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Growth, Decline, and Structural Change in U.S. Cities and Towns
Stuart Rosenberg
Dowling College
Oakdale, New York, USA
631/244-3423
rosenbes@dowling.edu
October 18-19th, 2008
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Growth, Decline, and Structural Change in U.S. Cities and Towns
ABSTRACT
There has been an ongoing shift in the population of the United States from the urban
centers of the Northeast and Midwest to cities in the South, Southwest, and Far West. Both
economic and social changes are driving this shift, but largely, it is explained by structural
change in the U.S. economy, and people have moved to other regions of the country in search of
better job opportunities and a better quality of life. The cities in decline continue to investigate
ways to reverse the trend, which clearly is a difficult task for policymakers and business leaders
to achieve. Examples do exist, however, of cities in the United States that have successfully
emerged from poor economic conditions. While many of these cities and towns are smaller than
the struggling urban centers of the Northeast and Midwest, they do provide some lessons in how
a city can effectively navigate a turnaround in its local economy.
INTRODUCTION
As this paper is being written, in the days leading up to the Pennsylvania primary, some
of the remarks in one of Barack Obama’s speeches that were made at a fundraiser in San
Francisco ignited a series of attacks from both his challenger for the Democratic nomination in
the 2008 Presidential election, Hillary Clinton, as well as from the presumptive Republican
candidate, John McCain, and they touched the collective nerve of American citizens not only in
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the region of Pennsylvania to which his remarks referred, but also to individuals in other parts of
the United States, from large urban centers to small rural towns. Senator Obama’s comments,
which some experts argued could slow his momentum in the race for the presidency, were as
follows:
You go into these small towns in Pennsylvania and, like a lot of small towns in
the Midwest, the jobs have been gone now for 25 years and nothing’s replaced
them. And they fell through the Clinton administration, and the Bush
administration, and each successive administration has said that somehow these
communities are gonna regenerate and they have not. And it’s not surprising then
they get bitter, they cling to guns or religion or antipathy to people who aren’t like
them or anti-immigrant sentiment or antitrade sentiment as a way to explain their
frustrations. (New York Times)
This paper examines the state of U.S. cities and towns in the first decade of the twentyfirst century--- those that are growing, and those that are not--- and it identifies, from an
economic perspective, the reasons for growth and decline. The paper then takes a normative
approach, suggesting a number of remedies, including possible policy approaches, in order to
enable a local or regional labor market to successfully transition through a structural change in
its economy. To illustrate this, three examples of towns that have reinvented themselves in recent
years are provided.
THE FASTEST GROWING CITIES IN THE U.S.
Over the last few decades, much has been written to document the exodus of Americans
from the Northeast and Midwest primarily to the South and the Southwest, and secondarily to the
Far West (Perry, 2002; Leichenko, 2001; among others). The shift in population is illustrated in
Figure 1, where it is evident that the cities of the Northeast and Midwest have either grown at a
slower rate than their counterparts in the South and Southwest or have in fact declined. The
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statistics reveal that in many cases, the direction of the change for the cities of the Northeast and
Midwest has been the polar opposite of that shown by the cities of the South and Southwest.
Figure 1: 25 Largest Cities in the United States, 1990-2006
Population
(in
thousands)
City
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
New York, NY
Los Angeles, CA
Chicago, IL
Houston, TX
Phoenix, AZ
Philadelphia, PA
San Antonio, TX
San Diego, CA
Dallas, TX
San Jose, CA
Detroit, MI
Jacksonville, FL
Indianapolis, IN
San Francisco, CA
Columbus, OH
Austin, TX
Memphis, TN
Fort Worth, TX
Baltimore, MD
Charlotte, NC
El Paso, TX
Boston, MA
Seattle, WA
Washington, DC
Milwaukee, WI
1990
7323
3486
2783
1697
989
1586
998
1111
1007
783
1028
635
732
724
639
497
664
449
736
428
516
575
516
607
629
2000
8008
3695
2896
1954
1321
1518
1145
1223
1189
895
951
736
782
777
711
657
650
535
651
541
564
589
563
572
597
2006
8214
3849
2833
2144
1513
1448
1297
1257
1233
930
871
795
786
744
733
710
671
653
631
630
609
591
582
582
573
Percent Change
199020002000
2006
9.4
2.6
6.0
4.2
4.1
-2.2
15.1
8.8
33.6
14.5
-4.3
-4.6
14.7
11.8
10.1
2.7
18.1
3.7
14.2
3.9
-7.5
-8.4
15.8
8.0
6.9
0.5
7.3
-4.2
11.3
3.0
32.1
7.6
-2.1
3.2
19.1
20.7
-11.5
-3.0
26.4
11.2
9.3
8.1
2.5
0.3
9.1
3.4
-5.7
1.7
-5.1
-4.0
Source: U.S. Census Bureau, 2008 Statistical Abstract of the United States
According to the website www.citymayors.com, of the 65 cities in the United States with
populations over 100,000 that experienced double digit growth between April 2000 and July
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2006, 41 are in four states (17 in California, 12 in Texas, 7 in Arizona, and 5 in Florida), while
another 17 are in nine states (4 in Nevada, 4 in North Carolina, 2 in Georgia, 2 in Colorado, and
1 each in New Mexico, Utah, Washington, Oregon, and South Carolina). Large cities like
Phoenix, Atlanta, Dallas, Las Vegas, and Charlotte have been booming for years. There are
several economic and other factors that have helped to drive this growth. Perhaps the four most
significant factors--- all of which are related--- are highlighted below:
1. The Migration of Jobs
Those regions of the United States that have consistently experienced population growth
are those that have been attracting employers, generally larger or midsize firms. Where jobs are
located, people will surely follow. Once a large enough population base is established in an area,
then a variety of services is needed, including--- much like the city-building simulation game
SimCity--- roughly in ascending order as residents continue to move in--- grocery stores; gas
stations; houses of worship; schools; retail establishments; municipal and support services (e.g.,
police and fire); professional services (e.g., doctors, lawyers, etc.); travel and leisure services
(e.g., recreational facilities, restaurants, and motels); and hospitals. With sufficient development,
the quality of certain services, such as the education system, for example, serves as a magnet for
the continued inflow of new residents. Also with sufficient development, the population of cities
and towns grows to be more and more diverse, and the people needed to be gas station
attendants, dishwashers in restaurants, janitors, landscapers, pool cleaners, and the like, create an
underclass in the economic and social landscape.
2. The Cost of Living
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There is also the case of people moving away from an area not because the supply of jobs
is greater in another area, but because their willingness to pay for housing and services in the
labor market they are exiting has become an issue. Business executives, educators, and local
politicians in large metropolitan areas--- particularly in the Northeast--- have been concerned
about a “brain drain” for several years. This refers to the significant numbers of college educated
residents in their twenties and thirties who have determined that the cost of living in the area,
especially the cost of buying a home, is excessive, and they subsequently move to other parts of
the country, creating a void for employers who require a pool of workers with the requisite skills
(Bailey, 2003).
Figure 2 shows a cost of living comparison for selected items between Nassau County,
New York (the county on Long Island that is closer to New York City and whose population of
1.3 million has one of the highest per capita incomes in the United States) and nine other U.S.
cities. Using an annual income of $75,000, the table clearly indicates that people can maintain
their standard of living at lower income levels in each of the nine areas identified. Similarly, this
disparity helps to explain why reverse migration--- i.e., the relocation of residents from other
areas of the United States to the Northeast--- is less likely to occur.
In recent years, it has also been evident that other “costs” of living, particularly the types
of externalities that are present in urban areas, such as traffic congestion and pollution, also drive
people away. This phenomenon is not restricted to the cities of the Northeast and the Midwest, as
residents of Los Angeles, for example, might opt for relatively smaller cities like Las Vegas or
Portland.
3. Retiring Baby Boomers
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The Baby Boomers, who represent the largest segment of the U.S. workforce, have begun
to retire and will continue to do so for the next ten to twenty years. There is little doubt that these
individuals will maintain the trend that has been in existence for the past generation of retiring to
areas with warmer climates and with access to recreational amenities. The traditional retirement
destination of Florida has been joined in recent decades by the Carolinas, Arizona, New Mexico,
and so on, and more recently, a growing number of Baby Boomers are being drawn to areas
outside the United States, such as Mexico or Costa Rica, which offer the same attractions as U.S.
retirement communities but with an even lower cost of living (Povich and Dobkin, 2007).
Figure 2: Comparative Cost of Living
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Equivalent Income
Decrease from $75K
Home Price
Apartment Rental
Gas and Electric
Doctor Visit
Washer Repair
Mens Shirt
Dry Cleaning
Pizza
Hair Cut
Movie
Gasoline
Dozen Eggs
Equivalent Income
Decrease from $75K
Home Price
Apartment Rental
Gas and Electric
Doctor Visit
Washer Repair
Mens Shirt
Dry Cleaning
Pizza
Hair Cut
Movie
Gasoline
Dozen Eggs
ISBN : 978-0-9742114-5-9
Nassau
County, NY
Boston, MA
Chicago, IL
Miami, FL
Portland, OR
$75,000
-----
$69,132
-7.82%
$59,907
-20.1%
$59,304
-20.9%
$58,970
-21.4%
$601,224
$1,818
$196
$80
$66
$32
$8
$11
$14
$9
$2.88
$2.29
$495,000
$1,358
$202
$113
$65
$33
$8
$9
$13
$10
$2.73
$1.95
$360,750
$1,439
$173
$87
$36
$26
$9
$11
$18
$9
$3.04
$1.94
$432,190
$1,104
$171
$106
$53
$25
$12
$10
$10
$9
$2.86
$0.92
$373,514
$821
$180
$91
$56
$34
$10
$11
$14
$8
$2.61
$1.57
Las Vegas, NV
$56,122
-25.2%
Denver, CO
$51,344
-31.5%
Phoenix, AZ
$51,227
-31.7%
Atlanta, GA
$49,716
-33.7%
Charlotte, NC
$47,185
-37.1%
$419,218
$861
$154
$88
$58
$21
$8
$9
$14
$9
$2.78
$0.90
$316,594
$737
$142
$95
$53
$17
$10
$10
$13
$9
$2.72
$0.84
$309,094
$279,543
$221,000
$731
$784
$769
$142
$127
$110
$72
$78
$84
$52
$49
$55
$29
$29
$22
$10
$8
$7
$9
$10
$9
$12
$12
$11
$9
$8
$9
$2.74
$2.90
$3.03
$1.02
$0.78
$0.96
Source: www.bankrate.com, April 2008
While the typical path for retiring Baby Boomers has been to the South and West, there
are a percentage of retirees or empty nesters that undertake a reverse migration, as identified
earlier, by electing to return to the central city from the suburbs. For these individuals, despite
the likely higher cost of living, a move to New York City, for example, has significant appeal,
given its tremendous accessibility to culture and the arts that retirement communities in Florida
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or Arizona can only dream of offering. Nothwithstanding this group of retirees, the probability is
high that there will be a net reduction in the population of Baby Boomers in the Northern urban
centers such as New York, Philadelphia, and Chicago, and a continued shift to the Sun Belt.
4. The Influx of Immigrants
As indicated earlier, any area undergoing either job growth or income growth requires
individuals who are willing to take on the new jobs being created in the labor force that are lower
paying support services. It is no surprise, then, that with the ongoing influx of immigrants to the
United States--- both legal and illegal--- that these potential workers will locate in those areas
where the demand for their labor will be present. One of the motivating factors behind the waves
of immigration to the United States has historically been political (i.e., to seek refuge from unjust
regimes), but for the most part, people have come to the United States--- whether it’s been the
massive immigration from Eastern Europe in the first half of the twentieth century, or the huge
stock of immigrants from Mexico that came later and continues today, or the more recent flood
of immigrants from China, India, and the Philippines--- driven by economic factors (Clark,
Hatton, and Williamson, 2007). The United States (as well as other developed economies)
presents opportunities to people who face poverty and overcrowded conditions in all parts of the
globe, and these individuals naturally gravitate toward the appropriate markets.
The proliferation of unskilled, non-English speaking Mexicans that has occurred not only
in places like Southern California, Texas, and Arizona, but also in places like suburban Cook
County in Illinois or Nassau-Suffolk County in New York, fills a specific need in certain jobs in
the local economy that generally will not be the types of jobs chosen by others in the labor force.
The fact that the population of Nassau County has not materially changed over the last decade is
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misleading. The young, skilled workers described earlier as part of the “brain drain” that has
caused concern for policymakers have been replaced largely by an unskilled immigrant
population. Although unemployment among the latter is certainly higher than the national
average, and although the effect of this influx of unskilled workers is also a concern for
policymakers on both an economic and a social level, the net inflow of immigrants is a function
of where work can be found.
Therefore, work can be found in Nassau County because it is a high income area. But in
many of the cities and towns of Southern California, Texas, and Arizona, which are among the
fastest growing in the United States, the influx of immigrants are not replacing other, displaced
workers, but rather they are being added to the total pool of workers. Together with the entry of
new businesses and Baby Boomers with income to spend, in addition to a lower cost of living,
the large immigrant population is easily understood in the changing mix of the demographic
profile of these areas.
CITIES IN DECLINE
The key determinant that accounts for those U.S. cities and towns that have declined in
population over the last couple of decades has been the transition from a manufacturing-based
economy to a service-based economy. Cities across the Northeast and Midwest, to one degree or
another, have been in decline; the degree of the decline has been impacted by how well these
cities have been able to weather the storm and develop new sources of jobs to replace the ones
that have left. Clearly, there are several major cities that have experienced difficulty navigating
this transition, but for the purposes of this paper, we will cite four examples, all of which are
located in the country’s Rust Belt, that section of the country that spans from the Northeast to the
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Upper Midwest. With a few exceptions, most notably New Orleans, which has been the fastest
shrinking city in population since the millennium (having been ravaged by hurricanes rather than
economic change, and therefore outside the scope of this study), most of the cities with the
sharpest declines in population in the United States are Rust Belt cities. This has historically
been a heavily industrialized area, but the contraction of manufacturing jobs in recent years has
left these cities economically depressed, and all four examples--- Buffalo, Pittsburgh, Cleveland,
and Detroit--- share similar challenges in their search for ways to halt the trend and to generate
turnarounds.
Buffalo
Buffalo, as well as other upstate New York cities such as Rochester and Syracuse, have
been losing population for decades. A drive up the New York Thruway toward Buffalo is dotted
by shuttered factories in a number of cities and towns that were once vibrant. Many of the young,
educated workers from this region have migrated to other, more desirable regions of the country,
typical of the brain drain phenomenon, to build their careers. Political and business forces have
come together in recent years to further diversify Buffalo’s economy that fell apart in the 1970s,
when the steel and grain industries moved out. In their place, industries such as financial services
and high technology have aggressively moved in. In addition, facing tremendous budget gaps,
the New York State legislature in 2003 approved a takeover by a control board to oversee the
Buffalo government's finances, which is a rarity in the history of the state and which clearly
represented a vote of no confidence by state leaders in the city’s ability to solve its own problems
(Givens, 2003).
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Pittsburgh
In Pittsburgh, the primary issue has been the ongoing difficulty in developing an industry
to create jobs in place of those lost in the collapse of the steel industry, which once defined the
city (“Steeltown”) and its region. As reported in the Pittsburgh Post-Gazette (2007), this lack of
a significant new industry has caused the economy not to grow enough in order to attract
immigrants to offset the natural population decline. Like Buffalo, various politicos have worked
hard to bring in new industry, but clearly, the burden is greater for cities of this size.
Cleveland
Continuing west in the Rust Belt, Cleveland, along with the smaller Ohio manufacturing
cities of Akron, Toledo, and Dayton, has struggled with the continued loss of jobs during the
recent economic downturn. From the first quarter of 2002 to the first quarter of 2006, Cleveland
lost 5,502 manufacturing jobs, representing almost a fifth of the city’s manufacturing
employment (Prizinsky, 2007). The city has been in the midst of a massive transition from an
industrial economy to a services-based economy, but, again, such an undertaking takes several
years to achieve. In the interim, central cities like Cleveland’s are generally home to a population
that is generally among the poorest in the country, with limited access to jobs, educational
opportunity, and health care.
Detroit
With the entrenched turmoil in the U.S. automobile industry, given the continued
increases in market share among Japanese automakers, it is no surprise that the impact of layoffs
and plant closings has caused unemployment to spike in Detroit. Just as Pittsburgh is known as
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Steeltown due to its traditional dependence on the steel industry, Detroit is the Motor City, or its
shortened form, Motown. The entire surrounding region, where many of the jobs are links in the
automobile manufacturing supply chain, has felt the effects of the downward cycle. For example,
The Bureau of Labor Statistics shows that the city of Flint, Michigan, with a population of
roughly 120,000, there has not been a single month since the recession of 2001 when its
unemployment rate has not been in double digits; the worsening condition of the Big Three U.S.
automakers--- General Motors, Ford, and Chrysler--- only exacerbates the problem.
In the 2008 Statistical Abstract of the United States, Buffalo (population: 276,000) had
declined by 10.8 percent in the 1990s and by another 5.7 percent between 2000 and 2006;
Pittsburgh (population: 313,000) had declined by 9.6 percent in the 1990s and by another 6.5
percent between 2000 and 2006; Cleveland (population: 444,000) had declined by 5.5 percent in
the 1990s and by another 6.9 percent between 2000 and 2006; and Detroit (population: 871,000)
had declined by 7.5 percent in the 1990s and by another 8.4 percent between 2000 and 2006.
Figure 3 shows a map of the Rust Belt, also known as the Industrial Heartland. A map
that illustrates the movement of the U.S. population from the Rust Belt to the Sun Belt is shown
in Figure 4.
From Figure 4, it is evident that many of the fastest growing cities in the United States, as
discussed earlier, are located in many of the states showing the fastest population growth. It
should be noted that the region of the Sun Belt (i.e., the states that stretch from Georgia directly
west to Southern California) where the rate of population growth has been less than the national
average of 5.3%--- Alabama, Mississippi, and Louisiana--- has experienced relatively less
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industry migrating into its states. (Note again that Louisiana’s population change has been
largely a function of the effects of Hurricane Katrina in 2005.)
Equally evident from Figure 4 is the relatively slow net growth in the traditional Rust
Belt states, which have seen considerable losses of jobs due principally to:

industry obsolescence (or decreasing significance)--- e.g., the steel industry, but also
industries like apparel/textiles, which has virtually eliminated entire towns in the South;

industry consolidation--- i.e., since the manufacturing sector is oligopolistic in structure,
there has been a wave of mergers and acquisitions in many industries, because, for
example, two firms experiencing difficulty are typically motivated to consolidate in order
to reduced their long run average costs of doing business;
Figure 3: The Rust Belt
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Source: www.coalcampusa.com
Fig. 4: The Shift in the U.S. Population
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Source: Negative Population Growth

the relocation of businesses (or parts of businesses) to areas with cheaper labor pools and
lower costs of operating, first within the United States, and later to other countries--- this
includes both offshoring (referring here to the movement of jobs within the same
company to another country) and outsourcing (referring here to the movement of jobs to
another company in another country); and

increased global competition--- e.g., in automobile manufacturing.
FOUR TOWNS IN THE UNITED STATES THAT HAVE BEEN REBORN
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It is useful to demonstrate that markets can effectively go through structural change and
develop new sources of employment for their labor force. None of the four towns selected for
this section of the paper are located in traditionally “glamorous” areas, making, in this writer’s
opinion, their successful turnarounds all the more impressive and worthy of attention. In other
words, none of these towns have been revitalized due to the fact that they possessed vast culture
and wealth as a means to attract businesses, like, for example, the flourishing Dallas-Fort Worth
metropolitan area of Texas, which is home to over twenty Fortune 500 companies, including
Exxon Mobil, AMR Corporation (American Airlines), Southwest Airlines, Texas Instruments,
Kimberly-Clark, and JC Penney, among others. Nor were any of these towns likely to undergo a
renaissance, like Reno, Nevada, which, according to the 2008 Statistical Abstract grew by 30
percent through the 1990s and by another 15 percent thus far in the 2000s, due to its ability to
capitalize on the tourism industry. Granted, these four towns are all relatively small, and scale
renders structural change for the cities identified in the previous section more complex and not
readily achievable in the short term. The point here, though, is that it can be achieved, and each
of these examples can be used as a model--- or at least a starting point--- for successful structural
change for cities in decline.
Kannapolis, North Carolina
Kannapolis is a city of 38,000 residents in Cabarrus County that is about 30 miles
northeast of Charlotte. The city is named for James Cannon, who, in 1906, bought several farms
to build the Cannon Mills Company, which would become the world’s largest producer of sheets
and towels. The Cannon family provided homes for the mill workers for low rent. Workers also
enjoyed free maintenance, low cost utilities, and free garbage collection and disposal while
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paying no taxes. The Cannons provided a hospital, a police department, scholarships, and loans
to their employees. At its peak, the mill employed almost 25,000 people.
The mill merged with Fieldcrest Mills in 1985. In 1997, the Pillowtex Corporation
purchased Fieldcrest Cannon. In 2002, Pillowtex filed for bankruptcy protection, a victim of the
dying domestic textile industry in the United States. On July 30, 2003, Pillowtex closed its doors
and announced total liquidation. It was the largest employer in Cabarrus County, and close to
5,000 employees lost their jobs. It was the largest one-day layoff in North Carolina history
(Barbaro, 2003).
Kannapolis, however, would be able to come back quickly. The state of North Carolina,
which had been a desirable location for educated Northerners to migrate to, since the
development in the 1950s of the Research Triangle of Raleigh, Durham, and Chapel Hill, about
150 miles east of Kannapolis, would soon have a similar center of research. As reported in the
journal Construction, David H. Murdock, the owner of Dole Foods, unveiled plans in September
2005 for the North Carolina Research Campus, a massive scientific and economic revitalization
project that would be headquartered in the former Cannon Mills plant. The David H. Murdock
Research Institute is scheduled to open mid-2008, and several firms will follow shortly
thereafter, creating significant employment opportunities for the people of Kannapolis.
Princeton, Indiana and Buffalo, West Virginia
We have already identified the reality of offshoring/outsourcing. In the global economy,
though, there are significant opportunities for foreign firms to establish operations inside the
United States. As they continue to steal market share in U.S. auto sales, the Big Three Japanese
automakers--- Toyota, Honda, and Nissan--- have all established production facilities in the
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United States. The reason for such a strategic decision is due to the fact that these companies
simply want to avoid costs related to overseas shipping and they want to be closer to their final
customers. Most of these facilities are located in areas that have an abundant supply of relatively
cheap labor. The largest of these companies, Toyota, first established operations in North
America in 1957, where by 2010 it will operate 15 manufacturing plants. Two of its production
facilities were opened in 1998--- Toyota Motor Manufacturing Indiana and Toyota Motor
Manufacturing West Virginia--- and they immediately generated economic booms in their
respective markets (PR Newswire, 1998).
Princeton, Indiana, which is in the southwestern part of the state, is probably most known
for being the birthplace of baseball great Gil Hodges. In the early 1800s, the rich farmlands in
this area attracted settlers, and its location near the Ohio and Wabash Rivers helped to make
Princeton an important market. Later, the railroads further enhanced Princeton as an industrial
center in an otherwise rural area. After being devastated by the deadliest tornado in U.S. history
in 1925, Princeton’s economy languished for decades, until Toyota opened a $1 billion
manufacturing plant there in 1998. A domino effect ensued, as many Toyota suppliers also built
plants in the area, followed by many service businesses to serve the population, which reversed
its downward trend through the 1980s and 1990s to reflect solid growth, from 8,175 in 2000 to
10,974 in 2007.
Like the Princeton, Indiana facility, the 1 million square foot manufacturing plant that
was built in Buffalo, West Virginia in 1998 must have seemed like a blessing to the local labor
force in this poor, backwoods area in the western part of that state, whose economy has
historically been so reliant on coal mining. As is the case in Princeton, Toyota is the largest
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employer in the Buffalo area, which, as a result, has become one of the fastest growing areas in
the state. Buffalo’s population was 1,171 in the 2000 Census; Toyota Motor Manufacturing West
Virginia employs close to 1,000 workers in 2008.
Tunica, Mississippi
A visit to the town of Tunica in 2004 was the inspiration for this paper. At a consulting
engagement in Memphis, it was suggested to me by my client to drive south on Highway 61
across the Mississippi state line to see the casinos in Tunica. The visit proved to be a revelation.
The majority of the residents in Tunica County, where cotton was historically the key
crop in the local economy, are black. When mechanized farming replaced the sharecropper
system, there were few jobs to replace it. The 1980 census ranked Tunica as America's poorest
county, with over half of its residents living below the poverty line. The Sugar Ditch
neighborhood in Tunica, with its row of shacks, was known as America’s most famous sewer, or
as Jesse Jackson referred to it, “America’s Ethiopia.”
In 1990, the Mississippi legislature approved the Gaming Control Act, which legalized
gambling on stationary boats along the Mississippi River. Within a few years, the state would
forever be changed economically and culturally. The small town of Tunica was one of the
locations in the state where casinos soon were built. Residents who previously were
sharecroppers could now be blackjack dealers.
In 2003, Webster Franklin, president of the Tunica Convention and Visitors Bureau,
could boast that ten years earlier, the county unemployment rate was 15.6 percent and now most
people who wanted a job in Tunica could find one, although jobs were essentially limited to the
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casinos. The county population was 9,227; about 16,000 people were employed in the casino
industry in Tunica. Over that ten year period, the number of hotel rooms in Tunica had grown
from 20 to 6,300. Perhaps more significant was the fact that ten years earlier, one in five Tunica
residents was on welfare; now one in 100 was on welfare.
Ten years ago, Tunica County's operating budget was about $3 million. Now it is
$50 million. The county, once so poor it couldn't always patch its pockmarked
roads, recently spent $12 million to build the Tunica National Golf and Tennis
Club. It spent $24 million to build an arena and exposition center, then spent $4
million to expand it. Now it's building the river park. Perhaps most striking is the
way Tunica has paid for the improvements. Most governments would issue bonds
and pay them off over time, but Tunica doesn't bother. “We pay cash for
everything in Tunica,” Franklin said. (Yerton, 2003)
The gambling boats in Mississippi Gulf Coast region cities like Biloxi were destroyed by
Hurricane Katrina in 2005, and the industry needed to be rebuilt in that part of the state. Tunica,
in the north, continued to develop. It is the third largest gaming economy in the United States in
2008, after Las Vegas and Atlantic City, and its population is likewise growing.
LESSONS LEARNED FOR POLICYMAKERS AND BUSINESS LEADERS
It is important for policymakers to emulate the creative thinking that brought about the
resurrection of Kannapolis, North Carolina; Princeton, Indiana; Buffalo, West Virginia; and
Tunica, Mississippi. Clearly, engineering a turnaround in the economies of the large cities
highlighted in this paper requires a more complex formula and a lot more time, but by ensuring
that the remedies identified below are acted upon, there is a better chance that the structural
change that is inevitable today will be addressed more effectively in more cases.
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
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Invest in human capital. This is critical for the members of our workforce who
lose their jobs and become mismatched for the new jobs coming in. In order to
obtain these new jobs, workers need to learn the requisite new skills.

Establish ties with international students. This has become increasingly important,
since the large cities of the United States are significant centers of higher
education, with one or more large universities located in each of them. More and
more students from fast growing economies, like China and India, come to these
universities to study. Creating a linkage with these students can provide business
opportunities down the road with their countries.

Attract foreign business. Large cities already possess much of the infrastructure to
draw businesses from foreign countries. In the global economy, it is likely that the
business organizations that enter an area to replace ones that have been displaced
could be headquartered in China, India, or another country with considerable
capital to invest.

Take advantage of trade agreements to open up new markets for U.S. exports.
Businesses need to partner with their local governments to maximize our net
exports.

It is imperative that our large city governments run efficiently and not be
unnecessarily burdened by bureaucratic malaise, so that they can join local
business leaders to set meaningful growth strategies.

Business leaders must encourage local government to improve the quality of life
in our large cities, which includes gentrifying neighborhoods, developing superior
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public schools, and reducing crime rates. Such measures could mitigate the flight
of affluent residents from our central cities.

Local governments must seek ways to provide inducements for the private sector,
such as tax incentives to attract new businesses.
Reversing a trend to bring about positive change is not easy. It has been shown in this
paper, however, that it can be done, especially in smaller areas, where the infusion of only one
stimulus will generally provide the cure. To be sure, successful adjustment to a structural change
in the economy has sizeable benefits. Having a strong base of jobs is vital to other sectors in the
local market, most importantly the housing and retail sectors. Cities that are growing are better
able to attract businesses since they can offer a strong labor force. More businesses and more
residents will generate more tax revenue. And more tax revenue of course provides cities with
the flexibility to better retain existing businesses and to develop new ones.
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