Urban decay is becoming a bigger problem as educated workers keep moving to the suburbs to avoid crime, poor schools, taxes and racial tensions. These businesses also find that building new facilities in the suburbs is much cheaper than refurbishing old buildings for their needs. There are many reasons to move out of the city but only a few reasons to stay. City officials are further encouraging this flight by utilizing racial politics and high tax bases.
Let us take the case of Comerica Bank and Detroit City as a relevant example. The cash strapped City of Detroit is always seeking ways of gaining new forms of revenue and to please city residents. The City of Detroit is 80% African American and has one of the highest poverty rates in the country. Even worse the police stations and schools are in such disrepair that the State of Michigan is considering coming in and running them. Companies like Comerica move out cities like Detroit because of cost, inability to recruit, lack of local candidates, declining city influence and racial politics.
The Reasons Why Companies Leave Urban Areas:
Tax Revenue: Cash strapped cities often go after large and wealth corporations to fund their city services. Since the income level of the city residents is poor the cities often raise taxes on businesses. These businesses get tax incentives from the suburbs and will considering moving when new facilities are needed. Comerica Bank moved to Arizona because it was cheaper than staying in the City of Detroit. The more they charge taxes the less likely businesses will stay.
Recruitment and Quality Workers: A strong labor market is important for companies to succeed. When the high schools are not graduating youngsters that are prepared to meet the challenges of the working world large companies suffer from poor quality workers. Likewise skilled professionals are less likely to move to an urban ghetto and enroll their own children in such poor educational systems.
Racial Politics: City governments may want to raise the self-esteem and hopes of their city residents by toting the racial mix of the city. However, if the politics becomes excessive diversified companies may feel the crunch when internal processes are affected by racial overtones. For example, promoting African American workers simply because of city politics may give companies a good incentive to leave.
Declining Influence: Since urban ghettos don’t often have a large amount of household income the amount of paying customers within the city may decline. Therefore the company doesn’t make the majority of its income from the city and may consider moving out to a suburb that reflects its customer base. Companies go where the money is.