Hurricane Katrina’s Impact on the Houston Metropolitan Statistical Area

Hurricane Katrina forced the evacuation of an estimated 130,000 persons to Houston, TX, causing its population to increase by 3% virtually overnight. Most of these evacuees were younger and less-educated than existing residents and remained in the Houston area for at least a year. The first objective of this dissertation is to estimate the effect of this massive in-migration on workers’ earnings in non-tradable goods industries in the Houston Metropolitan Statistical Area (MSA). Using establishment-level data from the Quarterly Census of Employment and Wages (QCEW) and gross sales and use tax receipts from the Texas Comptroller of Public Accounts, the study compares relative earnings per worker within the non-traded goods industries in the Houston and Dallas-Fort Worth MSAs before and after the Katrina-induced in-migration. Unlike previous studies, this study controls for the influence of an increase in the demand for local goods and services on the demand for labor in normally non-tradable goods and services activities. The study finds evidence that the average payroll per employee in the low-skill non-tradable industries decreased by 3.0% in the Houston MSA relative to the Dallas-Fort Worth MSA as a result of the Katrina-induced shift in labor supply. The study finds no evidence of any effect in the set of high-skill non-tradable industries. The findings also suggest that the failure to control for demand-side influences confounds this effect and severely underestimates the supply-side effect on wages.

The second objective of this dissertation is to estimate the possible damage that a natural disaster of the magnitude of Hurricane Katrina could cause in the Houston MSA. Using Census-Track and QCEW data, this study estimates the expected damage, payroll loss, and expected number of affected employees that could be sustained by the Houston MSA. The storm surge analysis is conducted using GIS and the hurricane-related damage is estimated using HAZUS-MH. The study points out the advantages of using GIS to analyze the expected storm surge damage estimation. The advantage of using the HAZUS-MH is that it provides results for a county-wise breakdown in terms of affected essential facilities and debris by tonnage. Also, it provides expected building damage by occupancy type and building type.