Question

26. The city of Detroit has high unemployment. The automobile industry in Detroit has suffered from global competition and has moved much of the remaining production out of Detroit. The population of the city has fallen from a high of 1,850,000 in 1950 to 701,000 in 2013. Some of the highest crime rates in the United States are now those of Detroit, and huge areas of the city are in a state of severe urban decay. The police force and fire service do not have enough money to pay for staff and equipment such as fully operational vehicles. In 2013, Detroit filed the largest municipal bankruptcy case in U.S. history. How does unemployment affect the income of city? Describe how unemployment might lead city bankruptcy. 7​

Answer 1

Unemployment has a significant impact on the income of a city. When people are unemployed, they are not earning income, which means they are not contributing to the local economy through spending. This can lead to a decrease in tax revenue for the city, as well as a decrease in consumer spending, which can lead to businesses closing and further job loss.

In the case of Detroit, the high unemployment rate has led to a decrease in tax revenue, as fewer people are paying income taxes. This has made it difficult for the city to fund essential services such as the police force and fire service. The lack of funding for these services can lead to a decrease in public safety, which can further contribute to the decline of the city.

Unemployment can also lead to a decrease in property values, as people may be unable to pay their mortgages or may be forced to sell their homes due to financial hardship. This can lead to a decrease in property tax revenue for the city.

In the case of Detroit, the decline of the automobile industry and the resulting job loss has led to a decrease in population and a decrease in tax revenue. This has made it difficult for the city to fund essential services, and has contributed to the severe urban decay and high crime rates.

Unemployment can lead to city bankruptcy when the city is unable to meet its financial obligations, such as paying for essential services, pensions, and debt payments. When a city declares bankruptcy, it is unable to borrow money and may be forced to cut essential services or sell off assets to pay its debts.

In the case of Detroit, the high unemployment rate, decrease in population, and resulting decrease in tax revenue made it difficult for the city to meet its financial obligations. The city was unable to pay its debts and was forced to file for bankruptcy in 2013. This has had a significant impact on the city, as it has struggled to recover and provide essential services to its residents.