Texas ra~ . OF rt'X_~i'l'fl£11s1r Ar .411".,. S[p r11 J O G 1983 TheUniversityofTexasatAustin 6EN£f1A LLIBRARIES 201 The State of Small Business in Texas Susan Goodman and Victor L. Arnold 207 Demographic Change and Economic Performance in Texas Metropolitan Areas Bruce Renfro and Joseph E. Pluta 213 Ahead for the Economy: The View from Late Summer George A . Christy 219 Can Taxes on Natural Resources Be Exported? Charles E. Mclure, Jr. 223 Women in the Labor Force in Texas Rose M. Rubin 229 Hazardous and Toxic Substances in U.S.-Mexico Relations Howard G. Applegate and C. Richard Bath 235 Effects of the 1982 NFL Strike on Attendance in Sunbelt Cities Stan Atkinson, JeffMadura, and Charles Keuthan 238 The Business of Hunting in Texas D. Gary Carman 243 Regional Shifts in Lumber Production: Implications for the Rail Industry Michael W. Babcock and H. Wade German -246 Off-System Sales and the Natural Gas Policy Act Eric R . Hundahl September-October 1983 . Texas Business Review reports the results of research in business the social sciences, and .th~ physical sciences in language that is readily unde;standable. Our readership includes policy makers in government, members of the busi­ness c~mmunity, university faculty, and the general public. Articles focus on topics of special interest to readers both in Texas and throughout .the Southw~st and South. These topics include energy, inflation, ma~ufacturu:g, populat10n, labor, public policy, transportation, the small business, reg10nal economic development, and other related areas. Because Texas Business Review encourages a free exchange of ideas op~mons expressed ~ articles are those of individual authors and not neces: sanly those of the editors or the Bureau of Business Research. Texas BUSINESS The Bureau of Business Research • ev1ew The University of Texas at Austin Vol. 57, No. 5 September-October 1983 Bureau of Business Research Victor L. Arnold , Director Review Staff Joseph E. Pluta, Editor Lois Glenn, Publications Manager Charles F. Dameron, Jr., Managing Editor Mary Jo Powell, Editorial Assistant Mildred Anderson, Data Compilation Jean Stenger, Computer Graphics Robert T. Jenkins, Production Assistant Joan F. Dameron and Meade E. Collard , Compositors Editorial Advisory Board Vernon M. Briggs, Jr. Cornell University George G. Daly University ofHouston John F. Due University ofIllinois Peter C. Frederiksen Naval Postgraduate School Malcolm Gillis Harvard University Robert W. Gilmer Tennessee Valley Authority John Stuart Hall Arizona State University Jared Hazleton Texas Research League William H. Leahy University ofNotre Dame Charles G. Leathers University ofAlabama Edward J. Malecki University of Florida Charles E. McLure Stanford University Edward M. Miller Rice University Jerome Olson University of Texas at A ustin Thomas R. Plaut University of Texas at A ustin James P. Rakowski Memphis State University James A. Richardson Louisiana State University R. Lynn Rittenoure University of Tulsa William J. Serow Florida State University Joseph A. Ziegler University ofArkansas Subscription rate: $20.00 per year. Single copy: $3.50. Published six times a year . Second-class postage paid at Austin, Texas. Publication number 540-400. ISSN 0040­4209. Copyright © 1983, Bureau of Business Research, University of Texas at Austin. Address manuscripts to Editor, Texas Business Review, P.O. Box 7459, Austin, Texas 78712. Address subscription inquiries to Sales Office, Bureau of Business Research, P.O. Box 7459, Austin, Texas 78712. Telephone: 512-471-1616. Postmaster: Send address changes to Texas Business Review, P.O. Box 7459, Austin, Texas 78712. Texas Business Review is indexed in Marketing Information Guide and Public Affairs Information Service and is available on microfilm from University Microfilms. Permission to photocopy for internal or personal use or the internal or personal use of specific clients is granted by the Bureau of Business Research for libraries and other users registered with the Copyright Clearance Center (CCC), provided that the base fee of $1.00 per copy of the article, plus .10 per page, is paid directly to CCC, 21 Con­gress Street, Salem, MA 01970. Special requests should be addressed to Lois R. Glenn. 0040-4209/83 $1.00 + .10. The State of Small Busi11 The creation and retention of small businesses in the United States is one of the most important economic devel­opment issues of concern to government at all levels and to business in the 1980s. Small businesses have played an im­portant economic role since the founding of the country, and the entrepreneurial spirit continues to pervade the American business community. Because of the significant job-creation effects attributable to small firms, economic development agencies at all levels of government have justified the use of public monies for assisting small busi­nesses as part of broader economic development strategies. In Texas, too, economic development is a priority for the 1980s. While the state is often cited as one with a prom­ising climate for small business, few financial programs are available for such enterprises. Existing programs are not specifically aimed at small businesses, but programs de­signed exclusively for them might be feasible for economic development. The Small Business Environment As a result of demographic changes that occurred in the 1970s and into the 1980s, Texas has become home to grow­ing industries, especially those involved in electronics, information, and computer technology. Adequate transpor­tation facilities, labor force characteristics, access to raw materials, and the absence of state corporate and personal income taxes are incentives that lure companies to many Texas cities. In addition to attracting large companies, the relatively strong business environment encourages the cre­ation and expansion of smaller firms. In its October 1982 issue, INC., a periodical dealing with issues of importance to entrepreneurs and small businesses, Susan Goodman is Research Associate at the Bureau of Business Research and Victor L. Arnold is Director of the Bureau ofBusiness Research, University of Texas at Austin. SEPTEMBER-OCTOBER 1983 in Texas Su~an Goodn1an 'ictor L. Arnold gave Texas its top rating for vitality of the small business environment. 1 Five categories were used to rank the states: capital resources, labor, taxes, business activity. and state government support. Texas fared well in the analysis, with strong capital resources and labor, as well as a low tax burden (see table 1). State support for small business re­ceived equal weighting with capital resources in the scoring system, since experts consider these two factors critical to investment decisions. Emphasis on High-Technology Industries in Texas As the Texas economy is relatively dependent on oil ex­ploration and production, the strength of the economy is greatly affected by variations in world oil prices. Conse­quently, recent governors have urged that the economy he diversified into areas other than oil exploration and produc­tion. Efforts by former Governor William P. Clements and present Governor Mark White to emphasize economic devel­opment through long-range planning and task force studies reveal this concern with the changing economic environ­ment in Texas. The Texas 2000 Commission and the Task Force on Emergency Jobs and the Unemployment Trust Fund are recent attempts to examine current economic development issues at the top level of state government in order to propose recommendations for change. Texas 2000 Commission The Texas 2000 Commission, created by Go\'ernor William P. Clements in April 1981 to make rccommenda· tions on long-range development strategies for Texas. stressed, in its final report, the need for the diversification of the state's economy, especially into high technology and information systems. One of the major issues put before the commission was the effect that the burgeoning population rate would have on a variety of important concerns. includ­ ~01 ing the economy, energy, agriculture , relations with Mexi­co, government finance, research and development, trans­portation, and water. Predicting that 3.2 million people would enter the Texas labor force during the 1980s and 1990s, the commission estimated that 164,000 new jobs would be needed each year to provide employment oppor­tunities for those looking for jobs. 2 In its examination of small business, the commission noted that a large percentage of firms in two important Texas industries, conventional energy production and in­formation technology, employ fewer than twenty persons. Consequently, the commission suggested that the petro­leum and information technology industries might be tar­gets for heavy capital investment. The present downturn in the Texas oil business suggests that small high-technology businesses will assume a large role in future economic development planning in Texas. Governor's Task Force on Emergency Jobs and the Unemployment Trust Fund To deal with the solvency of the Unemployment Com­pensation Trust Fund and to strengthen the lagging econo­my, Governor Mark White created the Task Force on Emer­gency Jobs and the Unemployment Trust Fund in January of 1983. The Job Training and Education Committee of the task force is investigating mechanisms to create high­technology jobs in Texas and has given priority to targeting specific technological companies for developmental pur­poses, exploring the use of state and local retirement funds as possible sources of capital, encouraging banks to develop capitalization programs for emerging technologies, and exploring public financing to support the establishment of new technology firms. 3 In stressing the need for a concerted program for eco­ nomic development at the state level, the task force sup­ ported legislation (Senate Bill 105) that renamed the Texas Industrial Commission and made it the Texas Economic Development Commission. The task force recommended the establishment of an lnteragency Task Force on Eco­nomic Development to exchange ideas and information and coordinate programs among state agencies; it also recom­mended that math and science receive greater emphasis in secondary and higher education. Successful High-Technology Firms The success of many small high-technology firms in Texas is documented in the INC. Private 500, a ranking of the fastest growing small companies in the United States that was included in the December 1982 issue of INC. Based on growth in sales and employment from 1977 to 1981, the companies included in this list share many qualities, including youth, productivity, and profitability. More than 20 percent of these firms (115 in all) are based in computer, electronic, or information technology. More important is their contribution to employment gains: from 1977 to 1981, the overall size of the work force in these top 500 firms increased by 315 percent, while the work force of Fortune 500 firms increased by only 2 per­cent over the same time period.4 Thirty-nine Texas firms are included in this list, placing Texas second only to Cali­fornia, which has 84 companies included in the rating. Nine out of the 39 firms in Texas are related to high-technology and information technology industries (see table 2). Small Business in Texas The exact number of small businesses in Texas is dif· ficult to ascertain, in part because of the ambiguity of the legislative definition of a small business, which allows two sets of criteria to be used in designating a small business: employment (fewer than 100 employees) or sales (less than $1 million in annual gross receipts). The employment size criterion, however, is most often used to distinguish small businesses from their larger counterparts because of the effect of inflation on the amount of sales. Several Table 1 Top Ten Small Business Climates, as Ranked by INC. Magazine, 1982 Small Business In- Commercial vestment Corporation Taxes on State Rank Bank loans as percentage of assets and ind us trial loans per capita (in dollars) fi nancing for each 1,0 00 population (in dollars) State programs Average weekly wage (in dollars) Percentage of workers in unions each $ 1,000 of personal income (in dollars) Texas l 54.8 2,527 3.90 DL• 328 11 9 8 California Colorado 2 3 64.7 57.9 1,468 1,262 3.20 3. 10 DL,LGt none 339 326 27 18 11 2 11 3 Florida New Hampshire Kansas Arizona Oregon Oklahoma Washington 4 5 6 7 8 9 10 49.5 63.2 48.4 62 .6 58.8 52.8 58.9 598 588 1,082 888 1, 112 1,921 1,382 1. 20 1.80 1.40 0 .60 1.80 1.20 0.90 none L G none none DL DL none 26 5 256 325 3 17 352 329 4 05 12 16 1 5 16 26 l 5 34 97 92 100 133 114 102 109 0 DL : direct loans. tLG : loan guarantees. Source: Bruce?· Posn~r, " A Repor.t ~n the States: INC. 's Second Annual Study Rates 50 Small Business Climates," IN C. 3 (October 1982): 96-97 · Reprinted with the perm1ss1on of INC. magazine, October 1982. Copyright © 1982 by INC. Publishing Company 38 Commerce Wharf, Boston, MA 02110. ' entities (including the U.S. Bureau of the Census, various state agencies, and Dun and Bradstreet) collect information on the number of small businesses in Texas. Although their numbers differ slightly, it is estimated that 300,000 Texas businesses have 100 or fewer employees. Dun and Brad­street files estimate 299 ,000, and the Bureau of the Census reports 293,700 establishments with 100 or fewer em­ployees in 1980. 5 According to the unemployment tax records of the Texas Employment Commission, 97 .1 percent of all busi­nesses in Texas employ 100 or fewer employees. Of these businesses, more than 80 percent have fewer than 20 employees. These data are complemented by similar infor­mation presented in County Business Patterns-1980, published by the U.S. Bureau of the Census. According to these data, small businesses employing 100 or fewer em­ployees account for 97. 7 percent of all business establish­ments in Texas; 85.9 percent of all establishments, or 258,462 firms, employ fewer than 20 people.6 Census data also reveal that in 1980 56. 7 percent of the Texas work force was employed by small businesses with 100 or fewer employees, while 26.2 percent of the work force was employed by firms with fewer than 20 employ­ ees. These figures are consistent with national figures, as approximately half of the U.S. work force is employed by small businesses. 7 In Texas the agriculture and service sectors are com­ posed primarily of small businesses with fewer than 20 employees (see table 3). Small businesses account for 61.4 percent of all manufacturing establishments, yet this classification is so broad that certain industries within the manufacturing and service categories that relate to elec­ tronics, computer, and information technology should be examined more carefully. Within the manufacturing and service sectors, a large percentage of high-technology firms are small businesses (see table 4). The computer and data processing services category is composed almost completely of small businesses, and the surgical instruments and supplies category has the largest concen­tration of high-technology small businesses employing fewer than 100 employees. On average, approximately 80 percent of the high-technology manufacturing establishments employ 100 or fewer employees, while the percentage of businesses with fewer than 20 employees is half of the total number of establish-men ts. Small Business Legislation The most significant piece of legislation concerning small busi­ness and its role in the Texas economy is the Small Business SEPTEMBER-OCTOBER 1983 Assistance Act, passed by the 64th Legislature in 1975. In promoting economic competition, the act stresses the im­portance of small business to the state and spells out in de­tail the types of assistance to be given to small businesses, primarily procurement and technical assistance. Procurement Under the act, each state agency is encouraged to attempt to award 10 percent of its purchases of articles, supplies, commodities, materials, services, or contracts for services to small businesses. Agencies are urged to include small businesses on master bid lists, inform small businesses of state procurement opportunities, waive bond require­ments where feasible, inform entrepreneurs of applicable rules and procedures relating to bidding on and procuring contracts, and monitor the effectiveness of the act itself in improving the ability of designated small businesses to do business with the state. At present, state agencies procure more than 10 percent of their purchases from small busi­nesses. Two bills filed in the 68th legislative session would have raised the percentage to 20 percent or 25 percent of all purchases, but neither passed. 8 In setting aside services to be performed by small busi­nesses through procurement, the Texas Legislature intended that small businesses should attract additional business for their services and products. Although helpful to many firms, this form of assistance does not alleviate problems with capital availability. Texas Industrial Commission Advisory Council on Small Business Assistance The 197 5 act created an advisory council to assist and guide the Texas Industrial Commission in administering the act. This advisory council initially consisted of the execu­tive director of the Texas Industrial Commission and nine Table 2 High-Technology Firms in Texas in the INC. Private 500, 1982 Percentage growth Company (location) CompuShop (Richardson) Metier Management Systems (Houston) Telecommunications Specialists (Houston) KMW Systems (Austin) Kent Electronics (Houston) Webb, Murray, & Associates (La Porte) Setpoint (Houston) Media Recovery (Graham) Tax Logic (Richardson) Rank 6 17 82 101 166 169 282 415 431 in sales 1977-1981 Business description 5,433 Retail computer stores 4,079 Turnkey computer systems devel­opment and marketing 1,305 Telecommunications equipment sales and service 1,119 Computer data communication equipment manufacturing 769 Electronics distributor 747 Loss control systems, engineering construction 504 Industrial process con trol pro­grams development 309 Computer accessories ale and service 294 Computerized income tax processing services Source : "The INC. Private 500," INC. 4 (December 19 82): 39-54. members (six of whom had to be owners or employees of small businesses) appointed by the governor. In 1980 the council sponsored a series of small business conferences in several Texas cities in conjunction with the White House Conference on Small Business. In May 1983, the member­ship of the council was altered to include an officer of a financial institution and an officer of an insurance company in addition to five owners or employees of small businesses and two members of the general public. With finance professionals on the council, more innovative approaches to small business financial assistance may be possible in the future. With the primary responsibility for administering the act, the Texas Industrial Commission provides technical and managerial assistance to small businesses by offering advice and counsel on procurement practices and sound manage­ ment procedures; provides information about the manage­ ment, financing, and operation of small businesses to organizations and agencies ; maintains a small business direc­ tory ; and conducts research to ascertain the means by which the productive capacity of small businesses can be used most effectively. The Business Development Department of the commis­ sion implements these provisions of the act. The depart­ ment can answer questions concerning state policies and programs and offer one-on-one assistance in identifying potential sources of capital. The department also maintains a Small Business Directory, which currently includes more than 2,000 profiles of small businesses in the manufacturing and service sectors. The directory is constantly updated and remains a source of information on small businesses in Texas. 9 Although the Business Development Department has a number of responsibilities, it has a limited budget and a small staff of eight professionals. State Financial Programs The Small Business Assistance Act of 197 5 remains the major indication of Texas policy regarding small business, yet it does not include any provisions for financial pro­grams designed exclusively for small businesses. Two pieces Table 3 Distribution of Small Businesses in Texas, 1980 (Percentage of total establishments) 1-19 Under 100 employees employees Sector 94.5 99.5 Agriculture 74.4 94.0 Mining 86.4 98.0 Contract construction 61.4 88.0 Manufac turing 72.8 94.4 Transportation and public utilities 83.0 98.3 Wholesale trade 86.4 98.6 Retail trade 98.2 87.6 Finance, insurance, and real estate 89. 8 98.3 Services Source: u.S. Department of Commerce, Bureau o~ the Census'. County Business Patterns, 1980, Texas (Washington, D.C .. Government Printing Office, 1982). of legislation, the Texas Rural Industrial Development Act of 1971 and the Development Corporation Act of 1979, enable small businesses to participate in financial programs to a certain extent. These programs were not designed exclusively for small businesses but rather were targeted to encourage industrial location ef(orts; they have, however, been used to finance a number of small business projects. Texas Rural Industrial Development Act Passed by the 62nd Legislature in 1971 , this act estab­lished a loan program enabling industrial development foun­dations in rural areas to apply for long-term, low-interest loans. The Texas Industrial Commission makes loans to qualified businesses from a specially designated revolving fund at an interest rate determined by the commission; the average term of loans under this program is 15 years. De­signed to promote the expansion of industrial, manufactur­ing, and development activity in rural areas, this program is specifically directed at manufacturing establishments. All of the sixteen loans from this program have been made to small businesses. The Texas Industrial Commission can make loans to businesses as long as it contributes no more than 40 percent of the total cost of the project. The remainder of the funds for each project are to be secured locally, most often from Table 4 Distribution of High-Technology Firms by Employment Class Size in Texas, 1980 Percentage Percentage employing employing SIC Industry 1-19 workers 1-99 workers 3 57 Office com puting and 47.0 73.S 361 accounting machinery Electric transmission and 50.0 7 8.5 362 distribution equipment Electrical ind us trial 54.7 89. 0 364 apparatus Electric lighting and 54.7 83.0 36 5 wiring equipment Radio and television 68.5 85.7 366 367 receivin g equipment Communication equipment Electronic components 41. 6 58.2 63.6 84.5 and accessories 369 Miscellaneous electrical 58. 1 79.7 mac hinery, equipment, 379 and supplies Miscellaneous transportation 56. 0 90.6 3 81 equipment Engineering, laboratory, 65.9 88.0 scientific, and research instruments and associated equipment 3 82 Measuring and controlling instruments 57.4 87.8 383 Optical instruments and lenses 38.4 69.2 384 Surgical, medical, and 72.7 91.9 dental instruments and 3 8 5 737 supplies Opthalmic goods Computer and data 70. 3 81.5 88.8 96.6 processing services Source: See table 3. banks and savings and loan institutions, before the commis­sion can approve the project. In the first ten years of operation, the state's share in the program totaled $2.1 mil­lion, or approximately 30 percent of the total project costs of the sixteen loans that have been made under the pro­gram. . The revolving fund from which these loans are made was set up by appropriations from the Legislature; in 1973, $500,000 was appropriated to the fund, and an additional $1 million was added to the fund in 197 5. Consequently, the principal and interest payments on loans made through this program are deposited into the fund. As of July 1983, the balance in this fund stands at $461,712, and no loans have been made since July 1982. Since the act enables the Legislature to appropriate more monies to the fund as it sees fit, this program will continue as long as there is money in the fund. Development Corporation Act of 1979 This act, passed by the 66th Legislature and amended in the 67th, allows Texas communities to take advantage of industrial revenue bond financing in their industrial loca­ tion efforts. Revenue bond financing enables cities to gain access to long-term financing for large projects, such as hotels, as well as to build up a tax and employment base. Since revenue bonds have lower interest rates and are tax free, they are an incentive for industrial relocation proj­ ects.10 Although state funds are not used directly in this pro­ gram, the Texas Industrial Commission must approve all industrial revenue bond issues. Section 22 of the act stresses that issued bonds are not a debt of the state and do not have the pledge of the faith and credit of the state but are payable solely from the revenue generated by the project. Nevertheless, this type of revenue bond financing is often not helpful for small businesses. Because of the pro­ hibitive legal and application costs involved, small busi­ nesses are rarely able to gain access to this type of funding. One solution to this problem is the establishment of um­ brella programs, such as those in Massachusetts, Connecti­ cut, Alaska, and Minnesota, which have been helpful in obtaining revenue bond financing for small businesses. By pooling twenty or more small loans in a bond issue, there­ by spreading the risk and diversifying the portfolio of bonds, a large issue can be sold in the public bond market. The amended version of this act created the Texas Small Business Industrial Development Corporation to serve as the mechanism for the issuance of an umbrella bond for small businesses. Rules and regulations, as well as program guidelines for the corporation, are in existence, and an issue under this program is expected by September 1983. Recent Legislative Initiatives Although many of the bills affecting small business introduced in the 67th legislative session (which met for the 1982-1983 biennium) focused on procurement and regula- SEPTEMBER-OCTOBER 1983 tion of small businesses, an unsuccessful attempt to estab­lish a loan guarantee program deserves attention. Senate Joint Resolution 47 would have required the Legislature to provide for the creation, administration, and implementa­tion of a program by which the state would guarantee all or part of small business loans. 11 In order to fund the pro­gram, the joint resolution proposed that payment of loan guarantees be made from the first unappropriated money coming into the state treasury, but this proposal would have required a constitutional amendment limiting the total paid by the state under the program to $25 million. None­theless, the joint resolution did not clear the Senate Eco­nomic Development Committee or the House Constitu­tional Amendments Committee. In attempting to design a coordinated state strategy to encourage and promote the growth of small businesses and receive recommendations for legislative action, Governor William P. Clements established a Task Force on Small Business in October 1981. Of the four subcommittees created within the task force to investigate specific issues, the Subcommittee on Capital Formation and Retention examined financing alternatives open to the state for pro­moting small businesses. Noting that small businesses often fail as a result of undercapitalization and are often unable to secure loans at favorable interest rates, the subcommittee proposed a rather innovative capital formation and reten­tion plan that would create a separate, nonprofit corpora­tion to implement a financial tax credit plan. 12 The task force recommended a plan whereby corporations could deposit up to 20 percent of their franchise taxes due to the state in a bank and receive dollar-for-dollar credit against the taxes due. These funds would be deposited in a pool fund from which banks would make loans to small busi­nesses at interest rates of 4 percent. As these funds would amount to no more than 30 percent of a loan, banks would finance the remainder of the loan out of regular funds. In effect, this program would result in small businesses being able to obtain loans from banks at a blended interest rate two to three points below the prime rate. The program would be administered by a nonprofit corporation with an independent board of trustees, including representatives of small businesses, financial institutions, and the Comp­troller's Office, to oversee the operations of the program. The task force recommended the use of state funds for the program by estimating that the program would inject as much as $300 million into small businesses with the state taking a small risk in early years and a low risk three to four years after the creation of the program, as state revenues would be significantly increased. Although recommended in the final report to Governor Clements, this type of franchise tax credit program will probably not be used to finance small businesses. A number of assumptions upon which this program is based weaken its chance for success. First, it is difficult to estimate the amount of revenue that would be generated by the creation of small businesses to compensate for the use of monies generated by the franchise tax. Second, the program does not attack the problem of capital availability for small busi­ nesses. Because the state's share in a loan would be only 30 percent, banks would have a great deal of discretion re­garding to whom they would lend the remaining 70 percent of the loan. This program would be unsuccessful if risky businesses were not able to secure financing from commer­cial banks in the first place. Third, one might question the constitutional feasibility of the recommendation; indeed, a constitutional amendment would be necessary to obtain the source of funds for this program. The unsuccessful attempt to establish a small business loan guarantee program in the 67th legislative session hindered any further initiatives for establishing such a pro­gram; no bills were filed to create a loan guarantee program in the most recent ( 68th) session. Senate Bill 105, estab­lishing the Texas Economic Development Commission, was passed, however, and it might be a springboard from which more concerted economic development efforts using small businesses might occur. In his executive budget, Governor White recommended a doubling of the Texas Industrial Commission budget for 1984-1985 from $4.4 million to $9.6 million; this increase would have helped the commis­sion to carry out its mandated duties and would have been used to expand agency operations and to add thirty-two staff members to enhance economic development, small business development, research and planning, advertising, industrial location, and international trade. Although more of a policy statement than a budget document, the gover­nor's budget request for the Texas Industrial Commission is an indication of the importance of strengthening economic development efforts at the state level. (In fact, the legisla­tive appropriation to the Texas Industrial Commission for 1984-1985 is approximately $4.2 million.) Although Texas has been praised as a state with a prom­ising climate for small business, few financial programs are available to small businesses. As existing programs are not specifically directed at small businesses or businesses concentrating in high technology and information tech­nology, programs designed exclusively for these businesses might be feasible for economic development purposes. It is well recognized that economic development is a priority issue in Texas in the 1980s. The role that small business and high-technology firms will play in the diversi­fication of the Texas economy cannot be underestimated, and efforts to design a coordinated state strategy to in­crease the state's comparative advantage could be the cor­nerstone of economic development policy in this decade. Notes 1. Bruce G. Posner, "A Report on the States: INC-'s Second Annual Study Rates 50 Small Business Climates," INC 3 (October 1982): 95. 2. Office of the Governor, Texas 2000 Project, Texas Past and Future: A Survey (Austin: Texas 2000 Commission, June 1981), p. 16. 3. Governor's Emergency Task Force on Jobs and the Unemploy­ment Trust Fund, "Potential Research Topics for Group II-Jobs" (Austin, March 1983, mimeographed). 4. "The/NC Private 500," INC 4 (December 1982): 37. 5. "Small Business Statistics," memorandum from Mario Hernandez, Business Development Department, to Chuck Wood, Executive Director, Texas Industrial Commission, June 10, 1982. 6. U.S. Department of Commerce, Bureau of the Census, County Business Patterns-I 980, Texas (Washington, D.C.: Government Printing Office, 1982). 7. The State of Small Business: A Report ofthe President (Washing­ton, D.C.: Government Printing Office, March 1982), p. 4. 8. Interview with Larry Lucero, Business Development Department, Texas Industrial Commission, Austin, June 23, 1983. 9. Interview with Wardaleen Belvin, Business Development Depart· ment, Texas Industrial Commission, April 4, 1983. 10. For more information on industrial revenue bonds, see Beverly Hadaway, "Industrial Revenue Bond Activity in Texas," Texas Busi­ness Review, January-February 1983, pp. 24-28. 11. Texas Industrial Commission, Business Development Depart· ment, "Final Review of the Actions Taken by the 67th Legislature on Bills Affecting Small and Minority Businesses in Texas," Austin, June 1981. 12. Governor's Task Force on Small Business, Final Report (Austin: Office of the Governor, September 1982), p. 3. Regional Change in the U.S. Brewing Industry Joseph E. Pluta Recent developments in the American brewing industry, including its regional shift over the past three decades and its seemingly frant.ic ~erger activity since 1981, have made the industry one of the more fascinating to study. These developments, along with the absence of a thoroughly .docu­mented account of regional change in the industry, were the primary motivations for this research. In many respects, such as who the leading firms are and what marketing strategies each pursues, the brewing industry of today barely resem~les ~he industry of a mere decade ago. Current events, including t~e consol1dat1.on of the industry, are shaping what is likely to be a vastly different brewing industry in the twenty-first century. Price: $8.00. Published in 1983. 85 pp., paperback. BUREAU OF BUSINESS RESEARCH The University of Texas at Austin P.O. Box 7459 Austin, TX 78712 512/471-1616 Demographic Change and Economic Performan • Ill ~--­ Recent demographic and economic data reveal impor­ tant changes in Texas metropolitan areas. While the three largest standard metropolitan statistical areas (SMSAs) continue to be Dallas-Fort Worth, Houston, and San An­ tonio, Bryan-College Station is now the fastest growing metropolitan area in Texas. The proportion of population change resulting from migration was greatest in Austin but was also very high in Bryan-College Station, Houston, and Tyler. Austin had the lowest unemployment rate in 1981 and the highest percentage change in the number of manufac­ turing plants between 1977 and 1983. Midland had the greatest growth in gross sales between 197 5 and 1981 as well as the highest 1980 per capita income figure. Growth in the value of building construction between 1980 and 1982, however, was highest in some of the state's smaller metropolitan areas, including Galveston-Texas City, Abi­ lene, Victoria, and Sherman-Denison. Diversity in econom­ ic bases and in characteristics of the population account for many of the differences in economic performance among Texas metropolitan areas. In order to compare entities of similar size, we have divided the state's twenty-six metropolitan areas into three categories-large, medium, and small-based on 1980 population levels. 1 The eight metropolitan areas with more than 250,000 persons are grouped in the large category, the ten with between 125 ,000 and 250,000 persons are considered medium, and the eight with fewer than 125,000 people are included in the small category. It should be emphasized that such a division is somewhat arbitrary and Bruce Renfro, formerly Editor of Texas Industrial Expansion news­letter, is now Marketing Director at the Bureau of Business Re· search, University of Texas at Austin. Joseph E. Pluta is Research Economist at the Bureau of Business Research and Editor ofTexas Business Review. SEPTEMBER-OCTOBER1983 Texas Metropolitan Areas Bruce Renfro Jo eph E. Pluta is made solely to divide the total number of metropolitan areas into three nearly equal groups. 2 As a result of such a division, both explicit and implicit comparisons are pre­sumably more meaningful because of similar characteristics of metropolitan areas within each group. Because of size, Dallas-Fort Worth, for example, has a number of character­istics that more closely resemble Houston than, say, either Victoria or Texarkana. In some instances, an individual metropolitan area could just as logically fit into a different category if population limits were altered slightly. Such metropolitan areas as Wichita Falls, Tyler, Odessa, and Laredo, for example, could be considered either medium­sized or small depending on where one chooses to place them. Space limitations preclude comment on every metro­politan area, although complete data on all twenty-six are included in the accompanying tables. 3 The variables chosen are some of the most widely used demographic and economic indicators for local areas and are readily available in standard sources (see tables 1, 2, and 3). Basic data on population, population change, and migration are useful measures of potential market size and relative attractiveness of a metropolitan area. The proportion of the population in the 18-64 age group indicates the percentage of people of working age and, therefore, the potentially productive population. A rela­tively low figure for this variable would indicate that an area has a relatively high dependent population consisting of children and retired persons who are not likely to be in the work force. The proportion of the population age 25 and over with a college education is one measure (albeit an imperfect one) of potential skill levels, even though a productive work force comprises people with many important skills that can be acquired by means other than a college education. Economic data for local areas provide a number of valuable insights into the relative strengths of each metro­politan area. Per capita personal income is a widely used indicator of economic well-being and buying power. Eco­nomic activity is also frequently measured by such variables as the growth in gross sales, the change in the value of building construction, the change in total bank deposits, and the change in the number of manufacturing plants. Two measures important to the economy in general and to the labor force specifically are the unemployment rate and average annual pay. Finally, the percentage change in motor vehicle registrations is included as an indicator important to both the automobile industry and urban planners facing potential traffic congestion problems. Large Metropolitan Areas Made up of eleven counties, the Dallas-Fort Worth SMSA is the largest in Texas according to 1980 population figures. While the Metroplex economy is highly diversified and not overly dependent on any single industry, the largest contributor to personal income in the area is the manufac­turing sector. The area's concentration of light industrial manufacturers includes electronics and computers, aircraft, apparel, oil-field equipment, food processing, automotive transportation, and printing and publishing. Other notable industries include wholesale and retail trade; services; transportation, communication, and public utilities; and finance, insurance, and real estate. Industries that have grown considerably in the area include electronics, trans­portation, and optics. Dallas-Fort Worth ranks relatively high among the state's metropolitan areas in per capita income (third high­est), average annual pay, percentage change in total bank deposits, college-educated population, and in-migration. Although large in size, it ranked only thirteenth in popula­tion growth rate among state metropolitan areas during the 1970s, and the proportion of its population in the produc­tive age group ranked only twelfth. Its percentage changes in gross sales over the later 1970s and in the value of build­ing construction since 1980 were also relatively low com­pared to other metropolitan areas. Percentage change fig­ures, however, conceal the enormous absolute volume of sales, construction activity, and population growth that has occurred in the Metroplex. The most important industries in Houston, the second largest metropolitan area in Texas, are manufacturing, Dallas-Fort Worth ranks high in per capita income, average annual pay, bank deposit growth, college-educated population, and in-migration. wholesale and retail trade, services, and construction. Much of the manufacturing is related to oil and gas in such key sectors as oil-field tools and equipment, petroleum refining, and petrochemicals. Other manufacturing activity is cen- Table 1 Selected Indicators for Large Metropolitan Areas Beaumont- McAllen· Indica tor Dallas-Fort Worth Ho uston San Anto nio Austin El Paso Port Arthur-Orange Corpus Christi Pharr· Edinburg· Demographic Population, 1980 Percen tage change in population, 2,97 4 ,81 9 2,9 04,204 1,071 ,952 536,674 479,899 375 ,497 326,228 283,323 1970-1980 Percentage chan ge in po pulation 25 . l 45 .3 20 .7 48.9 33.6 8.0 14. S 56.l - from migrati o n, 1970-1978 41. 5 62.6 35 .3 68.0 30.3 -25.0 -102.3 27 .J Percen tage of populatio n age 25 and over with college educa ti o n, I 980 20.0 2 2. 0 16.0 28.0 14.0 12.0 14.0 11.0 Percentage of population in 18-64 age gro up, 1981 Econom ic 71.8 70.6 69.3 74.3 65 .9 71.2 67.5 61.9 Pe r capita income (in doll ars), 1980 Unemployme nt ra te, 1981 Percentage chan ge in gross sa les, 11,04 1 4 .7 1 1,861 4 .3 8,445 6.6 9, 1 so 3. 5 6,677 9 .1 10,020 6.9 8,754 6.0 4,8qs 14.0 1975-1981 Percentage change in va lue of building 153.S 203.4 174.3 163.9 108.8 144.1 161.8 182.5 constructio n, I 980-J 982 Perce ntage change in to tal bank 22.7 47.6 41. 7 61.5 1.7 -6.4 19.0 53.8 deposits, 1977-198 1 Percentage change in number of manu­ 84.0 76.S 4 9.4 59.9 38.7 47.3 71.6 77.2 facturing plan ts, 1977-1983 Average annual pay (in doll ars), 1980 Percentage change in motor vehicle 4 .7 15 , 195 7. 6 17,4 60 -2. 5 12,679 41.1 12,608 8.5 11 ,502 -10.3 16,607 7.9 13,969 1.3 9,898 registrations, 1970-198 1 65.9 91. 8 67 .0 100.3 65 .7 43.8 47 .0 88.0 Sou;ce : F(· oAr a _comUpl~te l~st of original sources for e_ach series, see J oseph E. Pluta, Rita J. Wright, a nd Mildred C. Anderson, Texas Fact Book, 984 ustm. n1vers1ty o'f T exas, Bureau of Business Research, 1983). 208 TEXAS BUSINESS REVIEW tered in structural steel, computer technology, food pro­cessing, and printing and paper products. The Houston economy also benefits from key roles played by transporta­tion, communication, and public utilities; mining, especially oil and gas extraction ; and finance, insurance, and real estate. In recent years, Houston has become widely known as an international business center, a leading energy center, a leading medical center, and a leading transportation cen­ter because of its rapidly growing port and air transporta­tion activities. Consisting of six counties, the Houston SMSA grew rapidly during the 1970s; much of the growth was the re­sult of migration. Among the state's metropolitan areas, Houston ranks first in average annual pay, second in per capita income, and third in growth of motor vehicle regis­trations. Largely because of the influx of families with children, Houston ranks relatively low in the percentage of the population in the 18-64 age group. Nonresidents of San Antonio are often surprised to learn that the city ranks tenth in population among U.S. cities. With a 1980 population of 783,296, San Antonio is about the same size as Baltimore. The San Antonio SMSA, which includes Bexar, Guadalupe, and Comal counties, had a 1980 population of 1,071 ,952. In addition to the heavy military influence, the most important sources of personal income in the San Antonio SMSA are wholesale and retail trade, services (primarily health care, private education, and tourism), and manufac­turing. Most of the state's high-technology manufacturing and major financial institutions are located within the Texas Triangle, of which San Antonio is the southwest corner ; the triangle includes Dallar-Fort Worth on the north and Houston on the east. High-tech manufacturing is expected to increase dramatically along Interstate Highway 35 between Austin and San Antonio. Declining oil and gas prices pose less of a direct threat to the San Antonio area because the city never has been dependent on the petro­leum industry in the way that Houston has. Among Texas metropolitan areas, Austin had the lowest unemployment rate in 1981, the biggest percentage change in the number of manufacturing plants over the past six years, and the largest population change resulting from migration. Austin also ranks second in college-educated population and growth in motor vehicle registrations, third Table 2 Selected Indicators for Medium Metropolitan Areas Brownsville-Killeen-Harlingen-Galveston-Longview-Wichita Indicator Temple Lubbock San Benito Texas City Amarillo Waco Marshall Abilene Falls Tyler Demographic Population, 1980 214,587 211 ,651 209,727 195,738 173,699 170,7 5 5 151 ,7 60 139, 192 130,664 128,3 66 Percentage change in population, 1970-19 80 34.3 18 .0 4 9.4 I 5.3 20.3 15.7 .15.J 13 .9 1.6 32.2 Percentage change in population from migration, 1970­1978 37 .7 2.9 25.4 58.2 14.6 54.9 49 .2 14.9 -2,9 00.0 61. 7 Percentage of popula­ ti on age 2 5 and over with college educa­tion, 1980 I 5.0 20 .0 10 .0 I 5.0 16.0 15.0 14.0 16.0 14.0 16.0 Percentage of popula­ tion in I 8-64 age group, 19 8 1 72.0 72. 1 6 2.8 71.3 72.2 74.2 71.6 73.2 74. 1 72.0 Economic Per capita income (in dollars), I 9 80 7 ,227 8,782 5,444 10,424 9,870 8 ,425 8,9 58 9 ,437 9,933 9,278 Unemployment rate, 1981 5.9 4 .5 10 . I 7. 2 4 .5 4 .7 5.9 3.6 4 .0 5. 5 Pe~centage change in gross sales, 1975-19 8 1 113.4 14 2.5 193.6 107.9 126.9 109.8 161.4 122.3 134. 8 I 80.5 Percentage change in value of building con­struction, 1980-198 2 55.8 37.4 58.9 138.0 41 .3 -30.1 49.7 101.1 0.6 77 .7 Percentage change in total bank deposits, 1977-1 9 81 48.9 40.5 76. 1 48.8 56.4 48.0 89.4 116.7 70.7 99.4 Percentage change in number of manufactur­ing plants, 1977-1983 1.7 Average annual pay (in -, dollars) , 1980 11 ,383 _ -3.7 12,338 10,460 -4 .8 I 5,37 3 -8.0 13, 175 -1.0 12,013 11.5 13,9 55 7 .2 12,660 2 .0 12,571 6.2 13, 191 Percentage change in motor vehicle registrations, 19 70-1981 {i6.7J 4 0 .3 ~--.. <:!:'Y> G 52 . 48.9 rg-~ 57 .4 37.7 78.4 _./ • No change. Source : See table 1. SEPTEMBER-OCTOBER1983 209 in proportion of population in productive age groups, and fourth in total population and in population change during the 1970s. The Austin SMSA's lowest rankings are in bank deposit growth and average annual pay. Leading industries in Austin are state and local govern­ment (primarily activities centered on the state capitol and Houston has become widely known as a leading center of international business, energy, medicine, and port and air transportation. the University of Texas), services (primarily private educa­tion and tourism), wholesale and retail trade, and manufac­turing. Austin's recent diversification into manufacturing consists largely of high-technology industry producing such products as communication systems, silicon integrated cir­cuits, digital equipment, navigation instrumentation, oscil­lators, and industrial motors for electric utilities. This entire area of activity should receive an additional boost as a result of the recent announcement that Microelectronics and Computer Technology Corporation (MCC) will locate in Austin. In addition, the Austin central business district is undergoing revitalization with the construction of nu­merous new high-rise buildings that provide more centrally located office space. Medium Metropolitan Areas The Killeen-Temple SMSA, which includes Bell and Coryell counties, is the largest of the ten medium metro­politan areas. Its astonishing growth rate during the early l 970s-a population increase of more than 25 percent be­tween 1970 and 1974, according to Census Bureau esti­mates-ranked the area as the fastest growing metropolitan area in Texas for that period. By 1980, Killeen-Temple had slipped to seventh among Texas metropolitan areas in percentage change in population from 1970 to 1980; the fastest growing area in population now is Bryan-College Station. The 1980 population of Killeen-Temple was 214,587. Killeen-Temple combines two dissimilar economies: the military, centered at Food Hood in the Killeen area, and a diversified economy throughout the remainder of the area based on trade, manufacturing, and medical services. The economy of the metropolitan area as a whole is best under­stood by considering each segment, military and civilian, separately. Because military pay is below both national and state averages, combining military and civilian payments distorts per capita income figures for the region. At first glance, the overall picture of the Killeen-Temple SMSA with respect to average annual pay appears to be consistent with that of areas where social transfer payments, such as social security and welfare, are high, but in reality this impression is not accurate. Approximately half of the area residents draw military pay, a fact that helps to explain Table 3 Selected Indicators for Small Metropolitan Areas Bryan-Sherman-San Indicator Odessa Laredo College Station Denison Angelo Midland Texarkana Victoria Demographic Population, 1980 Percentage change in population, 115,374 99,258 93,588 89,796 84,784 82,636 75,301 68,807 1970­1980 24 .5 36.2 61.4 7 .9 19.3 26.3 9.3 28.0 Percentage change in population from migration, 1970-1978 21.9 -8.5 66. 5 -46.2 33.9 30.6 14.9 n.a. Percentage of population age 25 and over with college education , 1980 12.0 10.0 32.0 13.0 1 5.0 24. 0 12.0 12.0 Percen tage of population in 18-64 age group, I 981 Economic 69.9 6). 7 78.2 74.7 73.6 70.9 71.3 68.6 Per ca pita income (in dollars), 1980 Unemployment rate, 1981 Percentage change in gross sales, 10,271 4 .2 4,774 1I.2 6,703 4 .0 8,727 7.0 9,025 4.1 13,7 61 5.3 7,824 9.8 9,612 4.6 197 5-1981 Percentage change in value of building 229.J 206.0 252.6 51.2 213.7 301.3 119.1 205.8 construction , 1980-1982 Percentage change in total bank 42.8 25.5 71.8 87.2 56.1 78.9 -9. 1 98.3 deposits, 1977-1981 Percentage change in number of manu­ 112.7 113.8 84.9 68.0 62.8 175.7 64.8 70.2 facturing plants, J 977-1983 Average annual pay (in dollars), 1980 Percen tage change in motor vehicle 4.4 15,610 -16.4 10,404 14.6 I 0, 7 3 5 4 .6 13,067 -8.9 11 ,619 -3.3 17 ,136 37.7 12,760 -4.9 13,800 registrations, 1970-1981 82.9 59.5 110. 7 43.4 61.1 91.7 42.9 84.6 n.a.Data not available. Source : See table 1. 210 TEXAS BUSINESS REVIEW Killeen-Temple's ranking of twenty-second among twenty­six in average annual pay. Killeen-Temple also ranked twenty-second among Texas metropolitan areas in percentage change in gross sales from 1975 to 1981, but that ranking partly obscures a healthy growth rate. Retail sales increased 35 percent between Jan­uary 1981 and January 1982. The Galveston-Texas City SMSA, which might be in­correctly stereotyped as an unlikely combination of refin­eries and pleasant beaches, ranked first among all Texas metropolitan areas in percentage change in the value of building construction from 1980 to 1982. The substantial Amoco Oil expansion at Texas City, requiring more than 3,000 workers, helps to account for the region's high rank­ing in both population change resulting from in-migration and average annual pay; the region was fifth in both cate­gories. In spite of the increased construction reflected in the census data, the petrochemical refineries along the complex from Houston to Freeport are running well below capacity. The slump in the petrochemical industry is reflected in the unemployment rate; Galveston-Texas City ranked twenty­first among metropolitan areas in the percentage of the work force unemployed. A bright spot for future growth should be the plans for a major expansion of the Galveston port facilities. High interest rates and declining oil imports have prevented that project from moving as quickly as its backers would like. The Abilene SMSA has shown surpnsmg resilience in spite of the decline in the petroleum industry, a leading area industry. Although the percentage change in popula­tion from 1970 to 1980 (up 13.9 percent) was among the lowest of any of the state's metropolitan areas, Abilene ranked second in three important indicators. The area in 1981 posted a 3.6 percent unemployment rate ; only Austin was lower with a 3.5 percent rate. In percentage change in value of building construction from 1980 through 1982, Abilene was second to Galveston-Texas City ; Abilene showed slightly more than a 100 percent increase, while Galveston-Texas City ranked first in the state with a 138 percent increase. Abilene was second only to Midland in percentage change in total bank deposits from 1977 through 1981. The Abilene SMSA, which includes Callahan, Jones, and Taylor counties, had a 1980 population of 139 ,192, making it larger than only Wichita Falls and Tyler among metro­politan areas of medium size. Major sectors in the area economy are wholesale and retail trade, manufacturing, services (particularly oil industry services), and the federal military. Dyess Air Force Base houses both Strategic Air Command and Military Airlift Command units and employs almost 6,500 active duty and civilian personnel. The sizable military work force tends to add stability to the area eco­nomic picture while Abilene, like much of the rest of the state, waits for recovery in the petroleum industry. Local manufacturing received a boost with the announcement of a 723,000-square-foot plant expansion at the Texas Instru­ments facility. Small Metropolitan Areas Created by the railroads and sustained by the petroleum industry since the discovery of oil in 1926, the fortunes of the Midland area still rise and fall with changes in the price of oil. More than one quarter of Midland's work force is directly involved with extractive industries; the national average is approximately 1 percent. Despite losses suffered as a result of lowered prices for petroleum products, the Midland area remains first among state metropolitan areas in three economic criteria. Per capita income, at $13,761, remained higher than in any other area for 1980. Average annual pay, as might be expected, remained high at $17,136 for 1980. The Midland SMSA also ranked first in percentage change in gross sales from 197 5 through 1981 and first in percentage change in total bank deposits from 1977 through 1981. The Midland SMSA, which led all Texas metropolitan areas in job growth in nonagricultural employment for 1975 through 1981 (up 8.3 percent), has continued to show steady growth in the banking, retail, and communica­tions businesses. The Bryan-College Station SMSA ranks first in more categories than any other state metropolitan area. Bryan­College Station, which is characterized by an evenly bal­anced economy, had the highest percentage change (up 61.4 percent) in population between 1970 and 1980. The 212 area also ranked first in percentage of population age 25 and over with a college education (3 2 percent in 1980) and first in percentage of population in the 18-64 age group (78.2 percent in 1981). In addition, Bryan-College Station registered the largest change in the state in percent­age change in motor vehicle r~gistrations from 1970 to 1981. The continuing boom in this metropolitan area, which consists only of Brazos County, is fueled by growing num­bers of small light industries and oil drilling in the Austin Chalk formation. In addition, the recent decision by Micro­electronics and Computer Technology Corporation to locate in Austin will benefit Texas A&M University, which is already expanding rapidly. The University of Texas at Austin together with Texas A&M agreed to spend $15 million on additional teachers and researchers in electrical engineering and computer sciences. The economic stability of Bryan-College Station is re­fle cted in its relatively low unemployment rate; the area ranked third among state metropolitan areas in 1981 with a 4.0 percent unemployment rate. Only Austin and Abilene had lower figures. Contributing to the economic stability is the fact that approximately one-third of all personal in­come in the Bryan-College Station area is derived from state and local government earnings. Laredo, the largest inland port of entry in the United States, historically has depended upon wholesale and retail trade for a third or more of its nonagricultural civilian pay­roll. The metropolitan area, which consists of Webb County, has suffered from the two peso devaluations in 1982 that cut retail sales by more than 30 percent. (In addition, Laredo's unemployment rate for May 1983 reached 27.2 percent-the highest in the nation.) The Mexican de­valuations, while severely hampering trade, have boosted bank deposits by making U.S. banks more attractive to in­vestors. Laredo ranked third among Texas metropolitan areas in percentage change in total bank deposits from 1977 through 1981. Before the devaluations, Laredo had shown a strong upsurge in percentage change in gross sales from 197 5 through 1981 , posting a 206 percent increase during the period. Notes 1. Creation of the Victoria SMSA, the twenty-sixth in Texas, was announced June 19, 1981, by the Office of Management and Bud· get. The Victoria SMSA consists of Victoria County. Department of Commerce, National Bureau of Standards, "FIPS Publication Change Notice 8-4, Change No. 9," August 1, 1981, p. 4. The term standard metropolitan statistical area (SMSA) was dropped June 30, 1983, and replaced by the term metropolitan statistical area (MSA). The revised regulations are based on new standards adopted by the interagency Federal Committee on MSAs in 1980. Press Release, Executive Office of the President, Office of Management and Bud· get, January 5, 1983, p. 1. 2. No technique, such as cluster analysis, was used to group metro­politan areas according to similarity in selected variables. 3. For an in-depth look at each of the Texas metropolitan areas, ex· cept Victoria, see Charles P. Zlatkovich et al., Texas Metropolitan Area Profiles (Austin: University of Texas, Bureau of Business Research, 1979). TEXAS BUSINESS REVIEW Ahead for the Economy The View from Late Summer As the economy picked up momentum in the second half of 1983, Texans in business faced a new question. No longer was the issue "When will the recession end?"; now it was "How long will the business rise last?" Late in June, the U.S. Department of Commerce and the National Bureau of Economic Research announced that the 1981-1982 recession had ended last November-a con­clusion strongly supported by most business statistics. The Commerce Department's leading business indicators had been rising continuously since September 1982-in January they had given their biggest bounce in more than thirty years. The stock market had enjoyed a record-breaking blast-off in August 1982, and at the ten-month mark the widely followed Dow Jones industrial average had gained 60 percent from its start. All through the early months of 1983, one index after another of business activity and sentiment had climbed ; on July 21 the Commerce Depart­ment gave its final estimate that output in the second quarter had increased at an 8. 7 percent annual rate. Recessions, however, leave bleak memories-somber rec­ollections of bear stock markets, business red ink, outsized inventories, overdue receivables, and capital-expansion proj­ects not cut back in time. They also stir in the minds of businessmen and investors the irrepressible suspicion that unpleasant surprises are continually lurking to snare the un­mindful and unready. Texans, in particular, had been treated to the springing of two such economic booby traps in 1981-1982 with the collapse of a seemingly invulnerable oil boom and Mexico's abrupt slide into international pau­perdom. So with memories of recent discomforts still fresh , Texas enterprisers and securities traders began to wonder how long the good times would last. Die-hard doubters-a few at least-were warning that the end was already in sight. The business turnaround of the preceding winter, they argued, had been contrived through a headlong expansion of money and credit that would erupt in a few months time into a new round of price inflation, bringing on yet another credit crunch and recession. They George A. Christy is Professor of Finance, North Texas State Uni­versity. George A. Chri tv pointed out that just that kind of too-quick rebound from the 1980 recession had forced the Reagan administration to apply a tight-money cure early in 1981 , with the result that the 1980-1981 economic upturn had survived a bare twelve months. Concern also was voiced that the increasingly ebullient business statistics of the first half of 1983 reflected an un­sustainable rate of rebound in business inventories, a source of stimulus that would be exhausted when normal inventory-to-sales ratios were regained. Abetting misgivings on this count was the recognition that business spending for plant and equipment-always a late bloomer in cyclic up­swings-was still in low gear. That fact seemed to leave continuing prosperity up to the consumer and raised the question whether the consumer could be counted on to keep things turned around. Six Points to Remember For those who follow the wise habit of making their own forecasts, six points should be borne in mind. • Business recoveries in the past have not aborted; they have been killed with tight money, but only after infla­tion has threatened. • Back-to-back recessions have built up huge backlogs of deferred demand in the economy-enough, when released, to power a long, vigorous expansion. • Monetary policy has been expansive for a year already and, with an election year ahead, will probably remain so. • Inflation, formerly the nation's number one economic problem, was, by the middle of 1983, down but not yet out. • Precedent suggested that living costs were unlikely to act up again until 1985. • The presidential election cycle was obviously alive and would affect the economy. These six points appear to give a clear picture for the economy in the near future. For eighteen months at least, backlogged demands, flush credit, a contained cost of !iv- ing, and an approaching presidential election seem all but to guarantee a strongly rising, trouble-free economy. There­after, dangerous crosscurrents threaten to converge: price inflation could easily accelerate after the election, which would be the ideal period for another application of the tight-money cure. Seen in this perspective, 1985 looms as a likely candidate for the economy's next mountain top. Natural Death Unlikely Since 1949, U.S. business expansions, once launched, have fed on themselves. Growing strength in one sector of the economy boosts the next. Stepped-up consumer buying leads merchants to rebuild inventories, and that sparks new shifts and bigger payrolls at factories, which, in turn, bring larger incomes and more spending. Before long, factory owners are thinking a bout increased capacity. Like a rock thrown into a reflecting pool, a business upturn spreads prosperity in ever-widening circles. The process, of course, cannot go on forever. Left to run too long, the cycle of economic expansion dies a "natural death." 1 To shut off a boom and save some demand for years ahead is a chief task of monetary policy and its dis­tasteful medicine, tight money. Recently, however, until the cost of living has surged, or threatened to, the Federal Reserve has remained quietly on the sidelines. Renewed inflation, not natural exhaustion, has spelled the end of our prosperities in the past. On the average though, expan­sions have been able to run three years before dying, al­though 1980-1981 was an exception. A Well-Wound Economy Geoffrey L. Moore, a leading authority on business cycles, has emphasized that long, deep recessions are typi­ cally followed by Jong, strong expansions. 2 Logic as well as experience indicates that he is right. Recessions are periods of privation and precautionary self-denial. Squeezed by job losses or fears of job loss, con­ sumers cut spending. Businessmen run down their inven­ tories; expansion plans are cancelled. Time passes. First, soft goods wear out, then durables. Replacement demands and foregone purchases accumulate. The longer the reces­ sion lasts, the bigger are the backlogs of postponed de­ mand. Once the upturn arrives, a contagious cycle of new buy­ ing by consumers and businesses alike sets in. The larger the unfilled demands left by recession, the longer and more vigorously the rise will continue before markets become saturated . By the start of 1983, observers of the U.S . economy could take both past regret and future satisfaction in realiz­ ing that twenty-three of the past thirty-six months had been spent in recession: January to July 1980 and July 1981 through November 1982. So Jong and persistent an interlude of damped demand could only be likened to the tension in the spring of a completely wound up old toy. 214 On June 27, the Department of Commerce issued its preliminary estimate that the country's output in the second quarter of 1983 had risen at a surprisingly brisk 6.6 percent annual pace. That news both surprised and con­founded the pessimists who had argued strenuously that the recovery would be subnormal, might soon abort, and was creaking forward on shaky foundations. Actually, the evi­dence for months had pointed the other way. Consumers had reduced and paid off their borrowings until the ratio of consumer debt to consumer income stood at its lowest A strong resurgence . . in consumer prices seems unlikely to occur before the 1984 elections. point in more than four years. Housing, benefiting from Federal Reserve action in expanding credit and bringing down interest rates-a process under way since July 1982­had already rebounded vigorously, with furniture, appli­ances, and home furnishing poised to follow. Auto sales in June 1983 topped those of the previous June by 50 percent. Soft goods, always an early beneficiary of business recov­eries (since they wear out the quickest), gave a resolute boost to climbing department store sales. By June 1983, first-time claims for unemployment benefits-the leading indicator of unemployment-were tumbling by the week. Along with natural forces of recovery, the strong re­bound in 1983 was getting added muscle from the bull market in stocks, which by mid-June had carried the leading market averages up from 50 percent to l 00 percent in ten months. The high priests of economics estimated that each dollar's increase in total stock values would add six cents to the year's flow of consumer spending. Fed by the Federal Reserve The Federal Reserve had been flooding the financial sys­tem with an abundance of money since the preceding July. Over the elapsed twelve months, Federal Reserve credit had expanded at a breath-taking 10.6 percent pace. Interest rates, long term and short term, had fallen, though not quite to the low levels reached during the interlude of monetary ease in 1980. The increase in new dollars gave monetary economists a field day for arguing whether-and how soon-the cost of living would increase drastically. Some argued that mone­tary fuel was being piled up for a new price-level crisis as soon as the public worked up optimism and courage enough to borrow. Opponents replied that inflation was no longer TEXAS BUSINESS REVIEW a threat since the new money would not be spent but would be held in people's bank accounts as it had been in the old days before inflation became a household word. In other words, the increased quantity of money would be offset by a drop in money's velocity, and the consequence for the price level would be a standoff. As of mid-1983, this controversy raged on without reso­lution. The one thing nobody seemed to be denying was that there was plenty of money around to provide for any spending people might choose to undertake in months ahead. The recovery seemed most unlikely to wither from lack of dollars. 3 Nor were Congress and the Reagan administration failing to do their part. Whatever the merits of much-debated proposals to cut federal spending or raise taxes, the fact remains that deficits in the $150-$200 billion range loom over the next two fiscal years. That this amount of federal spending will fail to have a tonic effect on business indices seems to be sheerest fantasy. With increased chunks of fed­eral spending directed to the procurement of military hard­ware, Texas, with its strong concentration of missile makers and electronics manufacturers, seems likely to be a leading beneficiary among the nation's fifty states. Inflation-No Quick Return Over the twelve months through June 1983, consumer prices rose 2.6 percent, the lowest rate of climb since the 2.5 percent rise in the twelve months that ended in October 1967. Producer or wholesale prices for finished goods were up a bare 2.3 percent, a pleasant prospect since this index typically forecasts the behavior of consumer prices. Commodity markets, too, showed little starch in their price performance. The rate of increase in living costs, however, had sagged following both the 1969-1971 and 1973-197 5 recessions, only to come back stronger than ever. Lacking a dependable gift of prophecy, no one can really say whether living costs will again soar, but prece­dents are available to put an edge on one's thinking. In both 1969-1971 and 1973-1975, it took about two and a half years from the time monetary policy turned from restraint to stimulus before increased money supplies affected price levels.4 Could this benevolent timing lag recur? It seemed highly probable that it could. Indeed, at mid-1983 the obstacles to a quick upturn in living costs seemed solider and more durable than they had been in the business expan­sions of the 1970s. First, although the 1981-1982 recession had not dented output as deeply as the 1973-1975 decline had, other fac­tors had created greater slack. In June 1983, 9.8 percent of the nation's willing work force was still jobless, and less than 75 percent of manufacturing capacity was in use. Given idle people and idle machines on these scales, it seemed doubtful that most businesses would, or could be able to, lift prices for some time. Second, foreign competition in markets both at home and abroad was putting a further brake on price increases. Although President Reagan had backtracked in his antipro­tectionist remarks at the Williamsburg Summit Conference to the extent of slapping tariffs and import quotas on for­eign stainless steel, American consumers still enjoyed wide options for buying many goods offered from abroad at lower prices-and often better quality-than their domestic­made counterparts. Third, business gave little sign of reviving capital spend­ing. In the past, until orders had begun going out for new plant and equipment, machines, trucks, and other pro­ducers' durable items, business upswings had usually failed to take off. Finally, the continuing high value of the U.S. dollar was squelching the nation's export industries and adding to the exposure of domestic manufacturers and workers from hungry foreign competitors. For export industries, in par­ticular, no problem of overfull employment showed on the horizon. Given, therefore, that the Federal Reserve had reversed the monetary gears in July 1982, a strong resurgence in the U.S. price level seemed unlikely until Election Day 1984 had become history. Clearly, cost-push forces would re­main subdued for months to come. Demand-pull pressures were destined to increase with rising incomes, more con­fident consumer borrowing, and renewed buying cycles in such items as autos and appliances. In the normal course of things, however, several more quarters seemed likely to pass before these demand-pull pressures reached an explo­sive stage. "Disinflation" -The Next Battle That price-level pressures would ultimately rebound, however, seemed all but certain. Inflation was down but not out-down cyclically, but far from destroyed as a long­run force in the economy. Although consumer prices had risen only 2.6 percent in the twelve months that ended June 1983, they had risen almost as slowly in 1972, only to hurtle upward at a double-digit rate just two years later. Already undermining the foundations of growing price stability were the Federal Reserve's powerful input of new money, the Treasury's massive deficits, and the rapidly compounding income and buying-power effects of a strong­ly rising economy. Also to be reckoned with as prosperity grew headier were businessmen's urgent desires to restore profit margins, the deferred increases in utility rates and other lagging prices, the automatic escalation of costs and prices from cost-of-living clauses in labor contracts, the appearance of bottlenecks and shortages, and the inevitable fall in productivity and labor discipline as jobs grew easier to find. Once inflationary pressures revived, a new recession­risking money squeeze to kill them would be imperative. Too much depended on continuing progress toward price and cost stability. At stake were the fate of the nation's bond and mortgage markets (which had narrowly escaped collapse in 1980-1981 ), the ability of U.S. manufacturers and workers to compete with foreign rivals, and the savings needed to finance reindustrialization and the economy's progress into a new age of information processing, elec­tronic communications, automation, and robotics. Texans and all Americans could hope that inflationary pressures at the top of the coming cycle would be visibly less than those of 1980 or 198 l. If, as President Reagan had assured the nation, we were working back toward a stable dollar, further progress toward that goal must come with each new business cycle. The 1981-1982 squeeze on money might have wrung as much as half the built-in inflationary forces out of the economy. That still left half to be wrung out in cycles ahead. (Old-timers could easily recall that it had taken President Dwight D. Eisenhower three recessions during his eight years of office to shrink inflation from its 7.9 percent rate of Korean War days down to the 1.0 per­cent to 1.5 percent rate prevailing when he left the White House.) Distasteful, then, as a renewal of the tight-money cure for inflation might prove to be to millions of working, investing, or business-owning Americans, forethought and a grasp of fundamentals warned that one lay ahead. The all-important question for those riding the economy's waves was how soon. For an answer, one might plausibly have pondered not only the likely course of the ongoing business cycle but also what seasoned stock investors had long identified as the presidential election cycle. A Time to Every Purpose Business people would be well advised to pay closer at­tention than they have in the past to how the economy has typically behaved over the four years of a president's term in office. In a regularly recurring pattern, most presidential election years have brought high prosperity to the stock market and economy. The years after presidential elections, however, have typically proved to be years of slump for both Wall Street and Main Street. Since 1950, stocks have boomed, and the economy has prospered, in 1952, 1956, 1964, 1968, 1972, and 1976. Among presidential election years, only 1960 and 1980 have been tarnished by bear markets or interludes of reces­sion. In both of these years, recessions proved brief, with stocks making a delayed advance in the wake of election returns. Both stock traders and the economy have paid the piper in the majority of years that directly follow a presidential election. Recessions spanned the whole or part of 1949, 1953, 1957, 1969, 1973, and 1981. A so-called minirecession, highlighted by a nerve-shaking credit crunch, came in 1966 (missing 1965 by a hair), while in 1977 investors faced a plunging stock market that announced a recession that President Jimmy Carter had the bad judg­ment to postpone for another three years. 5 For the cynically perceptive at least, business cycles since World War II have marched consistently to the beat of a political drummer. Whatever the justification cited, presidents have in fact fed the economy its pep pills in the year or two preceding a presidential election, after using the first two years of their presidential term to accomplish whatever dirty work needed doing in the economy. Where presidents have been reelected, the impression left has typically been that they pumped the economy up before election day, then let the air out afterward. To reflect upon this indigenous principle of American political life at mid-year 1983 was in no way to belittle President Reagan or to denigrate his administration. Indeed, the nation appeared, on balance, to be mindful and approv­ing of the president's success in taming the price level and bringing down interest rates in the two and one-half pre· ceding years. If it was objected that the price had been a recession marked by double-digit rates of unemployment, soaring business bankruptcies, and an eye-popping bulge in the federal deficit, there was the inevitable question whether any cure other than the administration's bitter medicine would have worked. Administration defenders might plausibly contend that disinflation was only feasible by degrees and stages. Inter· vals of let up were needed to punctuate periods of restraint and avoid running the economy into major depression. (Some observers were still claiming in mid-1983 that the Federal Reserve's earlier reversal of the monetary gears had come just in time to prevent a new 1932.) Finally, dedi­cated as the president might be to ending inflation, he will not be in office to end it unless he is reelected, and a prosperous economic backdrop for 1984 is his likely key to reelection and his battle for a sound dollar. 6 Summary Although declining oil prices and Mexico's financial col­lapse had brought hardship to particular parts of Texas during the first half of 1983, the state as a whole had once more negotiated a recession with an unemployment rate well below the national average. A gain of nearly 150,000 jobs in June had pushed total employment in Texas to a record level and lowered the state's unemployment rate to 7.7 percent, the lowest figure in six months. In falling from a maximum jobless rate of 9.0 percent in March, unemploy· ment in Texas was obviously shrinking faster than it was in the nation at large where June's rate was still a discouraging 10 percent, down only eight-tenths of a percentage point from its maximum: the l 0.8 percent rate of the preceding December. The balanced mix of industry in Texas with a tilt toward high technology and defense, the continued in-migration of people and companies leaving the cold climate or urban decay of the nation's older areas, and the competitive ad­vantage of a low-tax, weakly unionized, probusiness climate, all promise a swift and widespread resumption of economic growth in Texas. Beyond this, it is clear that with the 1984 Republican National Convention to be held in Dallas, the eyes of the nation and world will be on the state through much of the year to come. In making plans, businessmen-in Texas and the nation­seem well advised to follow the promise of rebounding prosperity through Election Day 1984 and to move there­after with steadily increasing caution and restraint. For in- vestors, it appears likely that the big rush of money back into stocks-and thus the bull market's most profitable phase-is at least close to ending. Once interest rates have bottomed for the cycle, stocks will no longer be rising across the board; careful selection based on individual com­pany fortunes will be an investor's key to profit over the next year or more as industries rise and fall in market favor. Remembering that stocks typically commence their next bear market six months or so before business itself turns down, investors already might well be giving thought to lightening positions if, as usual, a preelection boom in the economy erupts into a further rise in an already aging bull market. Notes 1. The expression natural death applied to a business expansion is from Sir John Hicks' Value and Capital, 2nd ed. (Oxford: The Clarendon Press, 1946). 2. Moore is the director of the Center for International Business Cycle Research at Rutgers University. For his recent views on busi­ness cycles, see Geoffrey H. Moore, Business Cycles, Inflation, and Forecasting, National Bureau of Economic Research, Studies in Business Cycles No. 24 (Cambridge, Mass.: Ballinger, 1980). 3. Adding to the unlikelihood of severe near-term restraint from the Federal Reserve was the precarious state of international indebted­ness and the fear that if U.S. interest rates rose strongly. Brazil. Mexico, and other overburdened foreign borrowers would be pushed into default. 4. Linked to this tendency of price-level pressures to recur after about two and a half years of easy money is the fact that business upturns since World War II have averaged about three years of life. A year or so of reviving price-level pressures has usually compelled a fatal turn toward tight money. 5. Carter had taken office with a business rise aheady twenty-two months old and tried to stretch it through a four-year term. His effort met predictable failure. By the third year of his term, the price level was boiling. It blew its lid in his fourth year and forced Carter to cope with a recession in the year he ran for reelection. 6. There seems little doubt that a new president-or Reagan, if re­elected-will choose economic restraint at some point during 1985 or 1986. In his present term, Mr. Reagan wisely chose to risk re­cession during his fust two years in office. An attempt to run pros­perity continuously through a coming four-year term would be to risk in 1988 an election-year recession of the kind that helped de­stroy President Carter in 1980. Texas family Law Jack W. Ledbetter Written in layman's language, Texas Family Law covers a variety of topics including qualifications for and restrictions on marriage, premarital agreement, interspousal relations, marital property, home­stead and exempt property, parent-child rela­tionships, dissolution of marriage, wills and estates, and life insurance and other intangible assets. Paper $7 .00. Texas residents add 5% sales tax. Bureau of Business Research The University of Texas at Austin Box 7459 Austin, Texas 78712 University Microfilms International Please send additional information for __________ (name of publication) Name ____________________ Institution-------------------­Street ____________________ City _____________________ State ____ Zip _______________ 300 North Zeeb Road 30-32 Mortimer Street Dept. P.R . Dept. P.R. Ann Arbor, Mi. 48106 London W1N 7RA U.S.A. England Can Taxes on Natural Resou1·ces The increases in prices of natural resources that occurred during the 1970s accentuated the fiscal disparities between states that are rich in resources and those that are not. 1 These increases have created such ill will in resource-poor, consuming states that a "new war between the states" has been said to be just over the horizon. Though the complaints of the have-not states are not always clearly articulated, they can be summarized roughly as follows : the increases in economic rents resulting from increased prices of resources are allocated unevenly, and therefore unfairly, among the states; this uneven distribution creates unaccept­able disparities in the ability of states to finance public expenditures; these fiscal disparities make possible higher levels of public expenditures or lower taxes in resource-rich states than in other states and may lead to unfair and uneconomic interstate competition for labor and capital, thereby further worsening already depressed conditions in resource-poor states. These complaints have led to propos­als for federal legislation limiting state and local taxes on natural resources. Some observers have even suggested that most revenues from natural resources-and especially those resulting from increases in resource prices-should be re­served for the federal government. Resource-poor states assert that resource taxes levied by the resource-rich states are exported to consumers in other states. The belief that such taxes can be exported to nonres­ident consumers is also apparently widely held in resource­rich states. Montana's increase in its severance tax on coal to 30 percent appears to have been based in part on the explicit belief that the tax could be largely exported. 2 Advocates of a Texas tax on the refining of petroleum products have also justified that levy as a means of export­ing tax burden to consumers elsewhere.3 Resource-poor Charles E. McLure, Jr., is Senior Fellow at the Hoover Institution, Stanford University. SEPTEMBER-OCTOBER 1983 Be Exported? Charles E. }lcLure., Jr. states have also shown interest in attempting to export taxes, especially to out-of-state consumers. For example, the governor of Iowa has discussed the possibility of levying a soil depletion tax in an attempt to burden con­sumers of corn, much of which is exported from his state. More important, consuming states appear to be increasingly interested in employing the unitary method of taxing the income of multistate or multinational corporations in order to export taxes. Common to many of these assessments of tax exporting is the implicit view that all taxes on production are auto­matically shifted to consumers and that such a tax is there­fore largely exported if the taxed product is predominantly exported. Simple economic analysis indicates that the first of these two propositions is incorrect. Tax incidence depends on the context in which the tax is imposed; a tax is not necessarily automatically shifted to consumers.4 Among the important factors determining whether a tax will be passed on is whether or not the taxing state domi­nates the market. The more nearly a state dominates a market, the more likely it is that it will be able to pass the tax on to consumers. Even when it dominates the market, however, a state can export taxes only to the degree that the product itself is exported. Exporting taxes to consum­ers is not the only, or even the most important, way in which a state can fill its public coffers at the expense of nonresidents. Much more important are likely to be the tax burdens on nonresidents who receive rents from natural resources within the taxing state and on taxpayers nation­wide through the deductibility of state taxes in calculating federal taxable income. The Role of Market Dominance The role of market dominance and its relation to tax exporting can be better understood by considering the ~19 hypothetical case of a state that exports all of its produc­tion of a given resource that is sold in spot markets but produces only a minute fraction of the total output. 5 The market value of the resource is almost entirely beyond the influence of this state, including its imposing a production or severance tax. Under such circumstances, such a tax would only reduce rents received by owners of the resource and, perhaps, the exploitation of the resource. If, on the other hand, the state accounts for all of the output of the product in question, the possibility of shifting taxes to consumers is much enhanced. Under such conditions a state tax is just as likely to be shifted forward as would be a similar tax imposed by the federal government. If a high proportion of output is also exported by the taxing state, then significant tax exporting will occur. The relevant market for the taxed product must, there­fore, be carefully defined, but definition is not as simple as it may initially appear. Consider, for example, the market for bauxite, the ore from which aluminum is derived.6 Though aluminum has few substitutes in the manufacture of aircraft bodies, copper can be substituted for it in elec­trical wiring, and glass and cardboard, as well as other metals, compete with it in the market for packaging. More­over, recycled aluminum becomes competitive once a large backlog of this secondary source exists. Even if one or more political jurisdictions completely dominate the production of bauxite, they may not necessarily dominate the relevant market for aluminum. Dominance of the production of bauxite is not sufficient to guarantee that a tax on bauxite can be shifted to consumers. Market definition also has a geographical dimension. For such a highly perishable commodity as freshly baked bread, the relevant market is limited geographically. Where the extent of the market is not limited by perishability and where value is high relative to weight and bulk, the relevant market may be essentially worldwide. Of course, most interesting cases lie between these extremes. For example, coal from the Great Plains states can easily penetrate mar­ kets in Texas and Arkansas, but transportation costs would tend to place it at a disadvantage in competing with Appa­ lachian coal in the eastern states. (Even here, however, the low sulfur content of Great Plains coal might make it competitive with Appalachian coal for some uses, even in the East.) Even though Iowa is an important producer of corn, much of which it exports either directly or indirectly through fattened livestock, it clearly does not dominate the market for corn. Moreover, there are substitutes for corn, both as human foodstuffs and as feed for livestock. Thus it seems likely that Iowa's imposition of a tax on corn would have little effect on the price of corn and that such a tax would be borne largely by Iowa farmers, rather than being shifted forward to consumers. Much the same thing can be said about the Texas tax on the refining of petroleum products. In transportation costs it makes relatively little difference whether crude oil or refined products are being transported; thus, the relevant geographic market for refined products is quite large­roughly as large as that for crude oil. Texas accounts for only about one-quarter of the refining capacity of the United States, and even smaller proportions of the capacity of the Western Hemisphere and the total free world. Thus it seems that Texas could shift no more than about a quarter, or even less, of a refining tax forward to consumers. Two Aspects of Cartels One state or nation acting alone probably could not export a significant fraction of its taxes to consumers. On the other hand, tax collusion by states or nations that collectively dominate the relevant market could result in substantial forward shifting and tax exporting to consum­ers. Should state taxes levied at any given time be consid­ered the result of unilateral actions by individual states or the result of collusive behavior? Unilateral taxation results in minimal shifting and tax exporting to consumers; by comparison, collusive action suggests substantial forward shifting and tax exporting to consumers. The formation and success of the Organization of Petroleum Exporting Coun­tries (OPEC) is the prime example of the latter, but in most cases whether a tax is unilateral or collusive is less obvious.7 Consider now a second implication of cartelization: the formation and early success of OPEC raised prices of petro­leum products and, in effect, created an umbrella under which producers in nonmember countries could raise their prices without fear of competition from OPEC members. Legislatures in some states reacted to this increase in energy prices by raising severance and other taxes on natural re­sources. A common interpretation of this chain of events is that higher state taxes have been reflected in higher energy prices and have therefore been shifted to consumers, many of whom are nonresidents of the taxing state. If prices are determined in spot markets, however, this reasoning is fallacious. The price increase would have occurred with or without the increase in state energy taxes, since it was the actions of OPEC, not the imposition of energy taxes by the states, that produced the increase in energy prices. The in­creased state taxes merely siphon off some of the increased resource rents created by the price increase that would have otherwise enriched owners of natural resources. Reduced Resource Rents and the Federal Offset Given the rarity of substantial market dominance by in­dividual states and the difficulty states have in creating ef­fective cartels, tax exporting does not seem to be substan­tial in a free market setting. Rather, ownt!rs of natural re­sources (or those whom contracts give the rents resulting from natural resources) seem more likely to pay the taxes. This statement does not imply that no tax exporting oc­curs. Mineral rights may be held by nonresidents, including large multistate corporations with ownership spread through­out the nation. Where in-state ownership of resources is minimal, the tax burden on owners of natural resources implies a significant exporting of taxes to nonresidents. Even if natural resources are owned entirely by residents of the taxing state, taxes may still be exported. Exporting TEXAS BUSINESS REVIEW to the federal treasury, and therefore to taxpayers through­out the nation, occurs if resource taxes reduce the taxable income of owners of resources. For example, severance taxes could reduce the taxable income of resident owners of natural resources on a dollar-for-dollar basis. An owner of resources who is in the 40 percent marginal tax bracket would pay only 60 cents for every dollar of severance tax paid.8 This federal offset is not unique to taxes on natural resources but occurs any time a state or local government imposes a tax that reduces taxable income by reducing income or by increasing itemized deductions. Indeed, it is the most important avenue of exporting for all state and local taxes and, perhaps, for taxes on natural resources considered separately. 9 Long-Term Contracts and Regulation Much of the preceding discussion has dealt with crude oil, petroleum products, and corn, commodities that are largely free of price controls and are not sold under long­ term contracts. If prices of resources are being set by regulatory mandate at levels below free market prices, but regulatory authorities allow severance taxes to be passed on, tax increases will obviously be borne largely by con­ sumers, no matter how great the market dominance exer­ cised by the taxing state. Consumers will also pay the increased taxes if pass-through of taxes is allowed in long­ term contracts that had been written at prices below pre­ vailing prices. Since much Great Plains coal is sold under long-term contracts of this type, it is commonly assumed that increases in severance taxes on this resource are, in­ deed, borne by consumers, many of whom do not live in the taxing states. Newly negotiated contracts for unregulated products contain prices that reflect current or expected market conditions. Since those market prices should be unaffected by existing severance taxes, such taxes would reduce net rents that would otherwise be obtained and would not be borne by consumers. In that sense, taxes levied in markets where newly negotiated contracts predominate resemble closely those levied in spot markets. Taxation by Consuming States Apparently motivated by the desire to skim off some of the increased rents resulting from the actions of OPEC, some consuming states have attempted to use particular forms of taxes to export burdens to nonresidents. Two of these forms deserve special attention. First, several states have attempted to combine excise taxes on petroleum products with limitations on price increases. Without the state price control, the excise tax would simply be added to the price and shifted to con­ sumers in the taxing state. The limitation on price increase is intended to force oil companies to absorb the excise tax rather than shift it forward. While such a policy might be effective in the short run, it might be self-defeating in the SEPTEMBER-OCTOBER 1983 long run, particularly if petroleum products are in short supply, as they were several years ago. An oil company faced with the choice of selling in a state in which it must absorb the newly imposed excise tax or in another state with no comparable excise would naturally shift supplies to the latter market. In fact, however, the efforts of con­suming states to extract part of resource rents through ex­cise taxes and price limitations would be facilitated by the federal regulation of the allocation of petroleum products. The state price controls were, however, held to be an un­constitutional usurpation of federal powers, and the excise taxes were repealed. Some states have adopted the so-called unitary taxation of corporate income, presumably in an attempt to export taxes to nonresident owners of oil companies. Activities of the corporation in the taxing state are lumped together with activities elsewhere that are arguably more profitable than those in the taxing state, including especially those in foreign countries. The entire profits of the company or group of companies are then apportioned between the taxing states and other states on the basis of a formula that commonly includes the ratio of in-state to total payroll, property, and sales. Businessmen complain that this approach imports out-of-state income into the tax base of the taxing state.10 A fundamental tenet of the theory of tax incidence is that taxes are likely to be borne by whatever cannot move, be it owners of land, fixed capital that is earning quasirents, labor that cannot or will not migrate, or immobile con­sumers who must buy near home.11 Conversely, taxes are not likely to be borne by producers who can sell elsewhere and owners of capital who have alternative investment outlets. There is an obvious time dimension to the mobility of any group; workers just entering the labor force are likely to be more mobile than are their parents, and as capital depreciates and must be replaced it can move in response to taxes and other economic influences. The success of attempts to use the unitary method to extract rents from oil companies, thus, may be short-lived. Such a tax should be thought of as being imposed on what­ ever enters the apportionment formula, usually payroll, property, and sales. 12 Sales taxes are usually borne by con­ sumers and payroll taxes are usually borne by workers. Though property taxes may be borne by owners of capital in the short run, over time they are likely to fall on land, the least mobile factor of all, and perhaps on relatively immobile labor. To the extent that property is employed in distribution and sales, the portion of the tax related to property may even be borne by consumers. The unitary tax will probably not be simply reflected in lower profits in the long run; consequently, it is unlikely that the unitary method can be used by consuming states to export taxes in the long run. Conclusion There are good reasons why taxation of natural re­sources should be reserved largely to the federal govern­ ment, particularly if such a policy can be followed from a nation's beginning. There may even be good reasons for limiting state taxes on natural resources, if this revenue source is not reserved to the federal government. An exam­ination of those questions, however, goes well beyond the scope of this article. Part of the case for federal taxation or for limitations of state taxes involves the possibility of exporting state and local taxes to nonresidents. Many of those who have recently discussed the case for federal pre­emption of this revenue source or for limitations on state use of it have commonly failed to understand the theory of tax incidence and exporting and in some cases have made grossly naive assumptions about incidence and exporting. While careful analysis may reveal that tax exporting is every bit as great as advocates for consuming states contend, it may take quite different forms for various resources. The nature of tax exporting (to consumers, to recipients of resource rents, or to taxpayers through the federal offset), as well as its extent, may be relevant for assessing the case for limitations on state taxes on natural resources. Notes l. For evidence on the increase in fiscal disparities, see Peggy Cuciti, Harvey Galper, and Robert Lucke, "State Energy Revenues," in Charles E. Mclure, Jr., and Peter Mieszkowski, eds., Fiscal Federalism and the Taxation of Natural Resources (Lexington, Mass.: Lexington Books, 1983), pp. 11-60. 2. See, for example, the quotation from the Joint Conference Com­mittee of the Montana Legislature in Commonwealth Edison v. Montana 101 S. Ct. 2946 (1981) at 2965. 3. Sec, for example, the quotation from a Texas Senate study in Charles E. Mclure, Jr., "The Economic Effects of a Texas Tax on the Refining of Petroleum Products," Growth and Change 11 (July 1980) : 6. 4. For more on the principles of incidence analysis, see Charles E. Mclure, Jr., "Incidence Analysis and the Supreme Court: An Examination of Four Cases from the 1981 Term," Supreme Court Economic Review l (1982): 69-112. 5. This analysis and parts of the rest of this article draw heavily on two earlier articles of mine: "Tax Exporting and the Commerce Clause," in Mclure and Mieszkowski, Fiscal Federalism and the Taxation of Natural Resources, and "Market Dominance and the Exporting of State Taxes," National Tax Journal 34 (December 1981): 483...:85. 6. The discussion of bauxite and aluminum is based on Malcolm Gillis and Charles E. Mclure, Jr., "The Incidence of the World's Taxes on Natural Resources with Special Reference to Bauxite," American Economic Review 65 (May 1975): 389-96, and "The Distributional Implications of the Taxation of Natural Resources," RiceStudies61(Fall1975): 143-62. 7. A related question is whether all state taxes should be considered simultaneously or whether those of each state should be considered separately. For more on this issue, see two of my previous articles: "The 'New View' of the Property Tax : A Caveat," National Tax Journal 30 (March 1977): 69-75, and "The Elusive Incidence of the Corporate Income Tax: The State Case," Public Finance Quarterly 9 (October 1981): 395-413. 8. In the extreme case of a resident of the taxing state who owns resources through a corporation that would otherwise pay a 46 per­cent tax rate and distribute all jts net profits, as much as 73 percent of the state severance tax could be borne initially by the federal Treasury and indirectly by taxpayers throughout the country. This discussion is intended simply to indicate the nature of the federal offset that results from deductibility of state taxes in calculating federal taxable income. The degree to which deductibility results in tax exporting is much more complicated than can be indicated fully here. For example, a major oil company with excess foreign tax credits may pay no federal income tax. If so, the deduction for state taxes will be of no current value, though the carry-over of net operating losses may eventually have some value. Moreover, some recipients of resource rents may be so heavily involved in tax shelters that they do not benefit fully from the deduction for state taxes. 9. For estimates of tax exporting, see Charles E. Mclure, Jr., "Tax Exporting in the United States: Estimates for 1962," National Tax Journal 20 (March 1967): 49-77. 10. On July 27, 1983, the Supreme Court upheld the application of the unitary approach on a worldwide basis-that is, to the foreign subsidiaries of domestic firms. See 51 U.S. Law Week 4887. 11. Quasirents is the term applied to income earned by fixed capital since such capital has no alternative uses during the time it is in­vested. 12. The analysis summarized here is based on two earlier essays of mine: "The State Corporate Income Tax: Lambs in Wolves' Ooth­ing," in Henry J. Aaron and Michael J. Boskin, eds., The Economics of Taxation (Washington, D.C.: Brookings Institution, 1980), pp. 327-46, and "The Elusive Incidence of the Corporate Income Tax: The State Case." ABOUT YOUR SUBSCRIPTION How to know when your subscription will end: Printed on the label attached to the back cover is information about when your subscription will end. It's in slightly abbreviated form ­N D 83, for example, means that your last issue will be November-December 1983. Why renewal notices are sent out in advance: Producing a magazine takes a great deal of ad­vance planning. Unless we receive your renewal notice well in advance we may not always be able to continue your subscription without in­terruption. If you renew early, will you get two copies of the same issue? No, when we receive your renewal instructions on time, we tack it onto the end of your cur­re nt subscription. It is always best to use the re­newal forms we send you before your subscrip­tion is over. • Women Ill the Labor Force One of the most notable and far-reaching socioeconomic changes of the century has been the rapid and extensive growth in the labor force participation of women through­out the United States. During the past decade, nearly 1 million new women workers joined the work force each year, with a record of 1.9 million new entrants in 1978. Most of this gain in labor force participation occurred among women under 35 years of age, who have a strong labor force attachment and a more continuous participation rate. During 1979, a milestone for women workers was passed-the majority of women in the country age 16 and over were in the labor force. Almost 48 million women (53 percent of the total in the country) were in the labor force by the end of 1982, a considerable increase from the 23 million women (38 percent) in the labor force in 1960. The Labor Department estimates that there will be 57 million women in the U.S. labor force by the end of the 1980s. The entry of substantial numbers of women of all ages into the work force, as well as their continued commitment to work outside the home, is transforming the composition of the labor force and is closely related to fundamental changes in society and in the economy. Labor Force Participation of Women in Texas In Texas, as in the United States, women's labor force participation has increased significantly. In 1982, more than 3 million women, or 54.4 percent of women age 16 and over, were in the civilian labor force in Texas (see table 1). Of these, more than 2.8 million, or more than half of all Texas women, were gainfully employed outside the home, with the remainder actively looking for work. Until 1970, the percentage of women in the labor force in Texas Rose M. Rubin is Assistant Professor of Economics, North Texas State University. in Texas Ro e l\I. Rubin consistently lagged a few percentage points below the national average; since 1976, however, the female participa­tion rate has been higher in Texas than it has been in the country as a whole. In the Houston standard metropolitan statistical area (SMSA), the labor force participation rate for women is just slightly higher than the Texas average and almost 2 percent above the national average. The Dallas-Fort Worth SMSA has a startlingly high female participation rate of 63 percent, some 8 percent above the national average. Whether this high rate indicates increased job opportunity, economic need, labor mobility, or a younger population with generally higher participation is not known. The labor force participation of Texas women by race and Hispanic origin shows that 86 percent of working women in the state are white, 12 percent are black, and the remaining 2 percent are other nonwhite. Of the total, 18 percent are of Hispanic origin. The female participation rate for white women is between the national and state averages at 54 percent. While the participation rate for black women is considerably higher at 61 percent, the rate for Hispanic women is somewhat lower at 49 percent. The higher work force involvement of black women is a long­standing trend in both the nation and the state and reflects economic need. An analysis of female labor force participation in Texas by age group shows the highest numbers among women aged 20 to 44, whose participation rates are greater than two-thirds. This population group, many of whose members finished schooling and joined the labor force after the women's liberation era, displays stronger and more con­tinuous labor force attachment than women in this child­bearing age group of previous decades. In Texas, more than half of all married women, living with their husbands, now work outside the home. Of women who are single and never married, 68 percent are in the labor force. In the Houston metropolitan area. 70 per-cent of married women, with husband present, and 72 per­cent of never-married single women are in the labor force. In the Dallas-Fort Worth metropolitan area, the figures are even higher, with 73 percent of currently married women and 79 percent of never-married women in the labor force . 1 While 71 percent of Texans age 16 and over who are not in the labor force are women, their reasons for nonpartici­ Full-time and Part-time Women Workers In Texas, the average number of hours worked a week is 40.0 for all workers and 45.3 hours for those with full­time work schedules. For men, the average number of hours worked is 42.5, with full-time men working an average of 46.8 hours. In contrast, the average number of hours worked by women is 36.4, with full-time women's sched- In Texas, more than half of all married women who live with their husbands now work outside the home. pation arc distinctly different from those given by men. In January 1983, three-fourths of Texas women not in the labor force gave keeping house as the major reason for their nonparticipation, 11 percent indicated they were going to school, only I percent said they were unable to work, and the remaining 13 percent gave other reasons. In contrast, only 3 percent of Texas men cited keeping house as the reason for not being in the labor force, 29 percent were going to school, 4 percent were unable to work, and 64 per­cent cited other reasons. 2 ules averaging 42.8 hours.3 While 93 percent of men in the Texas labor force are full-time workers, 82 percent of women workers are full time (see table 2). More than nine out of ten part-time women workers are voluntarily part time; they number almost twice as many as male voluntary part-time workers. The reasons for part-time work by men and women, like the reasons for nonparticipation, differ on the basis of gender (see table 3). In 1982, of those part-time workers who usually worked full time, women were more likely to Table 1 Status of the Labor Force in Texas, 1982 (Annual averages in thousands) Civilian labor force EmploymentCivilian Unemployment noninstitutional Percentage of Percentage of Category population Number population Number population Number Rate Total work force 10,929 7,3S3 67.3 6,848 62.7 sos 6.9 Men S,32S 4,306 80.9 4,018 7S.4 288 6.7 Women S,604 3,047 S4.4 2,830 SO.S 217 7.1 White total 9,S74 6,430 67.2 6,043 63.1 387 6.0 Men 4,673 3,80S 81.4 3,S80 76.6 22S S.9 Women 4,901 2,62S S3.6 2,463 S0.3 162 6.2 Black total 1,170 799 68.3 698 S9.6 102 12.7 Men SSS 424 76.4 369 66.4 SS 13.0 Wo men 61S 47S 61.0 329 S3.S 46 12.4 Hisp~nic origin total 2,019 1,412 64.S l ,26S S7.8 146 10.4 Men 1,073 866 80.7 780 72.6 87 10.0 Women 1,116 S46 48.9 486 43.S 60 11.0 Women by age 16-19 years 498 2S2 S0.7 201 40.4 S2 20.4 20-24 7Sl S23 69.6 469 62.S S4 10.3 25-34 1,330 912 68.S 846 63.6 66 7.2 3S-44 880 S83 66.3 S59 63.S 2S 4.2 4 S-5 4 689 401 S8.2 386 S6.1 15 3.7 S5-64 670 284 42.S 279 41.6 s 1.9 6 S years and over 786 91 11.6 90 11.4 1.2 Women by marital status Single (never married) 990 672 67.9 S8S S9.l 87 13.0 Married, spouse prese nt 3,371 1, 71 1 S0.8 1,622 48.1 89 S.2 Other marital status 1,243 663 S3.3 6.1 623 S0.1 41 Women by metropolitan area Houston SMSA 1,137 624 S4.8 S76 S0.7 48 7.6 Dallas-Fort Worth SMSA 1,221 76S 62.7 721 S9. l 44 S.7 ·cite own illness, vacation, or other reasons for part-time work. Men were more likely to cite bad weather, slack work, or own illness, reflecting their greater concentra­tiOn in construction, oil and gas, and related industries. Two-thirds more women than men usually work part time in Texas, and over two-thirds of all women voluntarily working part time indicated the major reason as "busy," which may readily be associated with homemaking and child care. Unemployment of Women Worken in Texas Unemployment of women workers tends to be one to two percentage points higher than men's unemployment in both Texas and the nation. This gap usually narrows during a recession, however, when the blue-collar industries that hire mostly male workers have declines in employment. Thus, in Texas, as in the United States as a whole, reces­ sions can be perceived as "equal opportunity unemployers of women."4 The average unemployment rate for Texas women in 1982 was 7.1 percent, with 217 ,000 women unemployed, while the unemployment rate for men in Texas was 6. 7 percent, with 288,000 unemployed (see table 4). The reasons for unemployment of women and men workers in Texas differ markedly. For men, the overwhelm­ ing reason for unemployment was job loss: more than 62 percent of all unemployed men have lost jobs, and 71 per­ cent of all job losers were male. In contrast, the dominant reuon for female unemployment was reentry into the labor force. (A reentrant is defmed as someone who has worked in the past, left the work force for some period, and is entering the labor force again.) Women workers made up nearly 60 percent of all reentrants and of all new entrants into the labor force in 1982. In the two previous years, 75 percent of all new entrants were women; women workers made up more than 80 percent of all reentrants in 1980 and over two-thirds of all reentrants in 1981.5 Table 2 Full-time and Part-time Status of the Civilian Labor Force in Texas, 1982 (Annual averages in thousands) Category Total Men Women Full-time labor force Total 6 ,469 3,986 2 ,483 Employed Full-time schedules 5,736 3,568 2, 168 Part time for economic reasons 311 171 140 Unemployed (looking for full-time work) Number 422 247 174 Percentage of full-time labor force 6.5 6.2 7.0 Part-time labor force Total 884 320 564 Employed (voluntarily part time) 801 279 521 Unemployed (looking for part-time work) Number Percentage of part-time labor force 83 9.4 41 12.8 42 7. 5 Source : See table l . SBPTEMBER-OCTOBER 1983 Although the reasons for unemployment differed signifi­cantly on the basis of sex, the patterns of duration of un­employment for men and women in Texas were quite simi­lar, with a somewhat larger proportion of women than men being unemployed for fewer than five weeks. This result is consistent with national fmdings, as the average duration of unemployment for women tends to be lower than that for men, with the gap narrowing during periods of recession. Occupational and Industrial Distribution of Women During the past two decades, the period of rapid increase in women's labor force participation, important shifts have Table 3 Part-time Workers by Reason for Part-time Work in Texas, 1982 (Annual averages in thousands) Women a percen tage Reason Total Men Women of total Usually work full time Total Slack work Job started or terminated Holida y Bad weather Own illness On vacation Other Usually work part time Total Slack work Busy Full-time work less than thirt y-five hours Other 571 108 28 37 100 109 68 122 909 174 564 119 52 330 241 68 40 18 10 21 16 71 29 60 49 33 35 60 62 342 567 84 90 194 370 35 83 29 23 42.2 37.0 35.9 43.4 29. 1 45.0 51.5 50.9 62.4 51.8 65.6 69.8 44.3 Note: Workers are labeled part time if they work fewer than thirty­five hours a week. Source : See table l . Table 4 Reason for Unemployment and Duration of Unemployment in Texas, 1982 (Annual average percentage of total unemployment) Category Total Men Women Reason for unemployment Job losers, total 50.0 62.1 34.0 Job losers, on layoff 8.2 10.l 5.7 Job leavers 13.4 11.4 16.0 Reentrants 25.9 18.6 35.7 ew entrants 10.6 7.9 14.2 Duration of unemployment Less than 5 weeks 55.3 51.2 56.2 5-14 weeks 30.7 32. 1 28.7 l 5 weeks and over 16.0 16.7 15. 1 27 weeks and over 5.3 6.0 4.4 52 weeks and over 2.2 2.6 1.6 Total unemployed 505,000 288,000 217,000 Unemployment rate 6.9 6.7 7.1 Source : See table I. also occurred in the occupational distribution of jobs. Growth in the number of jobs in the service-producing sec­tor has been the basis of employment expansion, with most job gains having occurred in state and local governments, retail trade, and health, educational, legal, social, and rec­reational services. According to Janet L. Norwood, the commissioner of the Bureau of Labor Statistics, "By 1980, service-producing industries accounted for 7 out of 10 jobs in the American economy."6 Three-fourths of the growth in women's employment was in these service industries. Thus, despite the dramatic growth of women's labor force participation, women have been and continue to be highly concentrated in certain employment categories, either by occupation or industry. Occupational classifications are determined by the spe­cific job performed, while industrial employment categories are defined by the product or service produced by the em­ploying firm. While almost one-third of all Texas workers are classified as blue collar, most of these are men (see table 5). Almost one-half of all male workers, or over 2 million men in Texas, are blue collar, and only one-tenth of all women workers, or 326,000 women, are blue collar. In contrast, almost twice as many women as men are classified as service workers; however, many white-collar workers also produce services. While 53 percent of all Texas workers are white-collar workers, 69 percent of women are classi­fied as white collar. In particu­specific occupations. The most concentrated occupations include registered nurses (97 percent women), elementary and secondary teachers (71 percent), secretaries (99 per­cent), household workers (97 percent), bank tellers (94 percent), and health service workers (89 percent). The proportion of women accountants and computer specialists has increased markedly, however. Employment of men and women in Texas by industry shows a greater concentration of men in higher-paying heavy industry and manufacturing and of women in lower­paying jobs in trade; finance, insurance, and real estate; ser­vice industries; and government; many of these jobs are clerical (see table 6). If a comprehensive list of industries is ranked from high to low by the percentage of female em­ployees, it has a high inverse relationship to a ranking of these industries by level of hourly earnings. Those indus- Table 5 Distribution of Employment by Occupation in Texas, 1982 (Annual average percentage of total employment) Texas Houston SMSA Dallas-Fort Worth SMSA Occupation Total Men Women Men Women Men Women White-collar workers Total Professional and technical Managers and administrators Sales workers Clerical workers Blue-collar workers Total Craft and kindred workers Operatives (except transport) Transport equipment operatives Non farm laborers Service workers Farm workers 53.0 41.7 69. 1 47.0 77 .7 45 .8 70 .8 1 5. 1 14.3 16.4 17.2 18.2 16.9 16.4 12 .8 15. 7 8.6 16.8 10.2 16.0 8.2 6 .9 6.3 7 .6 7. 5 9.8 6.4 7.2 18.2 5.4 36.5 5. 5 39.5 6.6 39.1 31.8 46.6 10.7 46.5 8.0 43.2 12.8 14. 1 22.5 2.3 24.3 1.1 21.8 3.0 9.0 10.6 6. 8 9 .2 4. 5 10.2 8.4 3.7 5.9 0 .6 6 .0 1.1 4.6 0.2 4.9 7 .6 1.1 6.9 1.3 6.6 1.1 12 .4 7.5 19.4 6.4 14.2 9.4 16.2 2. 8 4 .2 0 .8 lar, more than 36 percent of the Source: See table I. women and only 5 percent of the men in the Texas labor Table 6 force are clerical workers. The occupational distribution Employment by Industry in Texas, 1982 for the Houston and Dallas-Fort (Annual average percentage of total employed) Worth SMSAs differs somewhat Dallas-Fort from that for the state as a Texas Houston SMSA Worth SMSA whole, with both metropolitan Industry Total Men Women Men Women Men Women areas having more white-collar Private nonagricultural wage workers. The Houston area, in and salary workers particular, has a substantially Total 74.2 74.5 73.7 84.7 81.9 84.9 81.7 larger share of both male and Mining 3.7 4.9 2.1 6.7 4.3 1.4 1.5 Construction female white-collar workers, 6.9 10.9 1.4 15.3 2.3 10.5 I.7 Manufacturing total I 5.5 18.6 11.1 19.5 8.4 27.4 16.6 with relatively fewer blue-collar Durab le goods 8.9 11.5 5.3 12. I 4.5 20.3 10.7 women workers. In contrast, the Nondurable goods 6.6 7.1 5.8 7.4 3.9 7.1 5.9 Transportation, communication Dallas-Fort Worth area has a and public utilities ' 5.5 7.1 3.2 7.8 4.4 7.6 3.9 higher proportion of women Trade 19.5 17.7 27.0 16.1 24.4 18.8 22.1 blue-collar workers than does Finance, insurance, and real estate 6.1 4.1 9.0 5.9 10.8 5.3 12.0 the state as a whole. Service industries 15.5 11.0 22.0 13.1 25.1 13.7 21.9 For the nation as a whole, as Government 13.5 10.8 17.4 5.9 11.9 7.4 11.6 Agriculture well as for Texas, women 3. 7 5.2 1.5 continue to be concentrated in Source: See table I. tries with high levels of female participation tend to· have low average hourly earnings. Earnings and Poverty Status of Women in Texas Primarily because of the concentration of women in lower-paying industries, earnings of full-time women workers average only about 60 percent of full-time men's earnings. This earnings gap has prevailed consistently since 1960. For all workers, when part-time workers are in­cluded, women's earnings decline to only 43 percent of men's earnings. Since women in Texas are segregated into the same occupations and industries as women across the nation, the earnings gap in Texas is very close to the na­tional gap.7 The 1980 census contains little state-level income data by gender, but it does indicate the numbers of people in poverty, and these figures show a high proportion of female­ headed households with incomes below the poverty level. Of Texas households below the poverty level, 34 percent are headed by a female, with no spouse present. Of Texas households headed by a female, 31 percent have income below the poverty cut-off level. 8 These poverty data for Texas households are very close to the figures for the nation as a whole. The family with more than one wage earner has become an important element in the economy of Texas, as well as that of the nation. In the 1980 census, 1.25 million Texas families had one wage earner and more than 2 million families had two or more. The average income of one­ worker families was $20,177, whereas the average income of families with two or more workers was $27,304, more than a third higher.9 Most of these families with two wage earners include a working wife, and two-thirds of these wives work full time all or most of the year. Policy Implications As more women have entered the labor force, marital patterns have changed, and the consequences include later marriages, many more families headed by women, and in­creasing numbers of families with two earners. Many families with two earners depend upon the second income to acquire and maintain desired housing. While fertility rates have declined and the average size of households has decreased the maJ·ority of children under age 18, some 55 , 10 percent, have mothers in the labor force. As employers, businesses need to be increasingly aware of the demands on the time of working women and to con­ sider such adaptations as flexible scheduling, job sharing, and on-site child-care facilities. Some of these innovations are being adopted by Texas firms, but the work place has been slow to respond to the needs of working women. Adaptations to working women on the supply side of the output market have been more rapid in some areas. In particular, housing markets have responded to shifting demographics and changing household demand with smaller SEPTEMBER-OCTOBER 1983 units containing more work-saving amenities for smaller households and two-earner families. In contrast, other sec­tors have not yet adapted to the changing buying patterns related to the increased number of women in the labor force. A recent study revealed that 40 percent of grocery shoppers were men and that these male shoppers have very different shopping and buying habits from the traditional female shoppers, but grocery marketing and advertising appear to be unaware of this change and not to have responded to this surge of male buyers. The changing composition of the labor force also has im­portant policy implications for communities and the state. Between 1970 and 1980, the number of working women in the United States who had completed at least one year of college almost doubled, increasing to 46 percent. 11 Women are matriculating in larger numbers and in more diverse fields to obtain the education to qualify for the jobs they want. Coupled with the forecasted declines in the college age population for the coming decades, college entrants will increasingly be mature women and reentrants, seeking to upgrade labor force skills. In many cases, they will need increased financial aid and support services from the state colleges and universities. Demands, especially at the state level, for government to enter the child-care field, either directly through public facilities or indirectly through subsidies and tax breaks for child care, will increase. The federal tax structure was adapted to dual-earner families and working women in 1982 with the marriage penalty deduction and child-care credit. Increasingly, state and local governments will be called on to adopt revised tax structures or to subsidize the concerns of dual-earner households and of households headed by women. Notes 1. Unpublished data from the U.S. Department of Labor, Bureau of Labor Statistics, May 1983. 2. U.S. Department of Commerce, Bureau of the Census, monthly Current Population Survey, table 1 for January 1983, Texas, unpub­lished data. 3. Unpublished data from the U.S. Department of Labor, Bureau of Labor Statistics, May 1983. 4. Rose M. Rubin, "Female Unemployment and Stagflation," Mid­south Journal ofEconomics 6 (May 1982): 7. 5. H. N. Goodson, "Supplemental Report on Women in the Labor Force in Texas," Texas Employment Commission, August 1981, p. 17. 6. Janet L. Norwood, "The Female-Male Earnings Gap: A Review of Employment and Earnings Issues," U.S. Department of Labor, Bureau of Labor Statistics, Report 673, September 1982, p. 2. 7. Paula England, Linda Lake, and Suzanne McConnell, "Texas Women in the Labor Force," Texas Business Review 52 (May 1978): 88. 8. U.S. Department of Commerce, Bureau of the Census, "Census of Population and Housing, 1980," Summary Tape File 3A, Texas, 1982. 9. Ibid. 10. Norwood, "The Female-Male Earnings Gap," p. l. 11. Ibid. BBR Publications on Latin America Atlas of Central America Arbingast, Stanley A., et. al. 1979. 70 pp. 11" x 14" spiral bound. $18.00. ISBN 87755-262-2. An economic atlas with maps of Central America and the individual countries-Guatemala, Belize, Honduras, El Salva­ dor, Nicaragua, Costa Rica, and Panama. Atlas of Mexico Arbingast, Stanley A., et. al. 1975. 164 pp. 11" x 14" spiral bound. $20.00. ISBN 87755-187-1. An economic atlas of Mexico, including political, physical, social, and historical data. Economic Integration in Latin America: The Progress and Problems of LAFT A Mathis, F. John. 1969. 112 pp. $4.00. ISBN 87755-076-X. Srudies in Latin American Business No. 8. The study is con­cerned primarily with the Latin American Free Trade Asso­ciation as the organization expected to determine the suc­cess or failure of the common market in Latin America. A Spanish edition is available from Editorial Diana, Mexico. Industrial Polarization under Economic Inte­gration in Latin America Garbacz, Christopher. 1971. 101 pp. $4.00. ISBN 87755­138-3 . Srudies in Latin American Business No. 11. The focus is the tendency for an economic union of countries with widely divergent levels of development to result in further extreme concentration of economic activity at a few industrial poles. Industrialization and Employment in Puerto Rico, 1950-1972 Holbik, Karel, and Philip L. Swan. 1975. 82 pp. $4.00. ISBN 87755-208-8. Studies in Latin American Business No. 16. Although de­velopment programs dating from the 1940s have made pos­sible the emergence of Puerto Rico as an industrialized economy, the economic changes have resulted in certain problems, problems that are a major focus in the book. International Tourism and Latin American Development Krause, Walter, and G. Donald Jud. 1973. 74 pp. $5.00. ISBN 87755-176- -j Ill c l: c: en m ll -4 c: m zz> . -c: -j < 0 mm 'Tl x ll l> (I) Ill (I) ­ -4 c:en ..., -< ­ co 0 2 ..., .,, m N-j ~ mll >< m l> en en m l> > -j ll l> C') c: J: ~ en m n 0 z 0 n r l> en en,, I 0 ' en -l )> G'l m ,, !: 0 )> -l )> c en -l ~ -l m )( ~