

decade ago. Key to strengthening exas

middle class will be overcoming this wage

stagnation. Earnings in exas are consis-

tently lower than they are nationally. exas

median earnings were 89 percent o thenational level in 2010 (see Figure 1).

educatiOn

In exas as elsewhere, a college degree is

the surest path to a middle-class income.

exas workers with a bachelors or gradu-

ate degree earn more than twice as much

as those with only a high school diploma

($55,080 versus $25,500 in 2010). exas

workers o all education levels experi-

enced earnings gains in the late 1990s butall except those with a our-year college

degree had lower earnings in 2010 than

2000. Bachelors degree-holders ended

the decade at the same earnings level they

attained in 2003. Workers with an associ-

ates degree lost ground throughout the

decade, whereas high school graduates had

an uptick in earnings only to see them all

since 2004 (see Figure 2).

FiGure 2. Median annual earninGs OF texaswOrkers by educatiOn, 1990-2010 (2011 dOlla rs)

FiGure 1. Median annual earninGs OF wOrkersin texas and the u.s., 1990-2010 (2011 dOllar s)

TEXAS UNITED STATES

$25,000

$27,000

$29,000

$31,000

$33,000

$35,000

$37,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

BACHELORS DEGREE OR MORE

ASSOCIATES DEGREE

SOME COLLEGE, NO DEGREE

HIGH SCHOOL DIPLOMA

LESS THAN HIGH SCHOOLCOMPLETED

sou r c e : Dmos analysis of Current Populaon Survey data

sou r c e : Demos analysis of Current Populaon Survey data using 3-year averages.Data not available for Some College, No Degree prior to 1993.


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page 4 of 11

race and ethnicity

As in the rest o the country, median earnings or Arican-American and Latino workers are lower in exas

than those or white workers. In 2010, the typical Arican-American worker earned $30,600 in exas, or75 percent o the earnings o the typical white worker, which were $40,800. At $24,480, median earnings

or Latinos were 60 percent o those or whites. Tis cannot be ignored in a state where 38 percent o the

population is Latino.

Gender

Men still typically earn more than women in exas, but the gap has narrowed considerably. In 2010, median

earnings or exas men were $8,400 higher

than those or women ($35,700 versus

$27,300 when both part- and ull-time

workers are included). Over the last two

decades, mens wages have stagnated whilemedian earnings or women have risen by

23 percent, narrowing the gender gap (see

Figure 3). exas women now earn 77 per-

cent o what men do.

FiGure 3. Median earninGs OF Male and FeMalewOrkers in tex as, 1990 and 2010 (2011 dOllars)

0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

1990 2010

MALE WORKERS FEMALE WORKERS

sou r c e : Dmos analysis of Current Populaon Survey data. Includes both

part- and full-me workers.


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p ag e 5 o f 1 1

Widespread access to well-paying jobs with good health and retirement benets is the cornerstone o a

middle-class lie. Unions have consistently advocated or public policy that promotes a stronger economy

or all, bargaining or better wages and benets, but ew workers in exas are union members. Te lack o

representation may contribute to the state's lower median earnings and reduced rates o health coverage

compared to the nation as a whole.

uniOn MeMbership

exas has historically had very low union participation rates compared with the rest o the nation. Only 5.4

percent o exas workers were union members in 2010, a gure that has changed very little over the past

decade (see Figure 4). Nationally 11.9 percent o workers participated in unions last year36 percent o public-

sector workers (7.6 million) and 7 percent o

private-sector workers (7.1 million).

health insurance

High out-o-pocket medical expenses are

one o the primary causes o bankruptcy

among the middle class, underscoring the

importance o health insurance coverage.

But 27 percent o exas workers lack health

insurance compared to 17 percent nation-ally. Te ranks o the uninsured have grown

steadily as access to employer-sponsored

health insurance has declined. Te propor-

tion o exas workers whose employers do

not provide coverage increased substantially

over the last decade, rom 27 percent in 2000

to 34 percent in 2010.

retireMent saVinGs

Several actors threaten the ability o exas workers to look orward to a secure retirement. Fewer than hal(48 percent) o the states workers have access to a retirement plan at work, a gure that has plummeted

since reaching a high o 61 percent in 2000. But even or workers whose employers do provide retirement

benets, such plans have gradually shited rom pensionswhose costs and nancial risks are borne almost

JoBS aND BeNefITS

FiGure 4. uniOn MeMbers as a percent OF allwOrkers in te xas and the u.s., 2000-2010

0

2%

4%

6%

8%

10%

12%

14%

16%

TEXAS UNITED STATES

sou r c e : Bureau of Labor Stascs, U.S. Department of Labor.Includes both public- and private-sector workers.


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page 6 of 11

FiGure 5. texas wOrkers access tO andparticipatiOn in eMplOyer-spOnsOredretireMent p lans, 1990-2010

exclusively by employersto 401(k)-type

plans that rely on worker contributions

and expose individuals to the vagaries o

the stock market and high ees that eat

away at returns. Nationally, roughly 63 per-

cent o all employer-sponsored retirement

plans are now 401(k)s or similar individual

plans. Nearly 9 percent o exas workers

dont participate in their employer-spon-

sored plan either because they cant aord

to contribute or ail to opt in (see Figure 5).

uneMplOyMent

Since the early 1990s, the unemploymentrate in exas has ollowed the same gen-

eral pattern as unemployment nationally.

Although exas ofcial unemployment

rate was slightly higher than the national

rate during most o that period, it did not

hit the national high o 10.1 percent during

the Great Recession. exas unemployment rate peaked at 8.3 percent at the end o 2010, ater the ofcial

end o the recession, and stood at 8.0 percent as o May 2011.

where the JObs are

Te past 20 years have brought signicantchanges to exas job market. Manuac-

turing and service jobs have accounted

or roughly hal o all employment during

that time, but these two sectors have expe-

rienced diverging trends. Manuacturing

employment declined rom 18 percent in

1990 to 10 percent in 2010, while service

employment increased rom 33 percent to

40 percent (see Figure 6). Manuacturing

jobs are more likely than service jobs to

be unionized, pay decent wages, and oermiddle-class benets.

30%

35%

40%

45%

50%

55%

60%

65%

ACCESS TO AN EMPLOYER PLAN

PARTICIPATES IN AN EMPLOYER PLAN

NO EMPLOYER PLAN


FiGure 6. texas eMplOyMent in ManuFacturinGand serVices as a percent OF the labOr FOrce

M ANU FAC TU RI NG S ERV IC ES

0

5%

10%

15%

20%

25%

30%

35%

40%

45%

1990 2000 2010



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page 7 of 11

exans pride themselves on being able to pass on a better lie to their children, but over the last generation,

this dream has become increasingly out o reach. Even with two parents in the labor orce, amilies struggle

to meet the high costs o housing and child care, let alone save or a rainy day or invest in the uture.

hOMeOwnership

Homeownership among exas workers

has increased considerably over the last 20

years, even as the growth in homeowner-

ship has slowed nationally. However, even

ater the recent gains, the state's homeown-

ership rate still lags behind the nation's.

Ater reaching a peak o 66 percent in 2007,

the Texas homeownership rate has declined

a ew percentage points since (see Figure

7). exans are devoting a larger share o

income to housing costs: in 2008, nearly a

third o exas homeowners (31 percent)

spent 30 percent or more o their income

on housing.

child care

Child care can be one o the largest expenses amilies ace, in some cases equaling or exceeding housing

costs. On average, ull-time care in a child care center in Texas costs $7,647 a year or an inant and $6,454 or

a our-year-old. For a amily with two children (an inant and a preschooler), the total cost o ull-time center

care averages $14,101 annually or 22 percent o amily income or a couple earning median wages. Care in

a amily child care home costs somewhat

less (see Figure 8).

FiGure 7. hOMeOwnership aMOnG wOrkersin texas a nd the u.s., 1990-2010

c hi l D c Ar e c e nT e r

f Am i l y

c hi l D c Ar e hom e

Ia,-m $7,647 $5,970

4ad,-m $6,454 $7,661sou r c e : Naonal Associaon of Child Care Resource and Referral Agencies,

2011 Child Care in the State of: Texas.

FiGure 8. aVeraGe annual price OFFull-tiMe child care in texas

RaISINg a faMILY

TEXAS UNITED STATES

50%

55%

60%

65%

70%

75%



8/12


page 8 of 11

FiGure 9. Median earninGs OF texas wOrkersaGes 25-34 by educatiOn, 1980-2010 (2011 dOlla rs)

Te trends acing young exans seeking to build and maintain a middle-class lie are worrisome. Over the

last generation, wages have been stagnant or declined or all young workers in exas except or those with

a bachelors or graduate degree. Yet the share o the state's labor orce holding at least a bachelor's degree is

expected to decline rom a quarter o the workorce today to 17 percent by 2040. And while a college degree

provides higher earnings and greater protection against unemployment, college tuition costs have soared

and students are accumulating greater amounts o debt.

labOr Market

In 2010, median earnings or workers ages 25-34 with a bachelors degree or higher were $45,900 in exas

88 percent higher than earnings or a typical high school graduate in the same age range ($24,480). Real

median earnings or young college graduates with a our-year degree ell in the late 1980s and early 1990s.

Ater recovering in the late 1990s, they peaked at $51,000 in 2002 but have allen since. Real earnings or

young workers with an associates degree

were also volatile over the last 30 years and

were lower in 2010 than 1980, although they

have risen in recent years. Young workers

with a high school diploma and those who

did not graduate high school experienced a

slight overall decline in earnings during the

period; over the last decade, their earnings

were stagnant (see Figure 9).

In 2010, the national unemployment rate

or workers under age 25 and not enrolled

in school was 18.4 percentnearly dou-

ble the overall U.S. unemployment rate o

9.6 percent. Unemployment among young

high school graduates is alarmingly high; it

was 22.5 percent nationally in 2010 com-

pared to 9.3 percent among young workers

with a our-year college degree. In exas,

25-34 year olds ace an 8.4 percent unem-ployment rate, lower than the rates o their

peers in other states, but still quite high.

THe fUTURe MIDDLe CLaSS:

a LooK aT YoUNg peopLe

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

BACHELORS DEGREE OR MORE

ASSOCIATES DEGREE

SOME COLLEGE, NO DEGREE

HIGH SCHOOL DIPLOMA

LESS THAN HIGH SCHOOLCOMPLETED

sou r c e : Dmos analysis of Current Populaon Survey data.Data not available for Some College, No Degree prior to 1991.


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page 9 of 11

FiGure 10. annual in-state cOlleGe tuitiOnin texas and the u.s. (2011 dOllars)

cOlleGe tuitiOn

At $6,477 or 2009-10, average in-state

tuition (including ees) at Texas colleges anduniversities is ast approaching the national

average o $6,829. Tuition costs have more

than quadrupled in exas over the past 20

years with the most rapid growth occurring

since tuition was deregulated in 2003 (see

Figure 10). Note that these gures do not

include room and board.

student debt

Nearly 3 out o 5 (58 percent) college gradu-

ates in exas entered the labor orce withstudent debt in 2009, and their average

debt was $20,015. In contrast to national

trends, the percent o exas college gradu-

ates with debt has held relatively steady in

recent years although the amount o debt that students hold continues to grow. Moreover, increasing numbers

o students are accumulating debt without completing a degree, putting them on a shaky path to economic

security and prosperity.

health and retireMent beneFits

Young workers ages 25-34 are more likely than other workers to lack health insurance coverage in exas

a third (34 percent) are currently uninsured.

wo out o ve (40 percent) o young workers

lack access to health insurance through their

employera proportion that has climbed

steadily over the last decade (see Figure

11). Fewer than hal (45 percent) o young

workers have access to employer-sponsored

retirement plans, and most o these plans are

risky and expensive 401(k)-type plans rather

than traditional pensions. About 10 percent

o workers ages 25-34 have access to a retire-

ment plan at work but do not participate.

LACKS HEALTH

INSURANCE

EMPLOYER DOES NOT

PROVIDE HEALTH INSURANCE

0

5%

10%

15%

20%

25%

30%

35%

40%

45%

1998 2002 2006 2010

FiGure 11. health insurance accessaMOnG texas wOrkers aGes 25-34

0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

TEXAS UNITED STATES

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988-89

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992-93

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994-95

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996-97

1

998-99

2

000-01

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002-03

200

4-05

200

6-07

200

8-09

sou r c e : Digest of Educaon Stascs. Figures include required fees.



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page 11 of 11

abOut dMOs

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www.ppp.g

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Texas' Middle Class and the Opportunity Crisis

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