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Austin Outpaces Houston in Economic Growth

By: Oscar L. Orias

A new study by the Brookings Institute ranks cities around the nation and world on how well they are recovering from the recession. Looks like this year Texas is a big winner, again. Houston, Dallas, San Antonio, and Austin made the top 15 in the nation in recovering. Austin led the pack by being the best city to recover in the US and 25th in the world. Houston made the list as the 61st in the world, lagging behind the rest of Texas. Houston has gained a reputation of being of the best recession proof cities but as the studies show it is behind the other major metropolises in the lone star state. It seems that for now Austin’s economy has come out pretty well.

Austin Booming
Austin for the last decade has remained one of the leading cities in growth and stable economy. It has gotten rid of it’s reputation as being just merely a home for the UT System, Texas government, and Dell headquarters. 7 companies from Austin made Delloitte’s list of fast growing companies. There are several reason for this rapid growth:

1) Stable Economy: the huge campus, UT-Austin and Texas government are stable employers that don’t lay-off huge numbers of employees. They can’t do things like outsource to India and China. Government and university jobs are also somewhat shielded from contractions that plague the finance, manufacturing, and constructions. Those two sectors also attract skilled workers and jobs. Skilled jobs tend to be more stable than unskilled labor.

2) Skill workforce: Austin is known as the intellectually capital of Texas. The biggest reason is that more than 50,000 students attend UT-Austin. With such a huge number of students, UT plays a major role in the culture and economy of Austin. The city itself has taken measure in becoming more than a college town and developing the city. These students are choosing to stay in the city because of the industries moving to the area and the infrastructure development. Many of these jobs that attract students are in technology sector, which traditionally relies on skilled domestic labor. These companies move to the metropolis mainly for low taxes, lower wages, and plentiful skill labor.

3) The suburbs: Suburbs around Austin have also done a tremendous job in attracting industry and jobs to the metro area. In fact the suburbs outpace the city of Austin in growth. The city is growing at 13% while the surrounding community experience growth at 62% from 1998-2006. Housing in the state is also very affordable compared to other states. These inexpensive houses and skilled jobs attract families from all over the country. This has softened the blow to the city’s real estate market.

4) The Fun factor: Austin is known worldwide for 6th Street. 6th Street brings tourism to Austin, which helps the city generate revenue and grow the economy. The entertainment and restaurant industry is a major player in Austin’s economy. It brings diversity to the municipality’s portfolio and more importantly it creates jobs. The local government also does great things like hold festivals on 6th Street and cater to tourists. It also entices students and young professionals to work, live, and play in Austin. Many of these young professionals later have families and move to a house in one of fast growing suburbs.

5) Texas attracts businesses: The state’s friendly tax policies and no state income tax entices businesses to move to Texas. The state also has lack laws in employee rights, union organization, and zoning laws. These make it very attractive to businesses to set up shop in Texas. The skilled and relatively inexpensive labor of Austin attracts high-tech industries that would normally go to places like Silicon Valley in California.

What Can Houston Learn from Austin
Unfortunately not much can be learn from Austin. Both cities attract different industries and people. Houston seen as an industrial city where oil and biotechnology reign supreme and to some extent this is true. Many companies that aren’t in oil or biotechnology depend on those industries in some sort of fashion. Here are some things that the city can do improve and strengthen the economy in the future:

1) Create a better relationship with the colleges: Houston has many big and great colleges within its metro area. This benefits the city by creating and keeping an educated labor force. Unfortunately the city has not done a great job working closer with these institutions and integrating them further into the fabric of the culture. It doesn’t have to work to the extent that Austin does with UT but needs to make the universities feel a part of the community. The relationship between the city and the University of Houston has appeared distant both their histories. The relationship has gotten better over the last 7 years but more can be done to bring these two organizations together. The same can be said about the other major research institute: Rice University.

2) Strengthening Infrastructure: Houston is growing and so are the needs of this huge metropolis. The city has the daunting task of trying to deliver services to such a large area. Houston will have to step up to the challenges of its size and rapid growth in the near future. Have a developed infrastructure will go a long way in delivering quality service to all citizens.

3) Smart growth: Houston throughout its boom period in the 80s and 90s was described by many at the time as organized chaos. Buildings and houses were appearing in strange parts of town and crime was high. Much of that disorganized growth was due to the lack of zoning laws. These same laws spared Houston much of the damage from the Great Recession. Houston is again described as a boom town but this time the cities growth should be more thought out and planned. I am not advocating zoning laws, just that city government must be smart in how they plan out growth. There are promising sign of smart growth with Centerpoint’s Smart Grid and the expansion of the Metrorail.

Sources:
http://www.statesman.com/business/content/business/stories/other/2009/10/27/1027cbriefs.html

http://www.forbes.com/2009/05/11/best-cities-jobs-employment-opinions-columnists-austin-texas.html

http://www.bizjournals.com/houston/news/2010/12/01/san-antonio-is-one-of-the-best.html

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