Detroit’s Problem: A City of Government and Health Care Workers

Detroit’s unique position as a large American city is not just related to the fact that the state may appoint an emergency manager and take the power of governing away from the mayor and city council. The city also has an employment base dominated by government and health care workers — not private enterprise.

Detroit’s 14 largest employers, which have among them roughly 75,000 workers, are dominated by public organizations. That situation is not matched by any other large American city. More than half of the employees at these operations work for government entities, led by the city and school systems. Another third work for health care companies — hospitals, hospital systems and health care networks. Only a little over 10% work for private businesses.

The situation is among Detroit’s largest financial problems. Government entities are not part of a business tax base. In many cases, neither are health care systems and hospitals. In all other cities among the top 20 in population, most of the primary employers pay taxes to the city.

Detroit’s mayor and council can claim that they cannot be held accountable for the drop in employment among the large car companies. They can, however, be blamed for not getting those auto manufacturers to keep large factories in Detroit. These politicians also can be blamed for not getting private companies that employ even a few thousand people to relocate or add to their employee bases in the city.

The tragedy of Detroit’s situation is that local government easily could have seen that its business tax base had eroded. But it did not manage expenses based on the predominance of employers who cannot be taxed.

The worker base of Detroit’s largest employers is unusually vulnerable to layoffs as well. Austerity measures among governments with financial problems usually involve the firing of public workers. That means the city government and school worker bases are certain to shrink, which will add substantially to the number of unemployed people in the city. These people, in turn, will become part of the population that do not pay personal income taxes or pay very little.

The composition of Detroit’s worker base, among its largest employers, is a sign that when government workers overtake those in the private sector in number, the city has reached a point at which it is financially unmanageable.

Douglas A. McIntyre