A Tale of Two Cities (Redux)

• Despite their similar sizes in 1960, Austin is now five times larger than Corpus Christi as a result of an average of 3% higher annual population growth rate.
• In Austin, human capital development through education and skill training has played a key role in attracting capital investments, which in turn have promoted job and income growth.
• Instead of expanding the hi-tech sector in Austin, Corpus Christi has relied on investments in heavy manufacturing and energy-related industries. Their exposure to different economic sectors was the most likely driver for their diverging growth paths in the last 60 years.

About 20 years ago, we wrote in a series of  articles  about Austin's rapid growth in contrast to the lackluster performance of Corpus Christi. Historical observations supported the role of workforce development as the key factor behind the diverging growth paths of these two cities. Since then, Austin's economy has continued to cruise along. Meanwhile, Corpus Christi and much of South Texas have undergone alternating periods of extraordinary growth and setback. Before the COVID-19 pandemic, oil and gas production in the Eagle Ford shale region and energy-based industrial developments near the Port of Corpus Christi were hailed as game changers for the South Texas economy.

Are these two cities closer today or even further apart in economic vitality?

In 1960, the Corpus Christi metro area's population size was similar to that of the Austin-Round Rock-Georgetown metro area. During the rest of that century, Austin's population grew 1.54% per year on average, while Corpus Christi's annual population growth averaged 0.4%. The about one-percentage-point difference between these two areas resulted in a cumulative gap of 800,000 people over the 40-year period, more than double the size of Corpus Christi's entire population.

During this 21st Century, Austin's population has grown at an even faster pace of 3.1% annually, while Corpus Christi has mostly extended its historical trend at 0.6%. By 2021, Austin was more than five times larger than Corpus Christi, instead of 3.3 times at the turn of the century. As the driving force behind the fastest growing region of the Texas Triangle, Austin's metro area has added nearly one million more residents since 2000.

The birth and death rates were similar between the two cities and over time. This leaves migration as the key factor for the widening gap in population size during that period as it had been historically. Since 2000, about 650,000 more people have moved to Austin than those moving out of Austin. During that same period, Corpus Christi has lost a total of 13,000 residents instead.

Economic growth usually shows up in people's income as a measure of living standards. In 2020, the income of a typical household in Corpus Christi was 27% lower than that in Austin. This income gap remains similar today. Compared to the national level at roughly $65,000, Austin's median household income in 2021 was 17% higher but Corpus Christi's median household income was 12% lower.

The flipside of a higher living standard is a higher cost of living. In 2000, Austin's cost of living index was about 3% above the nationwide average and Corpus Christi was nearly 17% below. Despite no sign of closing an income gap, the overall costs of living have narrowed noticeably between the two cities. Prices have appreciated at a faster rate for homes in Austin than homes in Corpus Christi. Since 2000, the median home price has risen about 3.1 times in Austin versus 2.7 times in Corpus Christi. Much of the  surge in the cost of living index  in Corpus Christi reflects rising utility, healthcare, and transportation costs.

Though Corpus Christi residents' income remains behind that of their Austin counterparts, their living costs are catching up. This results in greater financial hardships for Corpus Christi's low-income families. The median home price in 2021 was $450,000 in Austin and $255,000 in Corpus Christi. This means an average Texan would find Corpus Christi a great place to live in, especially given all its natural amenities on the Gulf Coast.

But when housing affordability also takes into account the lack of economic opportunities beyond comparing home prices with household income, then Corpus Christi becomes one of the least affordable cities to live and work in the U.S. According to  Goodhire,  the city is the least affordable city to live and work in the Southern region, after only Los Angeles in the West Coast and Hartford, Connecticut, on the East Coast.

In other words, Corpus Christi is an affordable place to live for Winter Texans or retirees, but housing costs are excessively high for families making a living wage.

Economic growth is mainly driven by resources and technological advances. Since the late 2000s, oil and gas drilling in the Eagle Ford shale play has become an economic driver for Corpus Christi and other communities across South Texas. As a result, these economies followed closely the boom and bust of the energy markets during the past decade.

Other than the benefits of natural resources like oil and gas deposits in Texas, Corpus Christi attracted more than  $55 billion in industrial investments in the past decade . Most of such private capital investments went to the construction of heavy manufacturing facilities, such as steel mills and plastic plants, in the Port of Corpus Christi district.

Despite the abundance of natural and capital resources, Corpus Christi's economic vitality, as measured by income and job growth, remains behind that of Austin. As explained in our 2002 newsletter article, labor resources, particularly human capital in the form of workforce training, were the main factors that separate these two cities.

The overall educational attainment of Corpus Christi's population was below the national or statewide average in 2000. In 2000, the share of the adult population 25 years and older that has completed a Bachelor's degree was 12% for Corpus Christi, only half of that for Austin.

Fast forward 20 years, the gaps are even wider: The share of Bachelor's degree holders has risen to 14.2%, but still far below the 29.4% for Austin or even the state average of 20.3%. In Austin, slightly more than 46% of its adult population is a college grad.

While Corpus Christi has arguably become the nation's energy hub, Austin has emerged as the new American tech hub. The development of high-tech startups in so-called Silicon Hills rivals Silicon Valley in California. Migration of tech companies from the West Coast, especially the Bay area, has only accelerated since the onset of the COVID-19 pandemic.

A comparison of the largest employers of the two cities also reveals how the economies of the two cities differ. In Corpus Christi, oil refineries, engineering, and construction are among the top industry employers. In Austin, the largest four private-sector employers belong to the hi-tech sector, which includes computing and engineering services and tech-based manufacturers.

The extent of hi-tech concentration in Austin is obviously a notable exception rather than the norm. In 2002, Forbes ranked Austin's exposure to the hi-tech sector as 13th among all U.S. cities. Now Austin is number one, according to  the Milken Institute.  By contrast, Corpus Christi is ranked 199 out of 200 cities, ahead of Peoria, Illinois.

Corpus Christi has received the most foreign direct investment (FDI) relative to its population among all U.S. metro areas, according to  StatsAmerica . Yet most of the capital investments within the past decade were for constructing heavy industrial facilities.

The hi-tech sector, however, has relied largely on venture capital investments. And growth in that sector might have proven particularly effective in promoting overall employment growth in the long run. During the 20 years leading to the onset of the COVID-19 pandemic, employment in Austin grew 2.8% annually on average, contributing to a cumulative total of 68% job growth.

In that same period, employment in Corpus Christi grew at an average annual rate of 0.6%, resulting in a modest cumulative gain of 12.4% after 20 years.

The underlying message in our comparison of Corpus Christi and Austin is relevant today as it was 20 years ago. It is still crystal clear that a region's sustainable income and employment growth depends critically on the productivity of its workforce.

A city can enhance labor productivity through education and training. A more skilled and productive workforce also makes the city more competitive in enticing new firms and capital investments that in turn drive economic growth.

The pandemic may have altered the migration patterns of businesses and people across the nation. According to the  Census Bureau’s  population and migration data released in March 2021, net domestic migration--measured by the difference of Americans moving in and out of an area--was the key factor for determining local population changes in the U.S.

Large counties, including New York, San Francisco and Los Angeles, lost the most population between July 2020 and July 2021, due mostly to outmigration. Like other large Texas cities, the Austin-Round Rock-Georgetown metro area, on the contrary, gain more than 53,000 residents from domestic and international migration.

During the early stage of the pandemic, many large U.S. metro areas have faced signs of  urban flight  from their centers to the suburbs. The Corpus Christi metro area also seems to have experienced a similar population shift, although the underlying driver is unclear.

Between 2020 and 2021, Nueces County, which encompasses the city of Corpus Christi, saw roughly 800 more residents leaving for other parts of the nation than moving into the area.

On the contrary, Aransas and San Patricio counties each saw a net in-migration of roughly the same number of people. The gain of 854 people in Aransas County is particularly remarkable as they amount to nearly 4 percent of the local population.

This latest migration pattern reversed the historical trend, in which Nueces County was the predominant source of migration and population growth. But, for now, it is too early to tell if the current migration shift is here to stay.

##

Note: This article was initiated by Brian Tietje, College of Business Dean at Texas A&M University-Corpus Christi.