How Texas can defy the demographic odds

Fans gather at the Austin City Limits Music Festival in Austin, Texas on October 5, 2024. (Photo by Rick Kern/Getty Images)

In the center of the American Sun Belt lies the eighth-largest economy in the world, home to nearly one out of 10 Americans. After decades of sustained economic and population growth, Texas is in the early days of a demographic shift that will profoundly shape its future. As states and countries around the globe grapple with declining populations, Texas is defying the trend by continuing to expand. Such growth is likely to continue. While it will bring many benefits, however, a more populous Texas will also present challenges – challenges that must be addressed if the state hopes to secure the future of its residents and avoid the fate of other regions that were unprepared for the growth they experienced.   

Bigger and better?

By the time Texas, home to 30 million people, celebrates its bicentennial in 2036, projections developed by the Texas Demographic Center indicate that the state will have between 3 million and 5 million more residents than it does today. By 2060, Texas will have 6 million to 14 million more inhabitants. This growth – and the declines facing many other states – mean Texas is on track to become the most populous state in the country by the turn of the next century, if not sooner.  

Texas also has a young population. With a median age of 35, Texas was the second-youngest state in the nation in 2023, trailing only Utah, which has a median age of almost 32 years old. This puts it in stark contrast to, say, Maine – the oldest state in the nation, which has a median age just shy of 45 years old.  

In the past, population growth in Texas was driven by a high fertility rate, which also kept the median age low relative to other states. Fertility in Texas has declined over the last two decades, however, and is now below the rate needed to maintain population size. And yet Texas has continued growing thanks to domestic migration from other states. A large percentage of these migrants have been younger adults attracted by an affordable cost of living and abundant employment opportunities. These people have not only helped the state grow; they have also kept it relatively young. 

As Texas’ population continues to expand, however, an interesting dichotomy will form as the median age shifts older. Texas is relatively young compared with other states because of historically higher fertility and current in-migration by young adults. But like all states and the rest of the developed world, Texas is on a trajectory to grow older over time because of the large cohort of aging baby boomers and because of medical and health advances contributing to greater longevity, coupled with lower fertility rates. According to projections by the Texas Demographic Center, between 2023 and 2050, the number of Texans 65 and older will increase by more than 88%, while the number of Texans 45 to 64 is expected to increase by 57%. Although some regions of the state, particularly rural areas, have already begun experiencing this shift in significant ways, many have not. But that will soon change. 

Texas, as the second-largest state by land mass, offers new residents substantial space to settle. The state’s population growth has been far from evenly distributed, however. The “Texas Triangle,” as the urban and suburban areas of metro Austin-San Antonio, Dallas-Fort Worth, and Houston are known, account for 87% of the state population today, and the exurbs surrounding these metro areas have enjoyed most of the recent growth. Between 2010 and 2020, 37 of Texas’ 254 counties grew faster than the statewide rate, and 14 of those counties saw their population increase by between 30% and 55%. Another 74 counties, largely ringing the highest-growth counties around metro areas, grew but at a rate slower than the state’s overall population growth rate. And 143 counties, many of them rural, lost population during that same time period. 

Two students study in a classroom at Rice University in Houston, Texas on August 29, 2022. (Photo by Brandon Bell/Getty Images)

A very different Texas

Texas’ ethnic makeup is also changing. The most dramatic shift in the state’s demographics involves the growth of the Hispanic population, which is now the largest ethnic group in the state and accounted for nearly 50% of the population growth from 2010 to 2020. Because of a historically higher birth rate, Hispanics under the age of 25 already represent the largest segment of the population divided by age and race/ethnicity, and by 2050, Hispanics will be the largest racial/ethnic group across every age category. 

Although much smaller in number, other non-Anglo ethnicities combined with Hispanics to account for the vast majority of Texas’ population growth during the last decade-long census period. Asians, Blacks, and those counted as non-Hispanic Others accounted for 15.3%, 13.9%, and 16.5%, respectively. Meanwhile, non-Hispanic Whites accounted for only 4.7% of Texas’ population growth during this period. This distribution of population growth is expected to continue. By 2050, the Anglo population will account for just 28.6% of the state’s population, compared with 40.9% in 2020. At the same time, Hispanic, Black, and non-Hispanic Others will make up 42.7%, 12.7%, and 3.8% of the state’s population, up slightly from 39.8%, 12.0%, and 2.2%, respectively. The most significant growth will be in the Asian population, which is projected to grow from 5.1% of the state’s population in 2020 to 12.2% in 2050. 

What it all means

The combination of all these trends will have a complex set of implications for Texas. To realize the long-term benefits that a growing population and greater diversity offer, the state must start acting now, while carefully considering a number of competing forces.   

Texas’ relatively young population could represent a great economic boon by offering a large workforce and consumer base. To take advantage of it, however, Texans will need the right education for the jobs available, and those jobs must pay family-sustaining wages – two things the state already struggles to provide for native Texans. In fact, migrants to Texas, both domestic and international, tend to be better educated than the native-born population. According to the Texas Higher Education Coordinating Board, only 22% of all eighth grade students in Texas go on to complete some form of higher education within six years of their anticipated high school graduation date. Black and Hispanic Texans fare particularly poorly. Only 15% of Black students and 18% of Hispanic students attain some form of postsecondary credentials within six years of graduating high school, compared with 31% of White students.  

Rural students also face barriers to a quality education. Schools and community colleges in rural areas are often small and geographically remote, which makes it hard for them to offer the advanced coursework or experiential learning opportunities that can lead to well-paying, in-demand jobs.  

To ensure that all students across the state have access to the right educational opportunities, policymakers need to strengthen funding mechanisms and support systems that address the needs of all learners, particularly for those that face additional barriers to educational achievement such as non-native English speakers and/or students from low-income families. They must incentivize and support educational institutions in providing courses and experiences that are aligned to jobs that are in demand and pay well. And they must recognize regional variations in the challenges and costs of delivering these programs. One good way to do this would be to build on the success of the reforms to Texas’ community college finance system passed by the state legislature in 2023, as well as reforms to the public school funding system in 2019 that reward districts and community colleges for ensuring that more of their students earn credentials that lead to higher employment outcomes.  

Workers build the foundation of a house in San Marcos, Texas on March 18, 2024. (Photo by Jordan Vonderhaar/Bloomberg via Getty Images)

The aging of Texas’ population presents another set of challenges that the state has not yet had to address at scale. As fertility rates drop and the population grows older, school districts and postsecondary institutions are already seeing decreasing enrollment. As this trend continues, ensuring financial sustainability will require making hard choices about the closure of campuses and facilities, reductions in staffing, and the elimination of programs. As seen in numerous communities across the country, such as St. Louis, a failure to right-size for the number of students actually enrolled can have a devastating effect on budgets and on the ability of institutions to effectively serve their students.  

As large numbers of highly skilled and experienced employees retire, meanwhile, Texas will experience a more pronounced brain drain of expertise as well as a tightening of the labor supply. To fill these vacancies, the state’s educational institutions will need to creatively address how to prepare students for the workforce in ways that accommodate the continuing shift from degree-based to skills-based hiring. One way to do this is by increasing apprenticeship and work-study opportunities. By adopting a stronger focus on competency-based learning, educational institutions can ensure that as many young people as possible are able to enter the workforce.  

Another challenge facing Texas is that, as a group, its older residents are now financially worse off than they were a decade ago. In 2022, 12.3% of Texas seniors were living in poverty. While this figure represented an increase of only 0.7% since 2012, it is notable in that during this same period, the percentage of Texans under 18 and between 18 and 64 living in poverty decreased, by 6.6% and 3.4%, respectively. As the number of older Texans grows, many of them will have limited financial means. That will create increased demand for health care services, as well as for transportation and housing that can accommodate those with limited mobility; these seniors and services will also require public support to subsidize the associated cost increases. These challenges will be particularly complicated in rural counties where the population is both shrinking and getting older faster than in other areas of the state. To cope, state leaders must start taking measures now that include modifying existing housing and developing new housing stock, and increasing the number of health care providers and facilities aimed at serving an aging population. They must also consider new funding sources to pay for these efforts. 

Can Texas learn from California’s past?

The explosive population growth California experienced starting in the 1960s and 1970s and the policy choices made in response offers a valuable lesson for Texas today. California’s rapid expansion created significant challenges, including a housing affordability crisis, strains on infrastructure, environmental challenges, and increased demand for social services – challenges that California largely failed to meet. Perhaps the starkest example is in home prices. In 1970, California’s residential real estate prices were 30% higher than median U.S. levels; by 1980, the figure was more than 80%. In April of this year, the median home price in California hit $900,000 for the first time, 218% higher than the U.S. average and 240% higher than the median price in Texas ($378,000). California’s expansion of state-subsidized programs and services has also driven up the cost of government and thus of taxes, with the state collecting and spending 60% more per resident than Texas. Early analysis indicates that some of California’s efforts to raise additional revenues have been counterproductive, leading more people to leave the state – many of them for Texas.   

Fireworks are displayed at the University of Texas at Austin commencement ceremony in Austin, Texas on May 11, 2024. (Photo by Brandon Bell/Getty Images)

Texas must take proactive and pragmatic steps now to prepare for the future, leveraging its resources and economic strengths to address challenges it faces, and will continue to face, as its population keeps growing. These steps include making investments now to address challenges that will be realized later. For example, Texas will need to invest more than $150 billion in water and wastewater systems in the coming decades to ensure it has sufficient infrastructure for its growing population. A failure to allocate funding now will exacerbate the problem and threaten economic opportunity in the future. Texas will also need to invest hundreds of millions of dollars in technology to support effective decision-making and the efficient delivery of services. With many state agencies already operating on outdated technology, Texas faces escalating security and stability risks as well as higher operating costs.  

Even as it makes such investments, however, Texas must ensure it maintains an affordable cost of living. Addressing housing affordability and accessibility must be a priority; the state government must reform regulations that create unnecessary barriers and add costs to development. It also needs to create frameworks that allow for more cost-effective financing, including public-private partnerships. The state should also consider encouraging in-field development and accounting for the total and long-term maintenance costs of greenfield development. In addition, Texas must find ways to improve the cost efficiency of its government. While investing in new technology will be an important component, the state must take additional steps, such as evaluating how well it is managing billons of dollars in state funds. For example, a recent consolidation of investment management from two different agencies to a single entity has resulted in more than $100 million in additional value annually. In a similar vein, a prudent, relatively small investment in addressing state pension fund liabilities now would save tens of billions of dollars over the long term. 

The complex and dynamic challenges likely to arise from the demographic changes underway in Texas raise several complicated questions with few clear answers. But uncertainty is not an excuse for inaction; indeed, action is the antidote for uncertainty. The state must adopt a data-driven, long-term, pragmatic approach to defining what is known and what is likely and then take appropriate and sustained action over the long term. Such a strategy is the only way to create the right opportunities and to enable responsive, high-value decision-making as the future becomes clearer.  

This kind of approach requires immense discipline. Elections, short budget cycles, uncertainty about the future, and current crises all work together to incentivize policymakers to focus on short-term benefits and discount long-term risks. California experienced periods of rapid population growth and economic expansion yet failed to adequately plan for what would happen when that growth ended. As a result, it found itself with stagnant population growth, aging and deteriorating infrastructure, growing deficits, and problems collecting the revenue with which to address these challenges. By understanding the dynamics of a growing and graying population, along with pronounced ethnic and geographical variations, Texas state leaders can still avoid that fate. But the time to start adapting to the future is now.