Depopulation is when an area sees a significant decline in its population. It can often have disastrous effects on cities such as poor public services, damaged infrastructure, and reduced government tax revenue.
What causes depopulation within cities?
The loss of a major employer can cause severe unemployment. This can see many residents move out in search of opportunities elsewhere. Deindustrialisation in the UK has meant many cities in Northern England have experienced large population declines.
Another reason for depopulation may be a declining fertility rate. This has been caused by the decline in the primary sector, meaning fewer children are needed to work on the land and the rising cost of raising children, as well as women choosing to prioritise their careers and delay having children. A shrinking fertility rate can cause an imbalance in the population structure and increase the dependency ratio[i] and reduce the labour force. Thus, cities may see their tax revenues fall while expenditure on pensions exponentially increase, which may create a budget deficit.
Other reasons for depopulation can include famine, drought, epidemics, natural disasters, conflicts, or short-sighted government policies.
What are the effects of depopulation on cities?
Depopulation means businesses within the city receive less demand for their products. This can lead to businesses making less profits, forcing them to close or relocate to other regions. As a result, unemployment is created, leading to a fall in average incomes. A negative multiplier effect[ii] ensues whereby a fall in incomes leads to less consumption and lower material living standards. Less consumption means other businesses see their profits fall further, leading to less investment and even higher unemployment. Government tax revenues will also fall as income and corporation tax receipts decline.
Most cities receive the majority of their tax revenue from property taxes such as council tax and funding grants from the central government. Depopulation often sees a reduction in the tax base and a huge decline in the demand for housing and a surplus of housing supply. This puts a downward pressure on house prices, making property values fall. To compound this, central government funding is often tied with a city’s population. Thus, as residents leave, government funding also dwindles. Less tax revenue for cities means that the quality of public services such as healthcare and education decline causing a further reduction in living standards. This can create many social problems such as lower life expectancy and reduced social mobility[iii], subsequently making it even harder for people to escape poverty. Quality of infrastructure will also decline as tax revenue falls as maintenance is no longer financially viable. This makes it harder to attract new businesses to relocate into the city and provide employment opportunities.
Lower tax revenues can cause budget deficits and risk austerity[iv] measures such as higher taxes and lower government spending. Most of the people left behind in a city facing depopulation tend to be earning lower income or are of an older age, thus making them more reliant on public services and government benefits. Consequently, austerity means that vulnerable residents may see their living standards decline significantly as their incomes and purchasing power falls. Austerity can also further exacerbate inequalities. Widening inequalities can lead to increased crime and deprivation, especially in inner-city areas.
What is an example of a city damaged by depopulation?
In the 1950s Detroit was the richest city in the USA by GDP per capita. At its peak, Detroit had over 1.8 million residents. It was an industrial powerhouse employing 296,000 in the manufacturing sector and famous for its automobile industry. However, in the 1970s increasing foreign competition and the global shift[v] meant that many manufacturing firms relocated away from Detroit. This has had permanent catastrophic consequences for the city.
Today, Detroit is the 2nd poorest major city in the USA and the population has shrunk to 632,000 people. According to the US Census Bureau, Detroit today has a poverty rate of 35%. Around 60% of children in Detroit live in poverty and 53% of adults are “functionally illiterate”. Many inner-city areas within Detroit are scarred with derelict buildings and low-quality infrastructure. In fact, 33% of Detroit’s 140 square mile land area is vacant or derelict.
A substandard education system and a lack of job opportunities meant that youth unemployment reached 40%. Therefore, many young people have turned to crime and join gangs.
Economic woes have also enflamed racial tensions between white and black communities and numerous well-documented incidents of violence have taken place since 1967.
What can a city do to attract or retain residents?
Some cities such as Manchester have turned to major building projects to regenerate and rebrand the city in the hopes of attracting new businesses and residents. Developing infrastructure and increasing the quality of human capital may help incentivise firms to locate within the city. Projects such as Spinningfields (a commercial, retail and residential development in central Manchester developed in the 2000’s) and NOMA (an £800 million, mixed-use redevelopment scheme in Manchester) have created new retail, commercial and residential spaces which attracted many financial services producers to locate there, including HSBC and Barclays. Manchester is also famous for its high-quality universities, which provide a supply of skilled graduates to firms. This helps diversify the economy and provide new job opportunities. In fact, the population of Manchester grew by 19% between 2000 and 2011.
Incentives which tackle factor immobility[vi] can be offered to attract new residents. For example, monetary assistance can be given to help people deal with the cost of living in cities. These can come in the form of rental assistance or retail discounts. Some rural towns in Japan offer extremely cheap housing, with some as low as $500 to encourage people to move there.
City councils can also offer incentives which can attempt to influence an increase the birth rate. These can come in the form of tax cuts or allowances as well as providing free healthcare for mothers. Working mothers can also be offered more flexible hours. South Korea, which has one of the world's lowest birth rates, has spent over $92 billion to incentivise families to have more children. These include housing benefits, tax cuts, infant care support as well as support for IVF.
Footnotes:
[i] Dependency Ratio - A measure of the number of dependents aged 0-14 and over 65.
[ii] Negative Multiplier Effect - An initial withdrawal (saving, taxation and/or imports) from an economy’s circular flow causes a larger than proportionate final decrease in national income.
[iii] Social Mobility - Change in a person's socio-economic situation, either in relation to their parents or throughout their lifetime.
[iv] Austerity - A set of political-economic policies that aim to reduce government budget deficits through spending cuts, tax increases, or a combination of both.
[v] The Global Shift - The massive shift in the global economic centre of gravity from the West to the East.
[vi] Factor Immobility - Occurs when a factor of production cannot move easily from one region of an economy to another.
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