(Bloomberg) -- If Texas is a test for how socially conservative US states will fare economically in the post-Roe world, then they’ll hold up just fine.
More than a year after passing the country’s most restrictive abortion law, Texas boasts the largest number of Fortune 500 company headquarters of any state. In the latest sign of the Lone Star State’s enduring allure, Chevron Corp. announced plans to relocate workers to Houston just hours after the US Supreme Court struck down Roe v. Wade.
Other southern and Mountain states have been a magnet for Americans in recent years, a trend that accelerated during the pandemic and boosted growth in cities across Florida, Arizona, Idaho and Utah. These states, led by Republican governors, are now all trying to further restrict abortion -- if not outright ban it.
“There will no doubt be people who won’t come to Texas or other southern states as a result of these policies, but, by and large, these things are determined by the dollars and cents,” said Brandon Rottinghaus, a political science professor at the University of Houston. “Businesses are getting more or less what they want from Texas -- that is low taxes, modest regulation and the freedom to influence their own destiny.”
Texas has for decades hung its hat on being a business-friendly state. Its population boom propelled it to the second-biggest economy, after California, and it’s among the fastest-growing in the past 20 years. None of the restricting laws passed by the state legislature and signed by Republican Governor Greg Abbott are threatening its prosperity in the foreseeable future.
Even Austin, long a liberal bastion, hasn’t seen a brain drain.
The economic risk is over the long term. Some state politicians, emboldened by a conservative Supreme Court, are already talking about punishing businesses that fund employees’ out-of-state travel for procedures. Reproductive-rights advocates have warned that in-vitro fertilization treatments could also be targeted. That would slowly chip away at the influx of people and companies willing to move to those places.
For now, low taxes on corporations and plenty of incentives outweigh any concerns about politics, reproductive rights and widening inequalities.
Texans, whether newcomers or natives, are unlikely to leave. The state is the “stickiest” in the US, retaining more of its population than any other, according to a study by the Dallas Federal Reserve’s Pia Orrenius and Madeline Zavodny of the University of North Florida.
“Very few people leave Texas, largely because of abundant economic opportunities,” the economists wrote, adding that the state has an above-average business formation rate.
A low cost of living and plenty of space don’t hurt, either. Chevron specifically cited lower housing prices in its offer to relocate employees from California, where the median home price is more than double that of Texas.
A relentless focus on growth has helped diversify the state’s economy beyond energy.
The Metroplex, home to Dallas and Forth Worth, has seen an influx of financial services firms. Houston, once mainly an oil town, is home to the world’s largest children’s and cancer hospitals. Austin, Texas’s capital, has blossomed into a major tech hub -- Telsa Inc. and Oracle Corp. are among the latest high-profile arrivals.
But the fall of Roe may eventually become a deterrent.
Cutting access to health care may pose challenges to businesses recruiting talent to the state, according to Shea Cuthbertson, president elect of Austin Women in Technology, a nonprofit networking organization. The state laws will add a financial burden on employers offering travel for care -- something startups can hardly afford, she said.
“The bottom line is that restrictive health-care policies significantly hurt people and will have a negative impact on the technology sector in Texas,” Cuthbertson said by email. “Ultimately, this will take away from diversity of thought, innovation, and equity in the workplace.”
The appeal of states like Texas may erode over time, according to Mark Zandi, chief economist at Moody’s Analytics.
“The overturn of Roe may also result in many smaller, but important, hard-to-see economic consequences,” Zandi said. Colleges in states that ban abortion could see fewer applicants from the rest of the country and world, who tend to be more socially liberal, he said.
Economists say bans will disproportionately hurt lower-income groups and minorities.
Professionals working for corporate giants like JPMorgan Chase & Co. or Walt Disney Co. will get travel expenses covered if they need out-of-state abortions -- at least until states try to outlaw the practice. But the majority of women living in states with severe restrictions or bans don’t work for companies that provide that benefit -- and Medicaid in most states doesn’t cover abortion.
Research shows that women forced to carry a child to term are four times as likely to live below the poverty line even years after the birth. They tend to have lower wages later in life. About 40% of Texas residents are Hispanic and the state has one of the biggest median-income gaps between White and Hispanic residents.
“There will be a negative macroeconomic effect,” said Sarah Miller, assistant professor of business economics and public policy at the University of Michigan’s Ross School of Business.
Miller was among more than 150 economists who submitted an amicus brief to the Supreme Court arguing to uphold Roe v. Wade, saying that access to reproductive care had a positive effect on women’s overall lives.
“This is going to increase inequality -- we’re already seeing it,” she said.
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