Despite the oil slump that began in the summer of 2014, in 2015, the Houston metropolitan area was still enjoying a relative economic high. The region ranked ninth in growth and second in prosperity among the 100 largest metropolitan areas when compared to the year prior, according to a 2017 analysis by the Brookings Institution. In 2016, those numbers looked remarkably different, according to a new analysis released Tuesday. Instead of leading the nation, the Houston area fell to near last, ranking 97th in growth, which looks at jobs in general, gross metropolitan product and jobs specifically at young firms. In prosperity, which captures productivity, standard of living and average annual wages, the Houston area fell to 96th.
The ripples of an oil slump are to blame, said Alan Berube, senior fellow and deputy director of the Metropolitan Policy Program at Brookings Institution and one of the team members behind the latest analysis.
But the real issue is Houston’s stubbornly low inclusivity ranking.
“Houston is less of an oil town than it was 30 years ago,” said Berube. “It was a lot worse when it happened in the late 1980s, so I think that the chances are that it’s going to rebound when we look at the numbers next year because it’s got science and medicine and high value professional services and firms of all types.”
Indeed, he argued, “The long-running underlying problem is: is this economy benefitting everybody? Are we reducing poverty? Are we enabling upward mobility? Is this crossing racial and ethnic lines? I’m not sure that the growth picture, up or down, is fundamentally changing that picture.”
In the latest analysis, the Houston metropolitan area ranked 84th overall when it came to inclusion in 2016 versus 2015. In 2015, the region ranked 86th on the same measure.
“It had those really high rankings on growth and prosperity and kind of mediocre rankings on inclusion,” Berube explained. “Then, in 2016, the growth wheels kind of fell off. So it was already not totally delivering big increases in median wages or declines in poverty for the bottom half of the population, let’s say.” With energy prices rebounding, he said, “All is not lost,” and during 2016, “there was an underlying inclusion problem in Houston and it’s kind of re-exposed with the huge drop in the growth in the prosperity.”
Over a longer period of time, Houston seems to do better on some of those measures. “These three categories–growth, prosperity and inclusion–they don’t travel together perfectly on a year to year basis. In fact, it's normally that you start to get growth and prosperity, and then typically inclusion sort of follows along later and helps to reinforce the growth and prosperity,” noted Berube.
In Houston’s case, extending the rankings to cover a 10-year period, moves Houston up considerably to fourth in growth and seventh in prosperity. And though its inclusion ranking is much higher than in 2015 or 2016, it’s still well below the other measures, ranking 23rd overall.
Though many of these numbers are framed as purely market-driven phenomena, policy underpins each to some degree and rather than simply following from economic growth, inclusion is key to continued prosperity.
“Unless you get a different trajectory on inclusion, then the growth thing is going to be a long-run problem and it’s going to be more volatile,” said Berube.
“The way we define [inclusion] and describe it, it’s about creating jobs, preparing people for jobs and then making sure that those jobs are accessible physically and through social networks,” explained Berube, “so policy’s got something to do with all of those things.”
Inclusive economic growth, said Berube, has to be part of a region’s economic strategy. In Houston, advocates and researchers have already begun to think through that process, starting with the mayor’s task force on equity. That team came up with a set of recommendations, including requiring a living wage for all city employees and subcontractors, and a pilot program to help fund early childhood education.
“In some ways, there’s been no better economy in the United States over the past decade than Houston and maybe no more troubled economy in that one year period than Houston,” explained Berube, comparing the 10-year 2016 rankings to the one-year 2016 rankings. “It does poke a hole in this notion that Texas and Houston have upended the business cycle and everything is getting better for everyone.”