While the last few decades haven’t been kind to the Motor City, there is new hope that the emergence of the Detroit tech scene will help turn the city’s fortunes around.
The area, which has its fair share of challenges, is attracting tech companies like Amazon, who specifically cited the talent coming out of local universities and the low cost of doing business in Detroit. Google and Twitter also now have offices in the area, and several accelerators are working to cultivate local tech startups.
In the not-so-distant-future, other cities in the region could look to Detroit as a model for Rustbelt revival.
Detroit’s fall from grace
Detroit’s woes are internationally notorious, often making headlines for offering would-be residents houses for a dollar in the decayed urban core.
There are a few factors that largely explain Detroit’s downfall. The dawn of automobile and interstate highways led to mass suburbanization in the metro area’s periphery. White flight caused capital flight to the suburbs and left the once mighty city largely abandoned. The city’s population is now the same as it was in 1910. In fact, the population in the city of Detroit peaked in 1950 at close to two million.
Today, about 700,000 residents call the city home out of nearly four million people in the metro area. It’s not that people left the Detroit area, they just left the city limits. Years of population decline and an ever-shrinking tax base has led to poverty and violence, and has left whole swaths of the city lying in ruins.
The once-roaring economic engine of Detroit, car manufacturing, has run out of steam. 200,000 people worked in auto assembly plants in 1950. Today, it’s about a tenth of what it was in 1950.
How tech can help Detroit
It’s obvious the city needs a shot in the arm to transition to the 21st century economy, and tech may be exactly what the doctor ordered.
While the Detroit tech industry may never replace all of the jobs loss in the past half century, tech jobs are extremely high paying, and tend to stimulate economic growth, which leads to the creation of non-tech jobs in the local economy.
The average worker in what the Labor Department calls technology-oriented occupations can easily bring in over $100,000 dollars a year, which means they have a profound local economic impact. In fact, according to a study by the Bay Area Council in California, they’ve estimated that every tech job creates 4.3 jobs are created across all income groups.
Tech jobs in turn create demand for coffee shops, bars, restaurants, houses, which need baristas, bartenders, waiters and construction workers to keep up. Tech jobs are noted for being stable for workers, and the sector is forecast to grow far into the future.
It’s always big news when tech behemoths like Facebook and Amazon decide to open offices in an area, because it sends the powerful signal that the region is ripe for becoming a techhub. In Silicon Valley, the spillover effects of being ground zero for the dot com industry are enormous, and that success can be replicated in cities around the country.
In essence, having the big boys like Google in town likely means that startup culture and tech networks are taking root. The same talent pool that works at the tech giants is much more likely to try their luck at entrepreneurism and launch their own tech startup, and vice versa.
Incubating the Future
The latest rage in tech and entrepreneurship is the emergence of accelerators, which are communities that exist to help startups get their operations going. Techtown Detroit touts itself as the most established tech-centric business incubator in the city, helping entrepreneurs with a wide range of services including “proof of concept, incubation and commercialization services.”
In essence, places like Techtown play a key role in Detroit tech, as they’re possibly incubating startups that will become the leaders of tomorrow’s cyber economy.
Many parts of Detroit are still abandoned, and need good, old-fashioned economic development in order to improve the city’s long-term prospects. Michiganders have been disproportionately affected by globalization and outsourcing, and the state’s economic woes were echoed in the 2016 election, when the previously blue state went to President-elect Donald J. Trump.
Detroit tech growth is part of the solution to the city and state’s economic difficulties. Given that Detroit is much less expensive than Silicon Valley or nearly any large city in America, look for many tech enterprises who are looking to cut their costs to move at least part of their operations to Detroit. Hopefully, the emergence of the city as a tech hub will fuel much needed economic growth.
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