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DALLASFED

Gone to Texas
Immigration and the Transformation of the Texas Economy

Pia M. Orrenius
Federal Reserve Bank of Dallas

Madeline Zavodny
Agnes Scott College

Melissa LoPalo
Federal Reserve Bank of Dallas

he United States welcomes more immigrants than any other
country, and Texas welcomes more migrants—foreign and domestic—than any other state. Nearly half of all new arrivals to
the state are foreign born. With a population of over 4 million immigrants, Texas is one of the top three states in terms of the number of
foreign born living within its borders.
Immigration to Texas has been both a cause and consequence of
rapid regional growth. The strong economy and the Texas business
model—low taxes, few regulations and a low cost of labor—have attracted many businesses and workers in recent decades. This influx
has, in turn, stimulated more growth.
Texas’ large, diverse immigrant population today is a relatively recent phenomenon. Early in Texas’ history, migration flows were
mostly composed of settlers from other states. Mexicans dominated
immigrant inflows, although most did not settle permanently in the
state until late in the 20th century.
Texas’ foreign-born population share did not surpass the nation’s
until the 1980s, when mostly low-skilled workers flowed into the
state’s booming oil and agricultural sectors. The 1986 oil bust and
ensuing recession provided the impetus for subsequent economic
diversification away from a commodities-based economy, and Texas
began attracting a broader range of immigrants, both from abroad
and from other states. New arrivals provided the “brawn” and the
“brains” crucial to rapid growth and economic development. The
state’s employment has grown twice as fast as the nation’s since
1990.
Despite a surge of high-skilled immigration since the 1990s, large
shares of immigrants in Texas still are poor and depend on welfare
programs. That said, labor market outcomes are better than one
would predict given many Texas immigrants’ low education levels. Readers may be surprised to learn that low-skilled immigrants
earn as much or more in Texas as they do in the rest of the nation. In
addition, more Texas immigrants participate in the labor force and
fewer are unemployed than among their counterparts elsewhere in
the U.S.
The rise in Texas’ immigrant population has occurred despite
federal immigration policies that limit entry by both high- and lowskilled workers. Many low-skilled immigrants are unauthorized since
immigration policy severely restricts low-skilled labor migration.
Meanwhile, relatively high wages and a low cost of living attract lowskilled workers, and the state’s limited safety net matters little to unauthorized immigrants.
While Texas benefits from having a large, diversified immigrant
population, it faces several challenges to ensure their continued
economic advancement. Sustaining prosperity requires making
public and private investments in education, English fluency, health
care and infrastructure. While costly, such investments will help the
state continue to attract the businesses and workers that have been
central to its growth and transformation.
About the Authors
Pia M. Orrenius is an assistant vice president and senior economist
in the Research Department at the Federal Reserve Bank of Dallas;
Madeline Zavodny is a professor of economics at Agnes Scott
College; and Melissa LoPalo is a research analyst in the Research
Department at the Federal Reserve Bank of Dallas.

Table of Contents
Introduction.................................................................1
Texas Immigration Through
Three Transformative Decades......................... 2–3
A Portrait of Texas Immigrants Today.............. 3–9
Origins
Destinations
Education
Age
Labor Market Outcomes
Earnings
Occupations
Illegal Immigration to Texas............................. 9–10
Economic Effects of Immigration...................10–11
Challenges Posed by
Immigration.........................................................11–14
Poverty
English
Fiscal Effects
Welfare Participation
Health Insurance
Domestic Migration...........................................14–15
What Texas Has Learned....................................... 16
Notes.................................................................... 17–18

Gone to Texas

Immigration and the Transformation of the Texas Economy

exas is one of the nation’s top destinations for
immigrants. The number of foreign born living
in Texas has increased by an average of 125,000
people a year since 1990, rising from 1.5 million to 4.3
million.1 Texas has more immigrants than Oklahoma
and New Mexico have people. Among states, only California has more immigrants than Texas; New York has
a similar number.
One in six people living in Texas is an immigrant. A
similar proportion is second generation—people born
in the United States with an immigrant parent.
Despite the large number of immigrants in
Texas, the state ranks lower than several other states in terms of foreign-born population
share. California, Florida, Nevada, New Jersey
and New York all have a larger proportion of
immigrants, some close to 20 percent and a
few even higher. But among large states, none
has experienced a surge like Texas has, with
immigrants rising from 9 percent of the population in 1990 to 16.4 percent in 2012.
As has been true since Texas joined the
Union, the state’s foreign born hail primarily from Mexico.2 Nonetheless, immigrants
to Texas are increasingly diverse and high
skilled. The changing composition of inflows
has been key to broadening the state’s economic base.
Surges of Asians and Europeans, along with swelling
domestic migration, in the 1990s and 2000s increased
the number of computer programmers, scientists, engineers, medical professionals and educators. This influx
was crucial to the growth of the high-tech industry in
Austin, the telecom corridor in Dallas, and the health
and energy sectors in Houston, in addition to expansion
of the state’s colleges and universities.
Not all immigrants living in Texas are new arrivals
to the U.S. Some find their way to Texas after first going elsewhere in the country. In recent years, net flows
of domestic migrants, which include U.S. natives and
immigrants, have dwarfed inflows from abroad. As migration from abroad slowed during the Great Recession

and its aftermath, domestic migration assumed a bigger
role in the state’s growth.
Texas’ distinction as a premier destination is a relatively recent development. Throughout the 20th century, migrants—U.S.- and foreign-born alike—flowed
overwhelmingly to California. Texas’ population grew
quickly, but from a small base and due mostly to births
outnumbering deaths. For the state to become a top destination, many things had to change while a few had to
remain the same.
Rapid economic growth for most of the
past four decades has been the key factor attracting people to Texas. Diversification of
the state’s economy in the 1990s following the
1986 oil bust provided a powerful jobs magnet,
creating economic opportunities for millions.
The state’s relatively low cost of living, low taxes and minimal regulatory burden in concert
with abundant land provide a welcoming environment for people and businesses alike.
In 2012, Texas was the nation’s second-fastest-growing economy, behind only North Dakota. The state’s diversified economic base and
ongoing oil and gas boom portend a bright future. Challenges remain, however. The state
faces a tension between keeping taxes low and
providing necessary public services. Rapid population
growth requires investment in public schools, public
health and infrastructure. Although immigration flows
to Texas have been increasingly high skilled, Texas
immigrants overall have low levels of education, high
poverty rates and low rates of health insurance coverage. Despite these challenges, low-skilled immigrants
in Texas do well economically relative to their counterparts elsewhere in the nation.
Still, Texas has more low-skilled immigrants than
other states, which raises questions for the state’s future.
What level and type of services should the state provide
to ensure that the second generation has opportunities
to reach the middle class? A thriving economy helps, but
investment in human capital is needed as well.

Gone to Texas | Immigration and the Transformation of the Texas Economy

Texas Immigration Through
Three Transformative Decades
Texas has always beckoned migrants, although
not necessarily from abroad. For most of its history,
Texas has attracted settlers from the rest of the nation—domestic migrants—rather than from other
countries. It wasn’t until the late 1980s that Texas’ immigrant share of the population surpassed that of the
nation as a whole (Chart 1).3 This shift was the result of
rising immigration beginning in the 1970s, a decade
when Texas thrived on high oil prices but the national
economy stagnated. Back then, Texas was still mostly
about cotton, cattle and oil. By 1980, high oil prices—
above $100 per barrel in today’s dollars—pushed state
income per capita above U.S. levels for the first time.
The glamour of the Texas oil boom was captured for
a worldwide audience in the television series Dallas,
which premiered in 1978.
During the 1980s, immigration to Texas was dominated by low-skilled workers, mostly from Mexico.
The foreign-born share of the state’s low-skilled labor
force vaulted from 8 percent to 26 percent during the
1980s.4 Mexicans had come to Texas for a century, but
they tended not to settle permanently and worked
Chart 1

Large-Scale Immigration to Texas
Is a Recent Phenomenon
(Foreign-Born Population Share by Decade)
Percent
18
16

Texas

14
12
10

U.S.

8
6
4
2
0
1850

1870

1890

1910

1930

1950

1970

1990

2010

SOURCES: “Historical Census Statistics on the Foreign-Born Population of the
United States: 1850–2000,” by Campbell Gibson and Kay Jung, U.S. Census Bureau, Population Division Working Paper no. 81, February 2006; 2010 American
Community Survey.

Federal Reserve Bank of Dallas

predominantly in agriculture. Circular migration
was the norm, with most migrants returning to Mexico at the end of the growing season. The late 1970s
and the 1980s marked a shift from traditional seasonal migration to permanent settlement.5 The 1986
Immigration Reform and Control Act (IRCA) both
reflected and reinforced this trend. Nearly 2.7 million unauthorized immigrants, 85 percent of them
from Mexico, received legal permanent residence under IRCA. Less than one-fifth of them lived in Texas,
while the majority resided in California.6 IRCA also
increased border enforcement, making it more difficult for unauthorized immigrants to reenter the U.S.
after returning home, further promoting permanent
settlement here.
The long economic expansion in Texas spawned
booms in housing and lending, which both ended with
the collapse of oil prices in 1986 and the ensuing banking crisis. A deep recession followed, and 425 state
banks failed from 1986 through 1989.7 Texas employment fell 3.4 percent, and nominal output contracted
3.7 percent from peak to trough.8 It wasn’t until 1988
that the state recaptured the level of economic activity
it enjoyed before the 1986 recession. In an abrupt break
with historical trends, the Census Bureau documented
net migration outflows from Texas during 1986–88, a
result of the weak economy.9
Few Texans saw any good coming out of the wreckage of the late 1980s recession and banking crisis, but
the downturn and the low oil prices that prevailed
during the 1990s were a catalyst for the modernization of the Texas economy, setting the stage for future
broad-based growth. Diversifying from commodities
in agriculture and energy to high-value-added manufacturing, information services, and professional and
business services required transforming the workforce. Domestic and international migration were
crucial to the development of the high-tech, financial
services, insurance, transportation and export sectors as oil prices fell below $20 per barrel and the rig
count scraped historic lows.
Not only did people move to Texas, but businesses
did as well. Companies such as Samsung, Nortel and
Intel expanded operations, while homegrown hightech enterprises such as EDS, Texas Instruments and

Dell blossomed.10 Meanwhile, the oil industry consolidated far-flung operations to Texas, and Exxon
Mobil and Marathon Oil moved their headquarters
to the state.
Immigrant workers—some coming directly from
abroad, others relocating from other states—were an
essential part of this transformation. They provided
raw manpower as well as niche skills. Overall, immigrants made up 42 percent of the state’s labor force
growth in the 1990s and 41 percent in the 2000s.
The share of foreign workers in the high-skilled labor force rose from 8 percent in 1990 to 12 percent in
2000 and reached 16.6 percent in 2011. Occupations
in emerging fields such as computer programming
and telecommunications could not meet rapidly
growing demand with just homegrown professionals but required foreign expertise also. Between 1990
and 2000, as Austin emerged as a high-tech center,
the city’s immigrant population nearly tripled, rising
from 49,000 to 149,000. In north Texas, the telecom
industry boomed and the foreign-born population in
Dallas–Fort Worth soared to 779,000 in 2000—more
than twice its 1990 level. Immigrant populations
continued growing in the 2000s, albeit at a lower rate
(Chart 2).
International trade also boomed in the 1990s, and
Texas export activity would continue to outperform
the nation in the 2000s. Reforms in Mexico following
the 1994 peso crisis and implementation of the North
American Free Trade Agreement (NAFTA) produced
surging intra-industry trade. Although this benefited
most of the state, increased competition from Mexican manufacturers initially hurt some Texas border
cities, such as El Paso. In the 2000s, immigrant shares
in El Paso declined.

distributions of U.S. natives living in Texas and in the
rest of the nation. Domestic migration and rising education levels in Texas have largely erased education
differences among U.S. natives.
Among immigrants, however, education gaps persist. Despite rising high-skilled inflows, the Texas foreign-born population is still disproportionately low
skilled. Much of this is explained by the state’s proximity
to Mexico. Among all immigrants from Latin America,
Mexicans have the least educational attainment. Interestingly, despite lower education levels and less English
fluency, low-skilled immigrants tend to do better in the
Texas labor market than elsewhere in the U.S.

Origins
Although the foreign-born population in Texas is
more diverse than ever, it is less diverse than in the rest
of the country. The majority of Texas immigrants—60
percent—are from Mexico, followed by immigrants
from Asia and the rest of Latin America (Chart 3). For
the rest of the country, Asia is the most common region
of origin, followed by Mexico.
This pattern reflects Texas’ shared border with
Mexico and the two regions’ deep historical ties. Within the rest of Latin America, El Salvador (4.2 percent of
Texas immigrants) and Honduras (2 percent) are the

Chart 2

Texas Metros Become Global Destinations
(Foreign-Born Population Share)
Percent
30
El Paso
25

Houston
Dallas–
Fort Worth

A Portrait of Texas Immigrants Today
Texans have historically attained lower levels of
education than the national average, reflecting the
state’s past as a commodity-based economy and other
factors. With the education deficit came lower average
earnings, higher poverty and fewer professionals to
meet growing demand at the high-skill end of the labor market, a trend that accelerated in the 1970s. But
today there is little difference between the educational

Austin

San Antonio

10
5
0
1970

1980

1990

2000

2011

SOURCES: 1970–2000 census; 2011 American Community Survey.

Gone to Texas | Immigration and the Transformation of the Texas Economy

Chart 3

Where Are They From?
(Origins of Texas and U.S. Immigrants)
Rest of U.S.

Texas

Mexico

Caribbean

Asia

Central and
South America

Africa

Europe, Canada and
Oceania

SOURCE: 2009–11 American Community Survey three-year estimates.

Chart 4

Immigration to Texas Got a Late Start

Destinations

(Arrival Dates of Immigrants)

The Austin, Dallas–Fort Worth and Houston metropolitan areas have experienced the most rapid
foreign-born population growth in the state. The foreign-born population share in Austin is 15 percent,
and it reaches 18 percent in Dallas–Fort Worth and
almost 23 percent in Houston.11 Foreign-born population shares have always been higher in the border cities because of their proximity to Mexico, and growth in
immigrant populations there has been slower.
In Texas and across the country, immigrants are
more likely than U.S. natives to live in urban areas.
Looking across the state, the foreign-born population share tends to be relatively low in rural areas and
higher in urban areas (Chart 5). Not surprisingly, the
U.S.–Mexico border is an important exception to this
pattern.

36
Since 2000

34
29

1990s

27
18

1980s

19
11

1970s

Texas
Rest of U.S.

11
6

Before 1970

10
0

Percent
SOURCE: 2009–11 American Community Survey three-year estimates.

most common countries of origin. Asian immigrants
in Texas are most commonly from India (4 percent),
Vietnam (3.7 percent) and the Philippines (2 percent).
What about immigrant origins within the major
Texas metropolitan areas? South Texas and the border
cities have very high shares of immigrants from Mexico: 92 percent of immigrants in El Paso and 67 percent
of immigrants in San Antonio are from that country.

Austin has a higher share of immigrants from Asia,
Europe, Canada and Australia than the other Texas
metro areas. Houston has more diverse Latin American immigration, with 20 percent of immigrants originating from Latin American countries other than
Mexico, compared with around 10 percent in Dallas–
Fort Worth and Austin.
Immigrants in Texas came to the U.S. more recently than immigrants in the rest of the country. Only 6
percent of Texas arrivals were in the U.S. before 1970,
versus 10 percent in the rest of the country. A quarter
of immigrants in Texas and in the rest of the U.S. arrived during the 1990s; more than one-third of immigrants in Texas and in the rest of the U.S. arrived after
2000 (Chart 4). Assimilation typically increases with
time spent in the U.S. Immigrants learn more English,
become more accustomed to American ways and create bigger networks that foster economic success.

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Education
In Texas, as in the U.S. as a whole, immigrants are
concentrated at the top and especially at the bottom of
the education distribution.12 In the U.S., immigrants are
three times more likely than natives to not have completed high school; they are slightly more likely than
U.S. natives to have a master’s, PhD or other graduate
degree. Immigrants are underrepresented in the mid-

Chart 5

Texas Immigrants Are Concentrated
in Urban Areas and Along Border
(Foreign-Born Population Share, by County)

0–5%
5–10%
10–15%
15–20%
Above 20%

Dallas/Fort Worth

El Paso

Houston
Austin
San Antonio

SOURCE: 2007–11 American Community Survey five-year estimates.

dle of the education distribution—among high school
graduates, people with some college education and college graduates without a graduate degree.
Immigrants in Texas are less educated than U.S. natives in the state. And Texas immigrants trail their immigrant counterparts elsewhere in the country (Chart 6).

Almost half of adult immigrants in Texas have not finished high school, versus less than one-third in the rest of
the country. Only 12 percent of adult immigrants in Texas
have a bachelor’s degree (versus 16 percent elsewhere in
the country) and 8 percent a graduate degree (versus 12
percent elsewhere).
The education distribution of Texas immigrants
reflects the dominance in the state’s immigrant population of Mexico and other origin countries with low
average levels of education. Almost 60 percent of adult
Mexican immigrants living in the U.S. have not finished
high school, and only 1 percent have an advanced degree, a factor mirrored in the Texas data. Only 11 percent of adult immigrants from Europe and 12 percent of
those from Asia have not finished high school, by comparison, while 16 percent of European arrivals and 21
percent from Asia have an advanced degree.13
Although Texas immigrants lag the nation’s immigrants in schooling, U.S. natives in Texas are near
parity with U.S.-born adults in the rest of the nation.
Among natives, 12 percent lack a high school credential in Texas, compared with 11 percent of natives in
the rest of the U.S., and 27 percent of natives in Texas
have a high school credential but no college, compared
with almost 30 percent in the rest of the nation. Among
natives, 33 percent have some college education and 19
percent have a bachelor’s degree in Texas, compared

Chart 6

Educational Attainment of Immigrants and Natives Inside and Outside Texas
Percent

Percent

50
45

Immigrants

Rest of U.S.

35
30

Rest of U.S.

35
27

19
15

15
10

16
12

12
8

5
0

Texas

40
30

25
20

Natives

Texas

15
10

19
12

5
Less than
high school
credential

High
school
credential

Some
college

Bachelor's
degree

Graduate/
professional
degree

Less than
high school
credential

High
school
credential

Some
college

Bachelor's
degree

Graduate/
professional
degree

NOTE: Calculations include individuals over age 24.
SOURCE: 2009–11 American Community Survey three-year estimates.

Gone to Texas | Immigration and the Transformation of the Texas Economy

of immigration. Working-age immigrants contribute
the most to the economy and to tax revenues. Younger
immigrants are expensive as they move through the
U.S. education system but will eventually enter the
workforce. Older immigrants are a fiscal drain, particularly if they participate in Medicare and Medicaid, the government health insurance programs for
eligible elderly and the poor. Of course, the same pattern of fiscal impact over the life cycle is true of U.S.
natives, with the very young and very old contributing less to the economy and to tax revenues than
middle-aged workers.

Chart 7

Immigrants Tend to Be of Working Age
(Age Profile of Immigrants vs. Natives in Texas)

Age
Over 79
75 to 79
70 to 74
65 to 69
60 to 64
55 to 59
50 to 54
45 to 49
40 to 44
35 to 39

Immigrants

U.S. natives

30 to 34
25 to 29
20 to 24
15 to 19

Labor Market Outcomes

10 to 14
5 to 9
Under 5
15

0
Percent

SOURCE: 2009–11 American Community Survey three-year estimates.

with 31 and 18 percent in the rest of the U.S., respectively. Nine percent of natives in Texas have a graduate
or professional degree, compared with 10 percent in
the rest of the U.S.

Age
An important benefit of immigration is the immigrant population’s relative youth. In Texas and the rest
of the country, immigrants are much more likely than
U.S. natives to be in their prime working years. The age
distribution of U.S. natives is fairly uniform until mortality rates begin rising after people reach their late
50s. The age distribution of immigrants looks like a bell
curve—few young people, few old people and lots of
people in the middle (Chart 7).
The difference in the age distributions arises because
relatively few people become immigrants when they are
very young. Typically, immigrants enter the U.S. in their
middle to late 20s. The similarly smaller share of older
immigrants arises because many migrants used to go
back to their origin country to work or retire. This return migration has become less typical over time. More
immigrants now set down roots and are joined by their
families here. This will push the immigrant age distribution closer to that of U.S. natives in coming decades.
The age distribution affects the benefits and costs

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Whether looking at the share of the population that
is employed, the unemployment rate or the proportion
of the population in the labor force, immigrants and
U.S. natives in Texas outperform their counterparts
with the same level of education living elsewhere in the
U.S. (Table 1).
Texas exceptionalism is most notable among immigrants at the top and bottom of the education distribution. Texas immigrants with a graduate/professional
degree are more likely to participate in the labor market
and more likely to work than their counterparts elsewhere—and half as likely to be unemployed. Among
immigrants who have not completed high school, Texas
immigrants are also more likely to be in the labor force
and to be working and one-third less likely to be unemployed than those elsewhere.
In Texas, immigrants who have not completed high
school also do better in the labor market than comparable U.S. natives. Immigrants are one-third more likely
to be in the labor force and working and almost one-half
as likely to be unemployed as U.S. natives in Texas who
have not completed high school.
Because even the least-skilled Texas immigrants
do well in the labor market, their relatively low education levels don’t lead to worse labor market outcomes among immigrants as a whole when one
compares Texas with the rest of the U.S. The share of
immigrants in the labor force and the share employed were higher—and the share unemployed lower—in Texas than elsewhere in the U.S. during 2012.
Additionally, immigrants were slightly more likely to

Table 1

Texas Immigrants Do Well in the Labor Market
Texas

Rest of U.S.

Immigrants
(percent)

U.S. natives
(percent)

Immigrants
(percent)

U.S. natives
(percent)

Less than high school credential

64.8

43.2

59.2

35.6

High school credential

67.2

64.1

65.9

58.0

Some college

75.4

69.8

71.0

68.5

Bachelor’s degree

72.5

77.4

72.5

76.1

Graduate/professional degree

84.3

77.1

78.8

75.7

Less than high school credential

60.4

37.9

53.4

30.1

High school credential

62.6

60.3

60.8

53.2

Some college

71.9

66.0

65.3

63.7

Bachelor’s degree

68.4

75.0

68.0

72.9

Graduate/professional degree

82.6

75.7

75.6

73.4

Less than high school credential

6.8

12.3

9.8

15.2

High school credential

6.9

6.0

7.7

8.2

Some college

4.5

5.5

8.0

7.0

Bachelor’s degree

5.6

3.0

6.3

4.2

Graduate/professional degree

2.1

1.9

4.1

3.0

Labor force participation rate

Employment-to-population rate

Unemployment rate

NOTE: Calculated for the population over age 24.
SOURCE: 2012 Current Population Survey Outgoing Rotations Group data.

be in the labor force and to be working, and less likely to
be unemployed, than U.S. natives in Texas during 2012.
The difference between Texas and the rest of the
country in 2012 shows the relative strength of the Texas
economy in the aftermath of the Great Recession. Since
the onset of the recession, labor force participation and
employment rates have fallen considerably and unemployment rates have risen in the U.S. The country finished 2012 with 3.3 million fewer jobs than when the

downturn began, in December 2007.14 Texas, by comparison, finished 2012 with half a million more jobs
than it had five years earlier.

Earnings
Immigrants’ earnings tend to fall short of those of
natives, whether in Texas or not, since immigrants have
less education than natives and English is not their
first language (Table 2). As can be seen in the last row

Table 2

Low- and High-Skilled Immigrants Earn as Much or More in Texas
(Median weekly earnings)
Texas

Rest of U.S.

Immigrants

U.S. natives

Immigrants

U.S. natives

Less than high school credential

$401

$423

$399

$439

High school credential

$460

$600

$499

$599

Some college

$514

$685

$601

$682

Bachelor’s degree

$857

$997

$942

$997

$1,435

$1,180

$1,342

$1,265

All groups

$496

$757

$597

$767

All groups (including ages 16–24)

$481

$677

$567

$678

Graduate/professional degree

NOTE: Median weekly earnings are deflated using the monthly CPI-W (December 2012 = 100) and are conditional on being employed, over age 24, with
positive earnings.
SOURCE: 2012 Current Population Survey Outgoing Rotations Group data.

Gone to Texas | Immigration and the Transformation of the Texas Economy

Chart 8

High-Skilled Immigrants Fill STEM and Health Care Jobs
Medical scientists
Computer software developers
Physicians
Mathematicians
Computer analysts and scientists
Mechanical engineers
Pharmacists
Chemical engineers
High school and college instructors
Registered nurses
Biological scientists
Chemists
Dentists
Economists, market and survey researchers
Accountants and auditors
Architects
Managers and administrators
Sales related
Actors, directors, producers
Chief executives and public administrators
Financial managers
Biological technicians
Lawyers/judges
Veterinarians

Foreign born as a percentage of
Texas labor force with college
education or higher

Percent
NOTE: Percentage foreign born among Texas workers over age 24 with college education or higher in selected occupations.
SOURCE: 2009–11 American Community Survey three-year estimates.

of Table 2, median weekly earnings among Texas immigrants in 2012 were $481, while immigrants elsewhere in the U.S. earned $567. U.S. natives’ $677 pay
in Texas was similar to natives’ earnings nationwide,
$678.
Since educational attainment is such a strong determinant of earnings, it is instructive to hold education constant and compare earnings for a given education group. Interesting patterns emerge. Despite
massive low-skilled immigration to Texas, Texas immigrants who have not completed high school actually
earn as much as their counterparts in the rest of the
country (see Table 2). Texas immigrants with graduate degrees outearned their counterparts in the rest of
the country and similarly educated U.S. natives. In the
middle of the education distribution, however, Texas immigrants’ earnings trailed those of immigrants
elsewhere and U.S. natives.
Comparing earnings or incomes across different
parts of the country is complicated by cost-of-living
differences. Texas tends to have a low cost of living
compared with other big states. Texas is 9 percent less
expensive than the national average and 12 percent

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less expensive than the other nine biggest states.15
Accounting for the lower cost of living lifts the relative
earnings of Texans vis-à-vis workers in the rest of the
U.S.

Occupations
Texas immigrants are disproportionately well represented at the ends of the skill spectrum in occupations as well as in educational attainment. Among
occupations that typically require a bachelor’s or graduate degree, immigrants are especially concentrated
in science, technology, engineering and mathematics,
or “STEM,” occupations. The foreign born make up just
over 16 percent of the state’s high-skilled labor force—
defined as workers over the age of 24 with a college
education or higher—but make up a much larger percentage of the labor force working as computer software developers, mathematicians, computer scientists, and mechanical and chemical engineers, among
others (Chart 8).
Immigrants make up 61 percent of the Texas labor
force with less than a high school education and are
even more concentrated in labor-intensive occupations

Chart 9

Low-Skilled Immigrants Concentrated in Services, Construction and Ag Jobs
Gardeners and groundskeepers
Construction laborers
Housekeepers, maids, butlers
Misc. food prep workers
Hairdressers and cosmetologists
Farm workers
Cooks, variously defined
Janitors
Kitchen workers
Child care workers
Mechanics
Waiters and waitresses

Foreign born as a percentage of
Texas labor force with less than
a high school education

Motor vehicle operators
Miners
Timber, logging and forestry workers
Nursing aides, orderlies and attendants
Pest control occupations
0

Percent

100

NOTE: Percentage foreign born among Texas workers over age 24 with less than a high school education in selected occupations.
SOURCE: 2009–11 American Community Survey three-year estimates.

such as gardening and groundskeeping, construction,
food preparation and farm work (Chart 9). Immigrant
workers in these occupations are much more likely
to be unauthorized than their peers in high-skilled
occupations.

Illegal Immigration to Texas
Texas has a long, interesting history of unauthorized
immigration, and how it is told depends on whom you
ask. Some say when Texas was still part of Mexico in the
early 1830s, Mexican border troops were incapable of
stopping a large-scale influx of illegal Anglo immigrants
entering from the east (over the Sabine River) and the
north (over the Red River).16 Others say the Mexicans
welcomed the Anglos in hopes that they would help
subdue the Indians.17 Fast forward to the early 20th century, and many illegal border crossers were Chinese and
Europeans blocked from entering legally by national origins quotas or because they couldn’t pass the federal
literacy test.18 Mexicans meanwhile were exempt from
national origins quotas and the literacy test, driving up
demand for their labor. Texas farmers sent recruiters to
Mexico to entice workers northward.19

The Great Depression put immigration on hold for
about a decade, but flows from Mexico rebounded
with heightened labor demand during World War II.
In 1942, the U.S. and Mexico governments crafted the
Bracero Program, which allowed Mexican workers to
take temporary agricultural jobs in the U.S. The program initially left out Texas at the insistence of Mexican authorities who cited Texas growers’ past abuses
of workers.
This exclusion laid the groundwork for illegal immigration into the state. The Bracero Program’s terms
and conditions also were onerous to many farmers,
who preferred hiring unauthorized workers rather
than dealing with the hassles of complying with the
program’s rules. Finding workers wasn’t difficult since
many more Mexicans wanted to work in the U.S. than
the program allowed. Additionally, there was no law
barring employment of unauthorized workers. On the
contrary, the 1952 Immigration and Nationality Act
included the so-called Texas Proviso, which specifically permitted the employment of illegal immigrants,
a condition that didn’t change until the Immigration
Reform and Control Act in 1986.20

Gone to Texas | Immigration and the Transformation of the Texas Economy

This combination of robust supply and demand,
together with migrant networks formed during the
Bracero Program (which ended in 1964), set the stage
for waves of unauthorized immigration from Mexico
during the ensuing decades. Other countries followed
later.
Almost 1.8 million unauthorized immigrants
live in Texas—43 percent of the state’s foreign-born
population and 7 percent of its total population.21
By these estimates, almost one in six unauthorized
immigrants lives in Texas. Only California—home
to one in four unauthorized immigrants—has more.
Of the top 10 states in terms of unauthorized immigrant populations, Texas posted the second-highest
growth rate of that group during 2000–11, 64 percent;
only Georgia experienced faster growth, 95 percent.
Although controversial, unauthorized immigration has economic benefits. Unauthorized immigrants
are more likely to work than both U.S. natives and legal immigrants. Unauthorized inflows are highly correlated with changes in labor demand. Most undocumented workers come to the U.S. to earn money, often
to send home to help their families.22 They work hard
in part because they have no choice since they lack
access to virtually all of the safety net—they are ineligible for almost all government transfer programs,
including cash welfare and unemployment insurance.
They’re more likely to be men, to be of prime working
age (25–54) and to have little education. Unauthorized
immigrants, particularly those living in Texas, are disproportionately from Mexico.
Public and political attitudes toward unauthorized immigrants are notably more moderate in Texas than in other states with growing unauthorized
populations, such as Arizona, Georgia and Alabama,
which have adopted anti-illegal immigration laws in
recent years.23 Texas Gov. Rick Perry stated that Arizona’s 2010 anti-illegal immigrant law (known as
SB1070) was “not the right direction for Texas.”24 In
2001, Texas became the first state to pass a law allowing certain undocumented students to pay in-state
tuition at Texas’ public colleges and universities.25
Despite the state’s role as both a destination and
transit region for unauthorized immigration, state
and local participation in certain federal enforce-

Federal Reserve Bank of Dallas

ment programs has been limited. Only three local law
enforcement agencies entered into agreements with
Immigration and Customs Enforcement (ICE) that
allowed them to act on behalf of federal immigration
officials, while at least 15 cities have passed “sanctuary
city” resolutions.26 Participation in Secure Communities, a program that checks the immigration status of
individuals who are already in police custody, has
been more widespread, however.
In the 2009 and 2011 Texas legislative sessions, less
than half of the 18 anti-illegal immigration bills passed.27
Most measures never made it out of committee. The
state’s more moderate stance likely reflects the better
economic opportunities in Texas as well as the state’s
large population of Hispanic voters. Texas has a much
larger adult population share of U.S.-born Hispanics, 19
percent, than the rest of the nation, 6 percent. Alabama,
Georgia and other states that have passed laws targeting unauthorized immigrants, such as Utah and Indiana, tend to have below-average population shares of
Hispanic natives. Native-born Hispanics make up nearly 15 percent of Arizona’s adult population, however.

Economic Effects of Immigration
Immigrants help power and grease the economy’s engines. First, immigration increases the labor
force, enlarging the economy. Although immigrants
make up only 21 percent of the Texas workforce,
they account for a much larger share of its growth.
Migration of foreign workers from international and
domestic sources was responsible for more than 40
percent of Texas workforce growth between 1990 and
2010. U.S.-born workers’ role in workforce growth in
the country as a whole is diminishing due to several
factors, including declining labor force participation
rates. As the native-born population continues to age
and baby boomers retire, the foreign-born contribution to labor force growth is expected to stay high or
even increase.28
When immigrants flow into the labor force, it
is not just a matter of adding more workers. As long
as immigrants differ from natives—which they do
to varying degrees—specialization occurs. U.S.- and
foreign-born workers move into the jobs and tasks
that they do relatively well. For example, one re-

cent study shows that less-educated U.S. natives
have a comparative advantage in communicationsintensive jobs, and less-educated immigrants in
manual labor jobs.29 Highly educated U.S. natives
have a comparative advantage in interactive and
communications-intensive jobs, and highly educated immigrants in quantitative and analytical
jobs.30 Specialization increases efficiency, which
allows more output to be produced with fewer resources. This boosts labor productivity, raising economic output as measured by gross domestic product (GDP).
Although the bulk of GDP gains go to the immigrants in the form of their earnings, the native-born
population benefits through the lower prices of immigrant-produced goods and services. The effect
of immigration on the GDP accruing to natives has
been termed the “immigration surplus.”31 Nationally, estimates suggest the gain to natives’ incomes
is in the range of $38 billion–$75 billion per year—
not insignificant even though it represents less than
0.5 percent of the $16 trillion U.S. economy. In Texas, the equivalent native income gain would be $3.4
billion–$6.6 billion per year (between 0.25 and 0.5
percent of state GDP). In addition to lower prices for
goods and services, investors, business owners and
landowners obtain higher returns on capital and
land. In cases where immigrants and U.S. natives
are complements, lower prices can have far-reaching
effects. For example, research shows the immigration-induced decrease in the cost of child care and
housekeeping has significantly increased the labor
supply of highly educated native women.32
Have jobs for Texas immigrants come at the expense of opportunities for U.S.-born workers? It
doesn’t appear so. However, a thorough answer
would require an in-depth study. Meanwhile, a quick
look at the aggregate data does not point to any large
or long-lasting adverse effects. Immigrants accounted for slightly less than half of state employment
growth between 2000 and 2012.33 During that period, the number of employed U.S. natives living in
Texas increased by almost 1 million. The number of
employed immigrants living in the state increased
by a slightly smaller number. In other words, immi-

grants and U.S. natives alike gained jobs in Texas.
Meanwhile, the Texas unemployment rate fell below
the national rate and has remained there despite
continuing migrant inflows to the state.
It also doesn’t appear that wages have been depressed by the influx of immigrants. In fact, wages
for the lowest-skilled workers, as shown in Table 2,
are as high in Texas as elsewhere among immigrants
despite the disproportionately high volume of lowskilled migration to the state and a state minimum
wage that is simply set at the federal rate (the minimum wage in most other large states exceeds the
federal minimum wage). Research on the labor market impacts of immigration tends to find a small but
significant adverse wage effect on low-skilled natives
who compete directly with foreign workers. However, if there are bottlenecks that constrain growth in a
region, such as a lack of workers in rapidly growing
industries, then worker inflows can actually speed
up growth.

Challenges Posed by Immigration
Texas immigrants do well in the labor market and
have been an important driver in Texas’ economic
transformation. However, Texas immigrants lag the
nation along a number of socioeconomic dimensions,
including high rates of poverty and welfare participation and low rates of health coverage. Texas faces
several challenges in providing services and a safety
net for its immigrant population, given the state’s traditional low-tax, low-services model of government.

Poverty
Immigrants are more likely than U.S. natives to
be poor. During 2009–11, almost one out of four Texas
immigrants was in poverty, versus 17 percent of U.S.
natives in Texas (Chart 10).34 Poverty rates are higher
in Texas than elsewhere in the country, and the immigrant–native gap is bigger in Texas than elsewhere.
As with earnings comparisons, poverty comparisons across areas are imperfect because they don’t
take into account differences in the cost of living. The
federal government sets the same income threshold
across the entire country for determining whether
a household lives in poverty; the threshold chang-

Gone to Texas | Immigration and the Transformation of the Texas Economy

Chart 11

Chart 10

Immigrant Poverty Rates Higher in Texas
(Poverty Rates by Nativity)

Immigrants’ English Proficiency
Lower in Texas
Percent

Percent

Texas
Rest of U.S.

Texas

Rest of U.S.

25
20

15
10

10
5

0
Immigrant-headed households

U.S. native-headed households

Do not
Speak English,
Speak
Speak English
Speak
speak English
not well
English well
very well
only English

SOURCE: 2009–11 American Community Survey three-year estimates.

SOURCE: Current Population Surveys for March 2010–12.

es with family size and age composition. Poverty is
determined based on pretax money income, which
includes cash welfare but not noncash government
transfers, such as food stamps and the value of Medicaid. Since the cost of living is lower in Texas than in
other big states, poverty rates may be overstated in
Texas relative to other big states. On the other hand,
cash welfare benefits are lower in Texas than in other
big states.
The relatively high poverty rate of immigrants in
Texas reflects several characteristics discussed earlier: Texas immigrants as a whole have lower wages
because they are less educated than U.S. natives in
Texas and than immigrants in the rest of the country.
It also reflects many Texas immigrants’ poor English
skills.

This pattern reflects cross-state differences in immigrants’ countries of origin—immigrants to Texas
are less likely to be from countries where English is
spoken or taught in school. Additionally, because
of the large Spanish-speaking population along the
U.S.–Mexico border, there is less need to learn English to get jobs, open businesses and simply conduct
daily life. Still, the ability to speak English plays an
important role in economic success for the majority
of immigrants, even in Texas.
How well an immigrant speaks English is the single most important factor determining whether he or
she is poor.35 Expanding English-learning programs
is thus an important initiative for Texas institutions,
including employers.

English

State and local governments bear the lion’s share
of the fiscal costs associated with low-skilled immigration. Some of these costs apply to high-skilled
immigration as well, such as educating immigrants’
children. After all, funding public education is the
largest single expenditure in state and local budgets.
But high-skilled immigrants typically pay more in
taxes than they receive in public services, even in a
low-tax state such as Texas. Regardless, providing

One in six immigrants living in Texas report having no English-speaking skills, and another quarter
say they do not speak English well (Chart 11). These
fractions are higher than among immigrants in the
rest of the country. Correspondingly, fewer immigrants in Texas report speaking English very well or
speaking only English than do their counterparts
elsewhere in the U.S.

Federal Reserve Bank of Dallas

Fiscal Effects

publicly funded education is important for increasing the earnings potential and, hence, future tax payments of immigrants’ descendants.
The structure of the Texas tax system reduces the
state and local fiscal costs of low-skilled immigrants
compared with other destinations of large, lowskilled immigrant populations, such as California.
Texas relies heavily on consumption taxes—taxes
on retail sales and on property—instead of on a state
income tax. This eliminates concerns about workers
being paid “off the books” and not having taxes withheld, although such concerns still apply at the federal
level. Immigrants buy or rent homes and purchase
goods and services just like U.S. natives and, hence,
pay taxes in Texas. Lower average incomes among
immigrants mean that these tax collections are
smaller, however.
A 2006 report by the Texas comptroller analyzed
the special case of the fiscal impact of undocumented
immigrants in Texas, noting that they boosted state
revenue by more than they cost the state in education,
health and other expenses.36 The study did not include
expenses that fund education and health care for the
U.S. citizen children of undocumented immigrants.
Similar studies that do a yearly accounting and include
all children tend to find significant negative fiscal
effects of low-skilled immigration. Studies that do
generational accounting, which takes into account
the fiscal contributions made later in life and those
of one’s descendants, tend to find much smaller negative effects.37

or food stamps); Supplemental Security Income (SSI,
or low-income disability benefits); public housing or
a housing subsidy; and Medicaid.38 This rate is about
13 percentage points higher than welfare participation
among households headed by a U.S. citizen in Texas
(Chart 12). It also is about 3 percentage points higher
than welfare participation among immigrant-headed
households in the rest of the country.
Because they have lower incomes, immigrantheaded households in Texas are more likely to participate in means-tested programs than both U.S. natives
in Texas and immigrants elsewhere. However, this
difference is far less than might be expected, given
the low education levels and correspondingly low incomes and high eligibility for means-tested programs
of many Texas immigrants.
Because unauthorized immigrants are ineligible
for almost all means-tested programs,39 their significant presence in Texas likely lowers the participation
in means-tested programs among immigrants in the
state. The U.S.-born children of unauthorized immigrants are eligible if they meet the same income and
other eligibility requirements that all U.S. citizens
face. However, U.S.-born children of unauthorized immigrant parents are less likely to enroll in means-tested programs for which they are eligible because of
fears of revealing their family’s unauthorized status.40
Chart 12

Immigrant Welfare Participation
Slightly Higher in Texas
Percent

Welfare Participation
Immigration’s fiscal effect depends in part on immigrants’ participation in means-tested government
programs—programs where eligibility depends on
income (and other criteria)—such as cash welfare,
food stamps and Medicaid. Because immigrants tend
to be poorer than U.S. natives, a greater share of them
is eligible for means-tested programs.
About 35 percent of households headed by an
immigrant in Texas participate in at least one of the
following means-tested programs: Temporary Assistance for Needy Families (TANF, or cash welfare);
Supplemental Nutrition Assistance Program (SNAP,

40
35

Texas
Rest of U.S.

30
25
20
15
10
5
0
Immigrant-headed households

U.S. native-headed households

SOURCE: Current Population Surveys for March 2010–12.

Gone to Texas | Immigration and the Transformation of the Texas Economy

Health Insurance
Immigrants in Texas are much less likely to have
health insurance than U.S. natives living in Texas and
than immigrants elsewhere in the country. During
2009–11, only half of immigrants living in Texas reported having health insurance (Chart 13).41 Four out
Chart 13

Immigrants’ Health Insurance Coverage
Much Lower in Texas

Percent
100

Any

Public

Private

90
80
70
60
50
40
30
20
10
0

Immigrants

U.S. natives

Immigrants
U.S. natives
Rest of U.S.

Texas

SOURCE: Current Population Surveys for March 2010–12.

Chart 14

Texas Is Top Destination
for Domestic Migrants Since 2006
Net migration to Texas (thousands)
400
International
350

Domestic
Hurricane
Katrina

300

Domestic Migration

250
200
150
100
50
0

’92

’94

’96

’98

’00

’02

’04

’06

’08

’10

NOTES: Census Bureau population estimates approximate the population on
July 1 of the year indicated and thus capture changes from the previous year.
Data are not available for decennial census years.
SOURCE: U.S. Census Bureau.

of five U.S. natives living in Texas had health insurance; by comparison, more than two out of three immigrants living in the rest of the country were insured.
The immigrant–native gap in health insurance was 30
percentage points in Texas versus 19 percentage points
for the rest of the country.
The immigrant–native gap in health insurance
coverage applies to both private and public health insurance. Private health insurance is typically employer sponsored but includes some individual policies
during this period. Public health insurance includes
Medicaid, Medicare, military health care and the Children’s Health Insurance Program. The immigrant–
native gap in private insurance coverage was 21 percentage points in Texas in 2009–11 and 17 percentage
points for the rest of the country. The immigrant–native gap in public insurance coverage was 15 percentage points in Texas and 8 percentage points for the rest
of the country. The relatively larger magnitude of the
immigrant–native gap in public health insurance in
Texas is likely principally due to the large share of unauthorized immigrants, who are ineligible for almost
all public health insurance programs.42
The Affordable Care Act (ACA) will require almost
everyone—with the notable exception of unauthorized immigrants—to have health insurance starting
in 2014 or pay a penalty. Texas has thus far not opted
to expand Medicaid under the ACA. The state also
has opted out of running a state-based health insurance exchange. Texas residents, with the exception
of unauthorized immigrants, will be able to participate in a federally facilitated exchange.

Federal Reserve Bank of Dallas

’12

Texas has been the No. 1 destination for domestic
migrants since 2006. Domestic migration is made up
of a mix of U.S. natives and immigrants who live in
other states but decide to make their way to Texas,
often for economic reasons. In 2011, 13 percent of domestic migrants who had moved to Texas in the past
year were foreign born.43 Domestic migration to Texas increased dramatically in the wake of Hurricane
Katrina and continued to swell throughout the years
of the Great Recession and subsequent weak national
recovery. Net domestic migration to Texas averaged

around 54,000 people annually during the 1990s and
early 2000s, below the number of net international
migrants, but increased to more than 150,000 people
annually during the period 2006 to 2012 (excluding
2010, when data are unavailable), exceeding the falling number of international migrants (Chart 14).
Domestic migration is skewed to high-skilled
labor and, hence, is an incredibly important source
of educated workers for the state economy. Arrivals
from elsewhere in the U.S. have nearly one more year
of schooling than the average Texan. Adults who
moved to Texas from another state, like those coming
from abroad, are more likely than the average Texan
to have a bachelor’s or graduate or professional degree. Nearly 15 percent of these recent domestic migrants have a graduate or professional degree, compared with 9 percent in the population as a whole.
They are also much less likely to lack a high school
credential (Chart 15).
Many of these high-skilled migrants were drawn
to the high-tech, health care, professional and business services, and energy sectors in the fast-growing
“Texas Triangle” cities—Austin, Houston and Dallas–Fort Worth. Internal Revenue Service tax records
suggest that over 80 percent of taxpayers who moved
into Texas during 2000–10 flowed into these three
metropolitan areas, which also experienced significant inflows from other parts of Texas. While there
is significant movement within Texas, native Texans
are slightly more likely to remain in their state of
birth than are residents of other states. More than 60
percent of Texas residents were born in Texas.
Domestic migration is a brain and human-resource drain from sending states. Since 2004, California has been the largest sending state by far—
nearly one quarter of net domestic migration to
Texas between 2006 and 2012 came from California
(Chart 16). In fact, so many Californians have been
moving to Texas in recent years that the price of a
one-way, 26-foot U-Haul rental truck from San Francisco to San Antonio was over twice the price for the
same truck traveling in the opposite direction in May
2012.44
An additional 9 percent of domestic migrants
to Texas during 2006–12 came from Florida. Other

major sending states included New York, Illinois and
Michigan—all with higher tax and regulatory burdens. Texas lost more residents than it gained from
only 10 states during the same period, mostly states
with growing energy sectors, such as North Dakota,
Utah, Colorado and Oklahoma.

Chart 15

New Arrivals Are a Key Source
of Skilled Workers for Texas
(Educational Attainment of New Arrivals)
Percent
35

Domestic migrants

Texas population

International migrants

30
25
20
15
10
5
0
Less than
high school
credential

High school
credential

Some
college

Bachelor’s
degree

Graduate or
professional
degree

NOTE: Population over age 24.
SOURCE: 2010–12 American Community Survey three-year estimates.

Chart 16

California Is Top Sending State
for Migration to Texas
California
23%
Other
33%

Florida
9%

Tennessee 3%

New York
7%

North Carolina 3%
New Jersey 4%
Arizona 4%

Alaska Michigan
4%
4%

Illinois
6%

SOURCE: 2006–12 American Community Survey.

Gone to Texas | Immigration and the Transformation of the Texas Economy

What Texas Has Learned
Texas has evolved from an oil, cattle and cotton
economy to an economic powerhouse. This transformation would not have been possible without inflows
of capital and labor that provide the investment, brawn
and brains required for economic growth and change.
Much of this labor has been foreign born and much of
it arrived despite federal government barriers.
Over the past 30 years, Texas experienced massive
low-skilled immigration while also attracting a disproportionate share of high-skilled workers. Low-skilled
immigrants, many of them unauthorized, chose Texas
for its geographic proximity to Mexico, low cost of living and plentiful job opportunities. High-skilled workers traveled longer distances, but they came for many
of the same reasons.
The Texas economy has inherent strengths that set
it apart from other states and have boosted economic
growth. Natural resources have been a tremendous
source of economic activity, innovation and prosperity. Texas provides oil, gas and petrochemicals as well
as oilfield services to the rest of the country and to
the world. However, the exhaustible nature of those
energy resources and the energy industry’s dramatic
booms and busts made economic diversification an
imperative for Texas. In fact, one of the most remarkable transformations of the Texas economy came
during a time when oil prices were relatively low, the
1990s.
Texas geography has also been key to its economic
development and economic diversification. The long
border with Mexico and the thriving Gulf of Mexico
ports positioned Texas to take advantage of globalization, the rise of trade and Mexico’s trade liberalization,
trends that have accelerated since the 1980s. The long
frontier also made Texas a gateway for immigrants
from Mexico and Central America.
It is one thing to be a gateway and quite another
to be a destination. How has Texas kept its workers
here while attracting more? The state’s business environment—relatively low taxes and few regulations—
has been crucial to luring and retaining talent. People have relocated to Texas because of abundant job
opportunities, a low cost of living, affordable homes
and a relatively low tax burden. Ready availability of

Federal Reserve Bank of Dallas

workers stimulates more business, creating a virtuous circle for the state.
What’s most puzzling perhaps is not why highskilled immigrants—and U.S. natives—have moved
to Texas, but why so many low-skilled people have
as well. With a skimpy safety net and lower levels
of publicly provided services than other large states
and historically lower wages for less-educated workers (although not recently, as shown in Table 2), Texas should have been relatively unattractive to the less
skilled. Much of this puzzle involves unauthorized
immigrants, who don’t qualify for social assistance
anywhere and so aren’t affected by cross-state differences in welfare generosity but are attracted by
abundant job opportunities and rising wages. The
state has also remained relatively immigrant-friendly, rejecting laws other states have passed that target
illegal immigrants. Suffice it to say, this group has
overwhelmingly chosen to live in Texas. Without unauthorized immigration, Texas’ education distribution would more resemble the nation as a whole.
The Texas experience offers some lessons for the
nation. First, rapid economic growth and development
require the inflow of factors of production. This report
has focused on labor, particularly foreign labor, which
along with capital was necessary for the diversification of the Texas economy and subsequent sustained
growth. Second, market forces are the best guide for
what types of labor best meet businesses’ demands.
Immigration policy that admits the workers that employers want to hire will have the greatest economic
benefits. Third, policy that does not take into consideration both supply and demand factors may well
become irrelevant, as the U.S.—and Texas in particular—has seen with illegal immigration. Fourth, there
is a trade-off between low-skilled immigration and
the provision of publicly provided services, particularly if the tax burden is low. Texas, for example, stands
in stark contrast to California, where taxes have increased substantially in an attempt to keep pace with
public services. Last, high-skilled migration is crucial
for economic development. Texas has benefited from
high-skilled migration not only of immigrants coming
from abroad but also of domestic migrants in search of
better opportunities and a better quality of life.

Notes
This report uses the terms “immigrant” and “foreign born” interchangeably to mean people who are not U.S. citizens at birth, regardless of their visa type, legal status or naturalized U.S. citizenship unless
otherwise indicated. Population numbers (1990 and 2012) from the
U.S. Bureau of the Census.
2
The Republic of Texas included Mexican residents as citizens when it
declared its independence from Mexico in 1836. When Texas joined the
Union in 1845, Congress recognized all Texas citizens as citizens of the
United States. See Impossible Subjects: Illegal Aliens and the Making of
Modern America, by Mae M. Ngai, Princeton, N.J.: Princeton University
Press, 2004.
3
“Historical Census Statistics on the Foreign-Born Population of the
United States: 1850–2000,” by Campbell Gibson and Kay Jung, U.S.
Census Bureau, Population Division Working Paper no. 81, February
2006.
4
Calculations based on decennial census data. Low-skilled workers are
defined as those who do not have a high school credential (a traditional
high school diploma, a GED certificate or an equivalent credential from
abroad).
5
Beyond Smoke and Mirrors: Mexican Immigration in an Era of Economic Integration, by Douglas S. Massey, Jorge Durand and Nolan J.
Malone, New York: Russell Sage Foundation, 2002.
6
The exact share of IRCA beneficiaries living in Texas is uncertain. According to the Legalized Population Survey (LPS), a survey of legalized aliens conducted in 1989 and 1992, 17.4 percent were from Texas.
However, workers who legalized under the special agricultural worker
(SAW) program were not captured in the LPS, and it was likely that
Texas had a disproportionate share of SAW beneficiaries (Immigration
Reform and Control Act: Report on the Legalized Alien Population, by
U.S. Department of Justice, Washington, D.C.: U.S. Government Printing Office, 1992).
7
From FDIC Failures and Assistance Transactions in Texas, 1980–2000,
Table BF02, Federal Deposit Insurance Corp.
8
Based on monthly payroll employment data from Bureau of Labor Statistics and annual gross state product data from Bureau of Economic
Analysis.
9
From Census Bureau state population estimates at www.
census.gov/popest/data/historical/1980s/index.html. Prior to 1990,
net migration is a residual component of population change that includes net international migration; net domestic migration; temporary
movement of military personnel, civilian federal employees and their
dependents; and a statistical residual.
10
“Silicon Prairie: How High Tech Is Redefining Texas’ Economy,” by
D’Ann Petersen and Michelle Burchfiel, Federal Reserve Bank of Dallas
Southwest Economy, May/June 1997.
11
Calculations based on 2011 American Community Survey data.
12
Education distributions are based on adults over age 24. This ensures
that most education, particularly high school and college, is complete.
Calculations based on American Community Survey data for 2009–11.
13
From Current Population Survey, March 2010, Table 3.5 at www.
census.gov/population/foreign/data/cps2010.html.
1

Comparison of seasonally adjusted nonfarm payroll employment for
December 2012 with December 2007, based on data from the Bureau
of Labor Statistics.
15
Based on the ACCRA Cost of Living Index 2010 annual averages. Figures are simple averages of all urban areas reported within each state.
16
“A Century and a Half of Ethnic Change in Texas, 1836–1986,” Terry
G. Jordan, Southwestern Historical Quarterly, vol. 89, no. 4, 1986, pp.
385–422.
17
Texas Got It Right, by Sam Wyly and Andrew Wyly, New York: Melcher
Media, 2012.
18
Options for Estimating Illegal Entries at the U.S.–Mexico Border, National Research Council, Alicia Carriquiry and Malay Majmundar, eds.,
Washington, D.C.: National Academies Press, 2013.
19
“Illegal Migration From Mexico to the United States,” by Gordon Hanson, Journal of Economic Literature, vol. 44, no. 4, 2006, pp. 869–924.
20
See note 18.
21
Estimates of the number of unauthorized immigrants from “Estimates
of the Unauthorized Immigrant Population Residing in the United States:
January 2011,” by Michael Hoefer, Nancy Rytina and Bryan Baker, Department of Homeland Security, March 2012.
22
“What’s Driving Mexico–U.S. Migration? A Theoretical, Empirical and
Policy Analysis,” by Douglas S. Massey and Kristin E. Espinosa, American Journal of Sociology, vol. 102, no. 4, 1997, pp. 939–99.
23
California adopted one of the first state initiatives intended to combat
illegal immigration, Proposition 187, in 1994. Many of the provisions of
recent laws, such as Arizona’s SB1070, and past laws, such as Proposition 187, were ultimately ruled unconstitutional and not implemented.
24
Press release issued by Texas governor’s office, April 29, 2010, http://
governor.state.tx.us/news/press-release/14574/.
25
California passed a similar law in 2001, although its measure took effect more slowly.
26
The Illegal Immigration Reform and Immigrant Responsibility Act of
1996 created the 287(g) program, which essentially deputizes local law
enforcement officers to enforce immigration laws. In Texas, only Farmers Branch, Carrollton and Harris County (where county sheriff deputies
mostly patrol suburban Houston) entered into such agreements. Sanctuary city resolutions vary across cities but typically prevent city employees from reporting on the immigration status of people they come
into contact with to federal authorities (see “The Immigration Debate in
Texas,” by Tony Payan, Latin America Initiative Immigration Research
Project Working Paper, Baker Institute, Rice University, April 2013).
27
One provision that passed in 2011, tucked into a school financing bill,
required proof of legal status to obtain or renew driver’s licenses. Proposed legislation that didn’t pass included mandated employment verification, enforcement of federal immigration law, information sharing, etc.
For details, see note 26, Payan.
28
“Annual Performance Plan for Fiscal Year 2012 and Revised Final
Performance Plan for Fiscal Year 2011,” Social Security Administration,
February 2011.
29
“Task Specialization, Immigration and Wages,” by Giovanni Peri and
Chad Sparber, American Economic Journal: Applied Economics, vol. 1,
no. 3, 2009, pp. 135–69.
14

Gone to Texas | Immigration and the Transformation of the Texas Economy

“Assessing Inherent Model Bias: An Application to Native Displacement in Response to Immigration,” by Giovanni Peri and Chad Sparber,
Journal of Urban Economics, vol. 69, no. 1, 2011, pp. 82–91.
31
“The Economic Benefits From Immigration,” by George J. Borjas,
Journal of Economic Perspectives, vol. 9, no. 2, 1995, pp. 3–22.
32
“Low-Skilled Immigration and the Labor Supply of Highly Skilled
Women,” by Patricia Cortés and José Tessada, American Economic
Journal: Applied Economics, vol. 3, no. 3, 2011, pp. 88–123.
33
Calculations based on Current Population Survey Outgoing Rotations
Group data for 2000 and 2012.
34
Poverty rate calculations are based on the 2010–12 March Current
Population Surveys, which ask about income during the previous calendar year. Poverty is measured at the family level because families
are likely to share resources; all individuals in a family have the same
poverty status in the Current Population Survey.
35
See “Limited English Skills, Relative Youth Contribute to Hispanic
Poverty Rates,” by Yingda Bi, Pia M. Orrenius and Madeline Zavodny, Federal Reserve Bank of Dallas Southwest Economy, First Quarter,
2012; and “Trends in Poverty and Inequality Among Hispanics,” by Pia
M. Orrenius and Madeline Zavodny, in The Economics of Inequality,
Poverty and Discrimination in the 21st Century, vol. I, Robert S. Rycroft,
ed., Santa Barbara, Calif.: Praeger, 2013, pp. 217–35.
36
“Undocumented Immigrants in Texas: A Financial Analysis of the Impact to the State Budget and Economy,” by Carole Keeton Strayhorn,
Special Report, Texas Comptroller of Public Accounts, December 2006.
37
The New Americans: Economic, Demographic and Fiscal Effects of
Immigration, National Research Council, James P. Smith and Barry
Edmonston, eds., Washington, D.C.: National Academies Press, 1997.
38
Welfare program participation calculations are based on the 2010–12
March Current Population Surveys, which ask about benefits received
during the previous calendar year. Households are participants if anyone living in the household participated in one of the indicated programs at any point during the previous year.
39
School lunch and breakfast programs are an exception, as is emergency Medicaid.
40
“Inside the Refrigerator: Immigration Enforcement and Chilling Effects in Medicaid Participation,” by Tara Watson, National Bureau of
Economic Research, NBER Working Paper no. 16278, August 2010.
41
Health insurance calculations are based on the 2010–12 March Current Population Surveys, which ask about coverage during the previous calendar year. People are considered covered by health insurance
if they had coverage at any point during the year, not necessarily all
year. The Current Population Survey is known to underreport health
insurance coverage and better approximates insurance coverage at a
specific point in time during the year than coverage for the entire year.
42
Costs that health care providers incur as a result of providing emergency health care to unauthorized immigrants may be covered by Medicaid; health care providers cannot refuse to provide emergency care.
Medicaid covers prenatal care and delivery costs for eligible low-income pregnant women regardless of their legal status because the
children will be U.S. citizens by birth.
30

Federal Reserve Bank of Dallas

American Community Survey 2011.
“U-Haul Rates Confirm the Great California Exodus,” by Mark J. Perry,
American Enterprise Institute, Carpe Diem (blog) April 21, 2012, www.
aei-ideas.org/2012/04/u-haul-rates-confirm-the-great-californiaexodus/.

DALLASFED Gone to Texas

Immigration and the Transformation of the Texas Economy
is published by the Federal Reserve Bank of Dallas. The views expressed
are those of the authors and should not be attributed to the Federal
Reserve Bank of Dallas or the Federal Reserve System.
Material from this report may be reprinted if the source is credited
and a copy of the publication or a URL of the website with the material is
provided to the Research Department, Federal Reserve Bank of Dallas,
P.O. Box 655906, Dallas, TX 75265-5906. This publication is available on
the Dallas Fed website, www.dallasfed.org.
Published November 2013
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