Detroit struggling to create jobs outside of downtown

Detroit has a host of well-documented problems – poverty, crime, street lights, mass transit – that hamper its recovery.

But the ability to create jobs may be its biggest hurdle. More jobs could mean less poverty and more tax revenues to fix the many broken things.

“It’s absolutely critical that Detroit grow jobs,” said Teresa Lynch, nonresident senior fellow at Brookings Institution and a principal at Mass Economics, which is helping the Detroit Future City’s group work on economic development strategies.

A large part of the problem is where jobs are located in the city. A Bridge look at jobs within Detroit’s sprawling boundaries shows that perhaps no other large city in the country finds most of its jobs confined to such a tiny sliver of its land, with much of the rest a veritable jobs desert.

Hundreds of thousands of city residents, many without access to a car, live in areas where there are fewer than 200 jobs for every 1,000 residents, neighborhoods that are miles away from where most jobs can be found, both in and outside of the city. Nearly 80 percent of city residents live over 10 miles from a central business district, one of the highest rates of the country.

“It’s a huge challenge for the city,” said Paul Hillegonds, chairman of the Regional Transit Authority, which was created by the state legislature “to plan and coordinate” transportation services in Wayne, Oakland, Macomb and Washtenaw counties.

As Mayor Mike Duggan and other civic leaders work to take advantage of the city's Midtown-Downtown economic corridor, it's also looking to bolster employment in the neighborhoods, where jobs are difficult to find.

Detroit has one of the worst jobs per capita rates among big cities, due largely to the closing of large manufacturing plants that were once spread across the city.

Roughly half of the city’s population lives west of Woodward Avenue - more than 335,000 people. But across that vast stretch of Detroit there are only 30,500 jobs – less than one job for every 10 people. Similarly jobs-poor areas abound on the city’s east side.

That compares to the 64,000 jobs from Midtown to downtown, where just about 18,000 people live (Detroiters hold about 27 percent of the Midtown-downtown jobs). All told, the city has a little over 200 jobs for every 1,000 people, well below St. Louis’s 613, Cleveland’s 481, Grand Rapids 477, Milwaukee’s 450 and Baltimore’s 391.

One of the nation’s largest cities geographically, Detroit is struggling to improve its city bus system while a number of the most jobs-rich suburbs do not participate in the regional transit system, with the spread-out nature of the region complicating the jobs problem for Detroiters.

The Duggan administration said it is addressing the issue several ways: One, by improving the bus system so people living far from active commercial centers can more easily get to the jobs. But the city has also sought to work directly on developing jobs, both within the already-successful Midtown-Downtown corridor and in the neighborhoods themselves.

It announced the creation of an “innovation district” centered on the corridor that will look to take advantage of the assets already in place – the hospitals, universities and businesses – to attract more businesses.

That area, bounded roughly by Henry Ford Hospital to the north, the Detroit River to the south, I-75 on the east and the Lodge Freeway on the west, – comprises just 3 percent of the city’s land mass – yet is home to 55 percent of its jobs. Yet nearly three-quarters of those job are held by non-Detroiters. The area is home to Wayne State and two hospital systems as well as the growing core of businesses owned by Quicken Loans.

A group of 17 leaders in private business and the education community have been appointed to a committee to outline plans for the district. It’s first report is due out soon. But the city is going to take a “hands-off” approach to it, Duggan said last year.

He named Henry Ford Health Systems CEO Nancy Schlichting as chair of an advisory committee tasked with developing a formal plan to make Greater Downtown Detroit an innovation district, and expanding its reach to other parts of the city.

There will be no tax breaks available for in-district businesses beyond what the city already offers. There may be tweaks to the city’s zoning rules to allow for more mixed-use development, Jed Howbert, executive director of Duggan’s jobs and economy team, said in an interview. The zoning changes would allow for more mixed-use commercial and residential developments that are a hallmark of new urbanism.

What the city is doing, he said, is helping connect businesses within the district with city residents seeking jobs.It has become a training program to help residents develop the lower-level tech skills that some of the new employers need.

The city is also working with the New Economy Initiative of Detroit, funded with $100 million in foundation money to offer grants and expertise to entrepreneurs and others to encourage city businesses to buy supplies from city-based businesses, said Pam Lewis, a senior program officer with NEI. In 2012, local businesses bought over $500 million in supplies from city businesses; it’s expected to top $900 million this year, she said.

Other city and private programs are underway: using $3 million in federal block grant money to get entrepreneurs started in neighborhood businesses and looking to encourage development of “critical commercial corridors” around the city, Howbert said. The program, called Motor City Match, is offering $500,000 in grants each quarter to start new businesses and to help landlords get buildings ready for active use. Comerica Bank is also bankrolling entrepreneurs, he said.

Though the city would surely love one or five 2,000-job manufacturers to show up, those are rare in today’s economic climate. “There are very few of those investments getting made,” said Lynch of Mass Economics.

Smaller manufacturers are still choosing the city and the region, but not in numbers that match the days of the Big 3’s heyday.

“Most jobs are created by small and medium size businesses,” Howbert said.

That wasn’t always Detroit’s story. For decades, many of the city’s neighborhoods teemed with nearby jobs as housing sprung up around the dozens of manufacturing plants in the city. But the plants moved or closed altogether. The neighborhoods remained but many have fell into disrepair as unemployment soared and residents moved out toward the jobs that once were plentiful in the city.

“If people can’t get to jobs closer to where they live, they soon consider moving closer to the jobs. That’s the story of Detroit,” Hillegonds said.

And solving the problem, either with better transit or more home-grown jobs, will write the next chapter.

Bridge Magazine is convening partner for the Detroit Journalism Cooperative (DJC), comprised of five nonprofit media outlets focused on the city’s future after bankruptcy. The group includes Michigan Radio,WDET, Detroit Public Television and New Michigan Media. Support for the DJC comes from the John S. and James L. Knight Foundation, Renaissance Journalism’s Michigan Reporting Initiative and the Ford Foundation.

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Comments

David Waymire
Thu, 08/06/2015 - 10:11am
Cutting the earned income tax credit hasn't helped with this issue. Many Detroiters used to get this credit, which offsets the impact of high property and sales taxes in Michigan which are naturally regressive, at 20 percent of the federal credit. We cut it to 6 percent when we ended business taxes for most state businesses. The EITC is generally spent quickly, and near homes -- a perfect prescription for helping businesses in the city. The cut in the business tax probably affected very few Detroit small employers, who were likely paying no or little businesses tax under the state business tax. But it did cut taxes by hundreds of millions of dollars for medium and large employers. It's clear that those companies are not building operations in Detroit. (And for most companies, the business tax flowed into the pockets of the company owners, most of whom were in the 30 percent federal tax bracket...so 1/3 of that tax cut probably went right to Washington, D.C., instead of staying in Michigan for our use.) So the natural consequence of this policy was to exacerbate job creation issues in Detroit (cut in consumer income means less demand for local goods and services), while handing middle- to upper-class business owners a windfall that they could have (but there's little evidence many have) invested in new jobs, likely not in Detroit. Now House Republicans have proposed eliminating the EITC to pay for roads. This will make a bad situation in Detroit neighborhoods even worse.
Matt
Thu, 08/06/2015 - 3:53pm
Dave - Take it from someone who paid it, the Single Business Tax was designed to favor large (unionized) manufacturers and was a nightmare for small businesses! Pre Snyder Michigan SBT specifically hit many LLCs and S-corps 2 - 3 times the rate individuals paid on their income. EITC has the same business benefit of throwing money out the window of a moving car - little to none. Very few states even have a state EITC, yet their economies seem to function largely OK without it. While I am sympathetic to helping those going through a temporary hard patch, do we really want (or can afford) this perpetual stipend?
Tom Tolen
Thu, 08/06/2015 - 1:04pm
This is an excellent article, and one would hope that the initiatives - such as Detroit Future City and the creation of an "innovation district" - bear fruit. All such steps are necessary if Detroit is to truly have a renaissance, because thriving, resurgent downtown and midtown districts are not enough. The other areas of the city need to have job opportunities for residents, particularly when one considers Detroit has a poor mass transit system and many of its residents cannot provide their own transportation. Not to nitpick, but a point of grammar about the story: In the 3rd paragraph from the bottom, it says "many (neighborhoods) have fell into disrepair…" Since it is in present perfect tense, the phrase should say "have fallen" into disrepair.
Chuck Fellows
Fri, 08/07/2015 - 8:43am
First understand why Detroit has become what it is today, read Jane Jacob's "The Death and Life of Great American Cities". (Root cause of decline = bad Public policy) Next understand the historical demographic of the city, Detroit has never been a city in the traditional sense. Detroit was a city of more private homes per capita than any other city in the country. It also used to be a city of churches, roses and strong ethnic communities and a diversity of small businesses supporting or related to the auto industry. Detroit must have a public transportation system, but state and federal legislators refuse to address this need. Ignorant public policy led to the exodus of the cities population. That ignorant public policy attitude must be reversed. A sound public transportation system is the reversal of decades of this bad public policy. Create an Authority independent of local, state and federal interference, fund it, and let that Authority achieve a clear purpose, public transportation within, between and among Detroit and the region the city serves. Focus on the purpose. That's how things get done! Finally, Detroit's potential workforce is being ignored by the Federal and State funding available for vocational (aka skills) training since these programs are oriented to achievement of a post secondary academic degree, not what Detroit's economy actually needs. There is little if any training and education in soft skills, or opportunities to overcome the shortcomings of the public education system in Detroit. The available labor pool lacks soft skills and their educational experience disallows their participation in skills training. A system stuck on an artificial academic achievement requirement ( a policy position) as the filter for further training literally prohibits those seeking work from gaining the essential skills that will lead to actual employment and a future. Publicly funded training programs are wholly disconnected from the actual urban workforce need. Demand that local employers specifically identify a training/education need, the private sector input, and demand that the public sector direct its resources to fulfilling that need. AKA tailoring the available public resource to the individual requirements identified by those who will actually put the outputs of the training/education to work. Many will complain that this is too hard or too expensive. Well, doing what we have always done, which is what we are doing today, and expecting a different outcome is not only the definition of insanity, it is a horrible waste of a whole lot of public and private money. The only thing it provides are political soundbites and leads for the Six O'clock News.
Duane
Sun, 08/09/2015 - 2:13am
Chuck, All of the things and money you mention can be tools for City/community success, but the reality is the culture has to be one that values those tools, that creates an expectation of using those tools, and one that drives people to use those tools to create a better future for them. People do use something simply because its there, they have to invest themselves in the tools focusing on their own efforts to achieve their success. Detroit had all of what you describe as recently as the 1940s and mid 1950s and then the community affluence started eroding the community culture that had created those tools and that culture has changed so much even if those tools were available tomorrow they would not be used enough to justify the investment. The desire has to lead the tools/spending if anything is to change. And that desire won't happen until the talk leaves the past and focuses on the the future, people focusing on how they can create teir future not waiting for government to provide that future for them. Tomorrow is about what people do for themselves, what their efforts return, and that must start with the culture of learning forstudents in the elementary schools. The tools don't lead change and success, desire that relys on effort does.
Rich
Sat, 08/08/2015 - 7:36am
Just read this morning that Mike Duggan's policies are hitting the poor the hardest. If you own property in Detroit, and if it gets sprayed with graffiti, you get a large fine plus a bill from the city to perform a less than reasonable job of cleaning it up. One poor individual had to pay $130 in ticket costs, plus $1,100 to have city workers remove the graffiti. All this to one who probably does not know how he will afford his next meal. No wonder people are leaving.
John S.
Sun, 08/09/2015 - 9:55pm
Thinking of causes, living in the City for middle class residents (especially families) is very expensive compared to the suburbs (auto insurance, property insurance, high millage, private/parochial school tuition, alarm/security systems, income tax if working within the city). They continue to leave. A related problem is the exit of retirees, particularly public and school employees. All of these people when they leave the city take their money with them. They aren't spending much of it in the City and thus there is less money to support businesses (and jobs) in the City. As the map implies, major employers downtown and midtown (DMC, Henry Ford, Wayne State, Quicken, GM, BC/BS, Meridian) offer most of the jobs in the City. The solution is to address all of the issues that make the City very expensive for middle class residents (especially families). Plainly, also, as others have commented, there's need to improve public transportation so that people can get to and from work more easily.
Sun, 08/09/2015 - 11:34pm
Businesses create jobs. Most Detroiters work for the municipal government or businesses owned by people of color. Yet, City leadership has yet to convince funders - angel investors and venture capitalist - to fund Detroit businesses. The Michigan Venture Capital Association reported in 2014 only 1% of venture capital went to people of color, women or Detroit residents. I am hard pressed to believe there are no good business ideas in Detroit amongst people of color or Detroiters. I created Weyn, LLC a mobile video game developer. We are in negotiations with the Federal government agencies and a credit company who thinks our idea is viable but not Funders. Perhaps we need to give the some money green colored money.