The Financial Factors Behind Population Decline

By Chris Neiger | June 26, 2012 AAA
The Financial Factors Behind Population Decline

Since WWII the American population has grown by about 2.5 million people a year, but despite the healthy increase in the general population some cities are facing major population declines. Some people are trading the city life for the suburbs. According to a story by USA Today, more African Americans are heading to the suburbs; recent immigrants are also moving straight to the suburbs. America's recent recession and current economic problems have slowed urban development. Although many cities across America have experienced an urban decline, there are four cities where the population decreases have been the most severe.

SEE: Demographic Trends And The Implications For Investment

Detroit
The automotive industry often experiences ebbs and flows, and Detroit has taken much of the brunt. For 30 years, from 1920 to 1950, it was the fourth largest city in America. Now its population is smaller than Jacksonville, Fla. Overall, Detroit's population is down 25% over the last decade. According to a New York Times article, Detroit's population is the lowest it's been since 1910 and it's the only city where the population has gone above 1 million and then fallen below 1 million.

SEE: The Industry Handbook: Automobiles

Flint, Mich.
Another city hit hard by the auto industry is Flint, Mich. The city has experienced at least a 10% decrease in population each year since the 1980s when the American auto industry began its decline. According to an article by 24/7 Wall Street, the city received money from the federal Neighborhood Stabilization Program to demolish abandoned houses because of the amount of neighborhoods with empty homes. The vacancy rate for housing in the city is over 22%. Based on the statistics, the city's population outcome doesn't seem to be changing.

Cleveland
Once the headquarters of John D. Rockefeller's Standard Oil Company, Cleveland's population is a far cry from what it was in its heyday. Many of the large companies that once fueled the city, like Peerless and Winton, simply don't exist anymore. The city used to be a hub for trade and manufacturing, but America's overall industrial decline has had a hugely negative impact on the city. Today, Cleveland has a population half the size it had in 1948.

New Orleans
Out of all the cities that have experienced population decline, none have a sadder story than New Orleans. Hurricane Katrina covered 80% of the city with flooding and left many homes vacant. Then the Great Recession hit America on top of that. According to the Daily Beast, New Orleans had a 26.8% decrease in population from 2000 to 2009. Devastated homes, crime, poverty and America's economic downturn have made it difficult for New Orleans to bounce back. Recently, the city has attracted entrepreneurs who are looking to start new businesses in the city and invest big dollars.

SEE: Do You Need Casualty Insurance?

The Bottom Line
One of the problems with the decline in city populations isn't just that there aren't enough people, it's that property values begin to fall and tax revenues drop when people move away. Cities are left with underfunded police and fire departments and public services suffer from the lack of resources. Abandoned neighborhoods contribute to more crime and drive down housing values.
Some cities see manufacturing jobs dwindle away because of lack of product demand, others slowly fade out because new ways of shipping, trading or producing are created. No matter what the reason for the decline in some American city populations, the country's overall economic instability is a contributing factor.

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