Monday, January 31, 2011

The "Detroitification" of Detroit

From James Hohman at the Mackinac Center:

"Mackinac Center analyst Jack McHugh has called the long process of hollowing out a private economy to prop up an unsustainable government "Detroitification." Detroit's most recent comprehensive annual financial report shows just how much the title-city itself has been hollowed.

The report lists the number of jobs provided by the city's largest employers, which indicates how sensitive its finances are to the actions of a particular firm. In Detroit's case, six of the top 10 employers are not private businesses at all, but government entities: public schools, the city government, the U.S. government, Wayne State University, the State of Michigan and the U.S. Post Office (see chart above). Two others are health care providers intrinsically tied to government policy, the Detroit Medical Center and the Henry Ford Health System. The remaining two are automaker recipients of federal bailouts, GM and Chrysler.

This is a double blow to the city. Not only is it no longer the home of large businesses that have helped the city prosper, the governments that are now the city's largest employers are struggling."

HT: Colin Grabow

17 Comments:

At 2/01/2011 7:59 AM, Blogger reprise8 said...

No questsion Detroit is a wasteland in more ways than we can count. But this list represents 8.7% of the total employment in the city. I would question the statistical significance of that. It means that potentially over 90% are in private employment. This is far from the classic one-industry town that we might see in less urban areas. To me, this list shows much more strongly that Detroit's problems go far beyond exactly who employs how many people. Very far beyond.

 
At 2/01/2011 8:49 AM, Blogger morganovich said...

what's u6 in Detroit, 30%? 40%?

while what reprise says is mathematically possible, i have my doubts (though admittedly am not terribly informed either, so if i am wrong, by all means show me some data and i'll change my mind) that detroit is much of a hotbed for small business and job creation.

my impression is that detroit was indeed pretty much a one industry town and has now become a no industry town...

 
At 2/01/2011 9:16 AM, Blogger reprise8 said...

Small businesses destined to become the next Microsoft, Intel, Fedex, etc. is probably not what is happening in Detroit. If it was, building lots would not be available for a couple of thousand dollars. The demand would be there to push the prices higher.

Working for Microsoft in 1978 was a private sector job. So was selling apples for a nickel on Wall St in 1930. My gut tells me Detroit is closer to the latter.

 
At 2/01/2011 9:25 AM, Blogger Michael Hoff said...

I know that Pittsburgh isn't much different. UPMC (health care) is first, but the fed, state, city, county, school district and Pitt (state school) are all in the top 10. Pennsylvania has to bribe companies to locate here.

 
At 2/01/2011 10:05 AM, Blogger James Fraasch said...

Michael,

I have complete faith in Governor Tom Corbett coming in and figuring out ways to make Pennsylvania more attractive to businesses.

One thing we have (at least here in Western PA) is a huge network of top ranked colleges and universities.

We do have businesses locating here to take advantage of our well-educated population. Google just located 500 jobs out here.

Now, if we could just do something about the 4 months of winter and 9% corporate income tax...

James

 
At 2/01/2011 10:34 AM, Blogger Che is dead said...

This short speech about Detroit is a little old, but is still right on the money.

 
At 2/01/2011 11:09 AM, Blogger Jet Beagle said...

Is this unique to Detroit? I believe the top five employers in the city of Dallas are:

Dallas ISD
City of Dallas
U.S. Post Office
Texas Health Resources
Baylor Health Care System

Many city of Dallas residents actually work in the giant corporations headquartered in the near suburbs:

American Airlines
Texas Instruments
AT&T
Fluor
Kimberly Clark
Exxon Mobil

I don't think anyone would refer to the city of Dallas as "hollowed out". But many of the large private employers moved to the suburbs (Dr Pepper, EDS, Frito Lay, TGI Friday's).

 
At 2/01/2011 11:09 AM, Blogger Benjamin said...

For decades, urban regions such as Detroit poured money into the federal government, which then subsidized rural development. Detroit was fantastically wealthy through the 1940s-60s, and even into the 70s.

Detroit has died since, but still we subsidize rural economies.

Don't let the toilet id hit you on your way out, Detroit.

 
At 2/01/2011 12:16 PM, Blogger Michael Hoff said...

James,

I hope you're right. But it will take a lot of work. First, right-to-work status. Second, deconstruct PennDOT. Third, tear down those gawdawful windmills that are destroying the Alleghenies.

I've seen a lot of friends leave PA for good jobs, every one of them a grad of one of our excellent universities. If Governor Corbett doesn't make PA business & competition friendly, the trends will continue (as demonstrated by Mark's graphic of out-migration yesterday).

 
At 2/01/2011 12:48 PM, Blogger Che is dead said...

I don't think anyone would refer to the city of Dallas as "hollowed out". But many of the large private employers moved to the suburbs ...

I think that it's a function of the policy differential between the core city and the suburbs. If, as is the case with Detroit, you have dramatic differences in the way that businesses are taxed, regulated and serviced between the city and the suburbs you will experience a "hollowing out". Of course, Detroit also suffered from the racist policies of Coleman Young who made no secret of his desire to force whites out of the city. That helped to firm up his power base, but it also resulted in the loss of many small businesses.

 
At 2/01/2011 12:54 PM, Blogger Ron H. said...

"Now, if we could just do something about the 4 months of winter and 9% corporate income tax..."

Well, I don't know about the corp. tax thing, but Al gore & others assure us that all of us are already working on the winter part. :)

 
At 2/01/2011 1:34 PM, Blogger AIG said...

Isn't this the situation with most cities, if we only take into account the proper "city" itself? After all, "Detroit" represents only about 20% of the metro area in terms of population, and the big auto companies don't have their plants in Detroit proper.

Still, are there many "inner cities" that do not follow the same employment pattern as Detroit? (perhaps with the exception of the big east-west coast cities)

 
At 2/01/2011 1:49 PM, Blogger harris66 said...

2/01/2011 9:25 AM

James Fraasch said...
Michael,

I have complete faith in Governor Tom Corbett coming in and figuring out ways to make Pennsylvania more attractive to businesses.

===================================
Well, that makes one of us. While I did vote for him, I don't have my hopes up. I have not forgotten which party rammed through the "pre-dawn pay raise." (Hint: It was NOT the Dems)

 
At 2/01/2011 2:03 PM, Blogger Jet Beagle said...

Che is dead: "Detroit also suffered from the racist policies of Coleman Young who made no secret of his desire to force whites out of the city."

Dallas suburbs truly began to grow in 1970s. A federal judge ordered that the city's 159 schools in nearly-all-white and nearly-all-black neighborhoods be integrated. Dallas began busing kids all over the city. Within 5 years, 50,000 whites moved to the independent school districts of the suburbs. Within 15 years, white, non-Hispanic children in DISD dropped from 57% to 20%.

IMO, it is not coincidental that Dallas's large corporations soon followed the exodus to the suburbs.

 
At 2/01/2011 2:04 PM, Blogger harris66 said...

2/01/2011 11:09 AM

Michael Hoff said...
James,

I hope you're right. But it will take a lot of work. First, right-to-work status. Second, deconstruct PennDOT. Third, tear down those gawdawful windmills that are destroying the Alleghenies.
===================================

That "right to work" comment was dead on.

Second should have been elimination of the damned property tax and replacing it with a stepped income tax. Those who make the most: elected officials at every level, teachers union, road workers union, prison guards union,
county office workers union (untouchable here in Dork county when it comes to budget cutting and needed lay-offs) should start paying their fair share.

Not going to happen though. Rethuglacraps and Demicons are both scared silly of losing those re-election campaign checks.

 
At 2/01/2011 2:09 PM, Blogger Paul said...

"For decades, urban regions such as Detroit poured money into the federal government, which then subsidized rural development. "

Leave it to Benji to figure out a way to blame Detroit's problems on rural America. The truth is every single mayor of Detroit since 1961 has been a Democrat. Vast fortunes were spent trying to remake Detroit into a socialist paradise as part of LBJ's "Model Cities Program." The results are what happens wherever Democrats are allowed to run rampant for decades on end.

 
At 2/01/2011 3:44 PM, Blogger juandos said...

Detroit going feral...

 

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