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exas middle class didnt just happen. Like much o America in the post-war
period, exas inrastructurerom its schools to its highways to its public
universitieswere built and sustained by public policy and public support. In ad-
dition, the states large natural oil resources helped spur job creation throughout
the 20th century. Unlike other regions in the nation, unions have not histori-
cally played a vital role in propelling exan workers into the middle class. As a
result, the earnings gap between high school and college graduates in exas is
much larger than in some other parts o the country where non-college-educated
workers were able to negotiate decent wages, health insurance, and retirement
benefts through a union. With ew unionized jobs, Texans have relied on higher
educationand the public systems and policies that make a college education a-
ordableto provide economic mobility. Smart investments in public education
in the 1980s and 1990s gave rise to a wave o rst-generation college students.
Obstacles tO GrOwinG and
strenGtheninG texas Middle
class
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T h e A m e r i c A n D r e A m is about working hard in return or decent wages, economic stability,
and being able to provide a better lie or your kids. But the kinds o jobs that can provide a solid
middle-class lie in return or hard work are in short supply in exas. Unemployment is still high,
earnings have been stagnant or a decade, and many workers lack health insurance and retirement
savings to protect them nancially during a serious illness or when they can no longer work.
c o n n e c T w i T h D mo s AT : www.deMOs.OrG
f o l l o w u s AT : @ de M Os _Or G
F ac e b OOk . c OM /de M Os i de as ac t i On
k e e p On t Op OF t h e l at e s t t r e nds and analy s i s
F r OM d M Os at Ou r ne w b lOG , p Oli c y s h Op . ne t
This is a brieng paper in
Dmos Future Middle Class
series and is co-published withCenterforPublicPolicy
Priorities
Under At tAckteX AS' Middlecl ASS And the
opportUnit y criSiS
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u n D e r AT T Ac k : T ex As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 2 of 11
Going orward, exas aces a number o challenges to building and sustaining a strong middle class. Work-
ers at all levels o education have aced stagnant or declining wages over the last decade. One reason is that
job growth has been strongest in the service industry and other sectors where wages are low and employee
benets are limited or non-existent. Across the economy, exas employers are much less likely than those
in many other states to provide their workers with health insurance. Rising out-o-pocket costs and skimpy
plans mean that a amily illness can lead to substantial costs and medical debt. And as employers replace
traditional pensions with 401(k)-type plans, or oer no retirement plan at all, middle-class workers cannot
count on a secure retirement.
At the same time, it has become more costly to raise a amily. Now that a majority o mothers are employed,
amilies must pay or child care. High-quality care or preschoolers is expensive, yet parents ace these costs
early in their working years when their earnings are low. Housing is also more expensive relative to household
income than it was decades ago. Te need or most working parents to have their own vehicle and the high
price o gas urther strain middle-class amily budgets. And because amilies struggle just to cover everyday
expenses, it is hard or them to save and protect themselves in the event o a job loss or other amily crisis.
Challenges to the uture o exas middle class can be seen most clearly in the economic prospects or the
states young people. Today many young workers are earning the same or less than their parents did a genera-
tion ago, dashing hopes or economic mobility. Although a our-year college degree improves job prospects
and lietime earnings, skyrocketing college costs, especially since exas tuition deregulation in 2003, are
making it hard or all but the most auent students to stay in school and graduate. exas college graduates
have high levels o student debt while their earnings have allen over the past decade. Young workers are
increasingly less likely to have access to health insurance and retirement benets through their employers,
with the most dramatic changes occurring in recent years.
Te unraveling o the social compact predated the Great Recession, but the economic crisis hastened itsdemise. Not only did the state lose 320,000 jobs because o the Great Recession, but the economic eects o
those lost jobs reverberated to all corners o the state, particularly the already-strained nances o the state
government. We estimate that the jobs lost rom the recession have reduced state sales tax revenues by over
$540 million, on top o other revenue losses rom the recession, putting thousands more middle-class jobs
at risk. o put this in perspective, that lost revenue could have paid the salaries o over 4,700 teachers or
nearly 3,900 nurses. Recent budget cuts, in response to the Great Recession, will create much more middle-
class job loss.
Now is the time or employers, workers, and policymakers to come together once again to rebuild pathways
to the middle class, create good jobs with air pay and decent benets, and ensure that prosperity is broadly
shared in the next generation.
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u n D e r AT T Ac k : T e x As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 3 of 11
eaRNINgS
Over the last 20 years, earnings or exas workers (ages 18-64) have grown modestly. Ater increasing in the
late 1990s during the economic boom, real median earnings have remained relatively at. Despite the Great
Recession, exas median earnings peaked
in 2009 at $33,280, although last year they
ell to $31,620, roughly where they were a
decade ago. Key to strengthening exas
middle class will be overcoming this wage
stagnation. Earnings in exas are consis-
tently lower than they are nationally. exas
median earnings were 89 percent o thenational level in 2010 (see Figure 1).
educatiOn
In exas as elsewhere, a college degree is
the surest path to a middle-class income.
exas workers with a bachelors or gradu-
ate degree earn more than twice as much
as those with only a high school diploma
($55,080 versus $25,500 in 2010). exas
workers o all education levels experi-
enced earnings gains in the late 1990s butall except those with a our-year college
degree had lower earnings in 2010 than
2000. Bachelors degree-holders ended
the decade at the same earnings level they
attained in 2003. Workers with an associ-
ates degree lost ground throughout the
decade, whereas high school graduates had
an uptick in earnings only to see them all
since 2004 (see Figure 2).
FiGure 2. Median annual earninGs OF texaswOrkers by educatiOn, 1990-2010 (2011 dOlla rs)
FiGure 1. Median annual earninGs OF wOrkersin texas and the u.s., 1990-2010 (2011 dOllar s)
TEXAS UNITED STATES
$25,000
$27,000
$29,000
$31,000
$33,000
$35,000
$37,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
BACHELORS DEGREE OR MORE
ASSOCIATES DEGREE
SOME COLLEGE, NO DEGREE
HIGH SCHOOL DIPLOMA
LESS THAN HIGH SCHOOLCOMPLETED
sou r c e : Dmos analysis of Current Populaon Survey data
sou r c e : Demos analysis of Current Populaon Survey data using 3-year averages.Data not available for Some College, No Degree prior to 1993.
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u n D e r AT T Ac k : T ex As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 4 of 11
race and ethnicity
As in the rest o the country, median earnings or Arican-American and Latino workers are lower in exas
than those or white workers. In 2010, the typical Arican-American worker earned $30,600 in exas, or75 percent o the earnings o the typical white worker, which were $40,800. At $24,480, median earnings
or Latinos were 60 percent o those or whites. Tis cannot be ignored in a state where 38 percent o the
population is Latino.
Gender
Men still typically earn more than women in exas, but the gap has narrowed considerably. In 2010, median
earnings or exas men were $8,400 higher
than those or women ($35,700 versus
$27,300 when both part- and ull-time
workers are included). Over the last two
decades, mens wages have stagnated whilemedian earnings or women have risen by
23 percent, narrowing the gender gap (see
Figure 3). exas women now earn 77 per-
cent o what men do.
FiGure 3. Median earninGs OF Male and FeMalewOrkers in tex as, 1990 and 2010 (2011 dOllars)
0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
1990 2010
MALE WORKERS FEMALE WORKERS
sou r c e : Dmos analysis of Current Populaon Survey data. Includes both
part- and full-me workers.
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u n D e r AT T Ac k : T e x As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
p ag e 5 o f 1 1
Widespread access to well-paying jobs with good health and retirement benets is the cornerstone o a
middle-class lie. Unions have consistently advocated or public policy that promotes a stronger economy
or all, bargaining or better wages and benets, but ew workers in exas are union members. Te lack o
representation may contribute to the state's lower median earnings and reduced rates o health coverage
compared to the nation as a whole.
uniOn MeMbership
exas has historically had very low union participation rates compared with the rest o the nation. Only 5.4
percent o exas workers were union members in 2010, a gure that has changed very little over the past
decade (see Figure 4). Nationally 11.9 percent o workers participated in unions last year36 percent o public-
sector workers (7.6 million) and 7 percent o
private-sector workers (7.1 million).
health insurance
High out-o-pocket medical expenses are
one o the primary causes o bankruptcy
among the middle class, underscoring the
importance o health insurance coverage.
But 27 percent o exas workers lack health
insurance compared to 17 percent nation-ally. Te ranks o the uninsured have grown
steadily as access to employer-sponsored
health insurance has declined. Te propor-
tion o exas workers whose employers do
not provide coverage increased substantially
over the last decade, rom 27 percent in 2000
to 34 percent in 2010.
retireMent saVinGs
Several actors threaten the ability o exas workers to look orward to a secure retirement. Fewer than hal(48 percent) o the states workers have access to a retirement plan at work, a gure that has plummeted
since reaching a high o 61 percent in 2000. But even or workers whose employers do provide retirement
benets, such plans have gradually shited rom pensionswhose costs and nancial risks are borne almost
JoBS aND BeNefITS
FiGure 4. uniOn MeMbers as a percent OF allwOrkers in te xas and the u.s., 2000-2010
0
2%
4%
6%
8%
10%
12%
14%
16%
TEXAS UNITED STATES
sou r c e : Bureau of Labor Stascs, U.S. Department of Labor.Includes both public- and private-sector workers.
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u n D e r AT T Ac k : T ex As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 6 of 11
FiGure 5. texas wOrkers access tO andparticipatiOn in eMplOyer-spOnsOredretireMent p lans, 1990-2010
exclusively by employersto 401(k)-type
plans that rely on worker contributions
and expose individuals to the vagaries o
the stock market and high ees that eat
away at returns. Nationally, roughly 63 per-
cent o all employer-sponsored retirement
plans are now 401(k)s or similar individual
plans. Nearly 9 percent o exas workers
dont participate in their employer-spon-
sored plan either because they cant aord
to contribute or ail to opt in (see Figure 5).
uneMplOyMent
Since the early 1990s, the unemploymentrate in exas has ollowed the same gen-
eral pattern as unemployment nationally.
Although exas ofcial unemployment
rate was slightly higher than the national
rate during most o that period, it did not
hit the national high o 10.1 percent during
the Great Recession. exas unemployment rate peaked at 8.3 percent at the end o 2010, ater the ofcial
end o the recession, and stood at 8.0 percent as o May 2011.
where the JObs are
Te past 20 years have brought signicantchanges to exas job market. Manuac-
turing and service jobs have accounted
or roughly hal o all employment during
that time, but these two sectors have expe-
rienced diverging trends. Manuacturing
employment declined rom 18 percent in
1990 to 10 percent in 2010, while service
employment increased rom 33 percent to
40 percent (see Figure 6). Manuacturing
jobs are more likely than service jobs to
be unionized, pay decent wages, and oermiddle-class benets.
30%
35%
40%
45%
50%
55%
60%
65%
ACCESS TO AN EMPLOYER PLAN
PARTICIPATES IN AN EMPLOYER PLAN
NO EMPLOYER PLAN
sou r c e : Dmos analysis of Current Populaon Survey data
FiGure 6. texas eMplOyMent in ManuFacturinGand serVices as a percent OF the labOr FOrce
M ANU FAC TU RI NG S ERV IC ES
0
5%
10%
15%
20%
25%
30%
35%
40%
45%
1990 2000 2010
sou r c e : Dmos analysis of Current Populaon Survey data
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u n D e r AT T Ac k : T e x As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 7 of 11
exans pride themselves on being able to pass on a better lie to their children, but over the last generation,
this dream has become increasingly out o reach. Even with two parents in the labor orce, amilies struggle
to meet the high costs o housing and child care, let alone save or a rainy day or invest in the uture.
hOMeOwnership
Homeownership among exas workers
has increased considerably over the last 20
years, even as the growth in homeowner-
ship has slowed nationally. However, even
ater the recent gains, the state's homeown-
ership rate still lags behind the nation's.
Ater reaching a peak o 66 percent in 2007,
the Texas homeownership rate has declined
a ew percentage points since (see Figure
7). exans are devoting a larger share o
income to housing costs: in 2008, nearly a
third o exas homeowners (31 percent)
spent 30 percent or more o their income
on housing.
child care
Child care can be one o the largest expenses amilies ace, in some cases equaling or exceeding housing
costs. On average, ull-time care in a child care center in Texas costs $7,647 a year or an inant and $6,454 or
a our-year-old. For a amily with two children (an inant and a preschooler), the total cost o ull-time center
care averages $14,101 annually or 22 percent o amily income or a couple earning median wages. Care in
a amily child care home costs somewhat
less (see Figure 8).
FiGure 7. hOMeOwnership aMOnG wOrkersin texas a nd the u.s., 1990-2010
c hi l D c Ar e c e nT e r
f Am i l y
c hi l D c Ar e hom e
Ia,-m $7,647 $5,970
4ad,-m $6,454 $7,661sou r c e : Naonal Associaon of Child Care Resource and Referral Agencies,
2011 Child Care in the State of: Texas.
FiGure 8. aVeraGe annual price OFFull-tiMe child care in texas
RaISINg a faMILY
TEXAS UNITED STATES
50%
55%
60%
65%
70%
75%
sou r c e : Dmos analysis of Current Populaon Survey data
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u n D e r AT T Ac k : T ex As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 8 of 11
FiGure 9. Median earninGs OF texas wOrkersaGes 25-34 by educatiOn, 1980-2010 (2011 dOlla rs)
Te trends acing young exans seeking to build and maintain a middle-class lie are worrisome. Over the
last generation, wages have been stagnant or declined or all young workers in exas except or those with
a bachelors or graduate degree. Yet the share o the state's labor orce holding at least a bachelor's degree is
expected to decline rom a quarter o the workorce today to 17 percent by 2040. And while a college degree
provides higher earnings and greater protection against unemployment, college tuition costs have soared
and students are accumulating greater amounts o debt.
labOr Market
In 2010, median earnings or workers ages 25-34 with a bachelors degree or higher were $45,900 in exas
88 percent higher than earnings or a typical high school graduate in the same age range ($24,480). Real
median earnings or young college graduates with a our-year degree ell in the late 1980s and early 1990s.
Ater recovering in the late 1990s, they peaked at $51,000 in 2002 but have allen since. Real earnings or
young workers with an associates degree
were also volatile over the last 30 years and
were lower in 2010 than 1980, although they
have risen in recent years. Young workers
with a high school diploma and those who
did not graduate high school experienced a
slight overall decline in earnings during the
period; over the last decade, their earnings
were stagnant (see Figure 9).
In 2010, the national unemployment rate
or workers under age 25 and not enrolled
in school was 18.4 percentnearly dou-
ble the overall U.S. unemployment rate o
9.6 percent. Unemployment among young
high school graduates is alarmingly high; it
was 22.5 percent nationally in 2010 com-
pared to 9.3 percent among young workers
with a our-year college degree. In exas,
25-34 year olds ace an 8.4 percent unem-ployment rate, lower than the rates o their
peers in other states, but still quite high.
THe fUTURe MIDDLe CLaSS:
a LooK aT YoUNg peopLe
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
BACHELORS DEGREE OR MORE
ASSOCIATES DEGREE
SOME COLLEGE, NO DEGREE
HIGH SCHOOL DIPLOMA
LESS THAN HIGH SCHOOLCOMPLETED
sou r c e : Dmos analysis of Current Populaon Survey data.Data not available for Some College, No Degree prior to 1991.
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u n D e r AT T Ac k : T e x As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 9 of 11
FiGure 10. annual in-state cOlleGe tuitiOnin texas and the u.s. (2011 dOllars)
cOlleGe tuitiOn
At $6,477 or 2009-10, average in-state
tuition (including ees) at Texas colleges anduniversities is ast approaching the national
average o $6,829. Tuition costs have more
than quadrupled in exas over the past 20
years with the most rapid growth occurring
since tuition was deregulated in 2003 (see
Figure 10). Note that these gures do not
include room and board.
student debt
Nearly 3 out o 5 (58 percent) college gradu-
ates in exas entered the labor orce withstudent debt in 2009, and their average
debt was $20,015. In contrast to national
trends, the percent o exas college gradu-
ates with debt has held relatively steady in
recent years although the amount o debt that students hold continues to grow. Moreover, increasing numbers
o students are accumulating debt without completing a degree, putting them on a shaky path to economic
security and prosperity.
health and retireMent beneFits
Young workers ages 25-34 are more likely than other workers to lack health insurance coverage in exas
a third (34 percent) are currently uninsured.
wo out o ve (40 percent) o young workers
lack access to health insurance through their
employera proportion that has climbed
steadily over the last decade (see Figure
11). Fewer than hal (45 percent) o young
workers have access to employer-sponsored
retirement plans, and most o these plans are
risky and expensive 401(k)-type plans rather
than traditional pensions. About 10 percent
o workers ages 25-34 have access to a retire-
ment plan at work but do not participate.
LACKS HEALTH
INSURANCE
EMPLOYER DOES NOT
PROVIDE HEALTH INSURANCE
0
5%
10%
15%
20%
25%
30%
35%
40%
45%
1998 2002 2006 2010
FiGure 11. health insurance accessaMOnG texas wOrkers aGes 25-34
0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
TEXAS UNITED STATES
1
986-87
1
988-89
1
990-91
1
992-93
1
994-95
1
996-97
1
998-99
2
000-01
2
002-03
200
4-05
200
6-07
200
8-09
sou r c e : Digest of Educaon Stascs. Figures include required fees.
sou r c e : Dmos analysis of Current Populaon Survey data
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u n D e r AT T Ac k : T e x As mi D D l e c l Ass An D T h e o p p o r T u n i T y c r i si s
page 11 of 11
abOut dMOs
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Dm os
220FhAv,5hF
NwYk,NwYk10001
Ph:(212)633-1405
Fax:(212)633-2015
@dm.g
Dm os m eDi A
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(212)-389-1407
cOntact
The c enTer for p u b li c p oli c y p r i or i Ti es
900LdaS
ATX78702
www.ppp.g