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Introduction
The business climate is one of the central determinants of economic growth prospects. It either contributes to the increased interest of investors in allocating resources necessary for the growth of the business sector or serves as a critical factor for avoiding conducting operations in a particular city. The main challenge with estimating business climate is the fact that there are different approaches to analyzing it.
For instance, according to the Michigan Future Business Index, there are positive prospects for business development in Michigan (2015). Still, there is as well a less optimistic stance on the city’s business environment. Therefore, to obtain a better understanding of the future of business in Michigan, it is imperative to conduct another assessment of its business climate. In this way, the main focus of the paper at hand will be made on estimating such aspects of the business climate as infrastructure, business environment, labor markets, and social environment to conclude which forecast is a more realistic and relevant – pessimistic or optimistic one – with stress laid on Detroit, Michigan.
Infrastructure
Transportation Networks
Nowadays, there is a significant challenge with transportation networks in Detroit because the city has nearly the worst transit system in the United States. It is connected to having no commuter rails and streetcars. As a result, the volume of urban and suburban transit declined to 36 million annually. The main challenge is that large as it is, the region spends only $69 per capita on developing transportation networks (Grabar, 2016). Still, when it comes to supply acquisition and product distribution, some companies offer these transportation services – regionally, nationally, and internationally. Therefore, regardless of the poorly developed public transit system, there are some positive options for business transportation.
Financial Networks
In Detroit, special attention is paid to financial development. The most influential local investors, practitioners, and policymakers initiated the creation of the Opportunity Finance Network – an organization aimed at re-allocating existing funds and satisfying the needs of underdeveloped and underinvested regions of the city. Besides, banking and finance consulting services are well developed.
City Maintenance
There are numerous city maintenance services provided in Detroit. In general, city services are rationed effectively. However, there is a critical challenge, as the cost of services is constantly increasing, especially after local authorities announced bankruptcy. Besides, there are vast unsettled lands. In this way, the shrinking of the city, along with the desire to expand it, entails the growth of city services costs.
Communication
Communication networks are well developed. There are numerous options for sharing information, including the Internet and telephone services. At the same time, there are many points for a wireless Internet connection. Communication systems are both centralized and decentralized.
Business Environment
The business environment in Detroit is characterized by several specific features. To begin with, there are different types of companies. They vary from small private businesses to major corporations. Also, they operate in various industries. Therefore, there is a unique mix of business because enterprises are involved not only in the services sector and culture but also in manufacturing and finance. Still, historically, Detroit has always been known as an automotive center.
From this perspective, the automobile construction industry is entrenched in the region. Nevertheless, after city authorities declared bankruptcy, they faced the necessity of attracting investors and motivating economic players to re-enter the local economy. For this reason, there are numerous new businesses in the region – those that were launched after 2013. This initiative is supported by both local authorities and the Opportunity Finance Network.
More than that, it is essential to point to the fact that there are several strategies for enhancing Detroit’s business environment. For instance, special attention is paid to the support of information technologies. This strategy is implemented as a part of the communication network development program. Also, numerous specialists are offering IT support services. In this case, it should be mentioned that they are among the most wanted professionals, so this segment is actively developing.
Speaking of politics, local authorities are interested in attracting investors and motivating local and neighboring residents to become involved in the business, as it is the foundation for the growth of the city economy and its recovery after the bankruptcy. Finally, as for the business tax environment, it is favorable. Even though all corporations and individuals – both residents and non-residents – involved in business activities in Detroit should pay income taxes, their level does not exceed 4.35% that is lower than in the State of Michigan (Detroit Economic Growth Corporation, 2017).
Labor Markets
In general terms, the overall situation in Detroit’s labor markets is improving, as unemployment rates are continuously decreasing. However, regardless of the positive trends in this segment, it is essential to note that they have not yet reached the 2007 level. It means that the markets are still recovering from the massive recession and 2013 bankruptcy. At the citywide level, poverty rates are significantly higher than across the State of Michigan.
It means that regardless of the growing employment rates among the Detroit population, salaries are low. Nevertheless, for this reason, labor resources are readily available because everyone is interested in increasing the level of their incomes. As for now, there are numerous people with adequate skills in all areas of professional occupation from information technology to education. Low-income positions are easily accessible. However, compared to the nationwide figures (75%), only 53% of Detroit residents are willing to occupy them. It is true for those aged between 18 and 64 (U.S. Department of Transportation, 2016).
Speaking of workers’ characteristics, most of them graduated from either college or high school. From this perspective, education and professional training system is operating and in place. What is even more critical, people are interested in occupational education. As for main skill sets, they vary because there are numerous different businesses in Detroit, so, to become employed in differing industries, differing skills are needed. Nevertheless, health care and social assistance, waste management, retail, manufacturing, and accommodation (including food) services are the most attractive sectors of employment, while public administration, as well as financial, scientific, and educational services, are the less desirable ones (Murembya & Guthrie, 2015).
Social Environment
Regardless of the recent bankruptcy, the overall social environment in Detroit is positive. Its development can be viewed from two different perspectives – labor resources and customer viewpoints. Speaking of labor resources, the social environment is well developed because there are numerous options for professional occupations in different sectors of the local economy. Besides, being the largest city in the State of Michigan, there are vast opportunities for education and both professional and personal development. Finally, for the same reason, the city is multicultural. It means that there are options for becoming involved in culturally diversified working environments and cooperating with culturally competent people.
On the other hand, reviewing Detroit’s social environment from the perspective of an ordinary customer, it is as well positive. It can be easily explained by the fact that there are vast opportunities for entertainment, including restaurants, museums, cinemas, and shopping. Also, special attention is paid to satisfying the accommodation needs of the local population. In this way, new housing facilities are being constantly constructed as well as the costs of living are lower compared to the average level across the State of Michigan. Finally, medical care is also available that is as well connected to the increased interest of the majority of the local population is getting involved in the health care sector.
Conclusion
Based on the findings of this research, it is obvious that there are both strengths and weaknesses of the business climate of Detroit. From this perspective, the future of business in this city is dependent on the effectiveness of strategies and initiatives developed and implemented by both local authorities and the most influential local organizations. Being the largest city in the State of Michigan, possessing adequate labor, social, and educational resources, and positively developing business environment, Detroit has chances of becoming economically powerful again and totally recover from the recent recession and bankruptcy.
However, this future requires a significant collective effort, governmental support, and constant individual work of professional and personal development to boost the local economy. In this way, it may make a valuable contribution to the future of business in the State of Michigan and the overall level of its economic development.
References
Detroit Economic Growth Corporation. (2017). Tax rates. Web.
Grabar, H. (2015). Can America’s worst transit system be saved? Web.
Michigan Future Business Index. (2015). Web.
Murembya, L., & Guthrie, E. (2015). Demographic and labor market profile: Detroit. Web.
U.S. Department of Transportation. (2016). City of Detroit: From “motor city” to “mobility city.” Web.
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