The City Of Ann Arbor, Michigan

The City of Ann Arbor, Michigan

Ann Arbor, Michigan is the 7th largest city in Michigan, having an estimated population in 2004 of 113,5671. It is located in the East North Central region of the Midwest region of the United States2.

Ann Arbor lies in Washtenaw County (FIPS=26161)3, which is the only county in the Ann Arbor Metropolitan Statistical Area (11460). As you might have figured, Ann Arbor is the primary city of this statistical area.4 In terms of urban influence, Washtenaw County is classified as a small metropolitan area with fewer than 1 million residents. 5 In terms of its rural composition, Washtenaw County resides within a metro area containing 250,000 to 1 million people. 6

Ann Arbor has no real advantage when it comes to raw resources. It sits too far from Lake Erie to experience any transportation benefits, and the river that cuts through the city is too shallow and winding to be of any major commercial value. It doesn’t sit on any valuable mineral deposits, nor does it have any spectacular resources for heavy industries. There are reasons one would locate in Ann Arbor, though.

Numerous technology dependent companies call Ann Arbor home. These companies require highly skilled employees and being in general proximity to the University of Michigan makes that possible. One such employer is the EPA’s National Vehicle and Fuel Emissions Laboratory (NVFEL)7. Another company that requires skilled researchers is Pfizer. Though Pfizer is closing its doors in Ann Arbor, numerous startup companies are purchasing laboratories and hiring skilled graduates to continue pharmaceutical research8.

This is an obvious example of agglomerate power. Though all of these firms compete both for market share and skilled labor, they still share a close proximity to each other. There are external increasing returns to scale which is due directly to the environment (not just physical) of Ann Arbor.

Proximity is its greatest resource. As mentioned above, its spatial relationship the University of Michigan is invaluable. It is also located along two major highways in Michigan: Highway 23, that runs north to south, and Interstate 94 which runs east to west, straight through Detroit and pretty much links up with Toronto, Canada. Ann Arbor is a medium order city, and provides medium order services. The reason for this is due to the fact that Detroit (which has a population more than 7 times that of Ann Arbor) is located very close to Ann Arbor.

(The following information can be found on Table B)

Before we delve into more specific issues, let us consider some general information. Despite the fact that population of Washtenaw is growing, Ann Arbor’s population is shrinking. From 2000 to 2006, Washtenaw county posted an 6.55% population growth (a yearly geometric mean of 1.06%), whereas Ann Arbor posted -0.72% (a yearly geometric mean of -0.12%). This effectively means that in comparison to its county, Ann Arbor shrunk by 1.18% yearly.

Furthermore, from 2000-2006, Washtenaw County employment fell by 3.65% (a yearly geometric mean of -0.62%). So although the total population for Washtenaw increased, the number of working individuals actually decrease. Both of these issues (lower population of Ann Arbor, lower employment for Washtenaw County) combine to create a problem. Loss of people equates to loss of jobs equates to loss of tax revenue.

Let us now look at industry-specifics. This information pertains to Tables A, B, and C. All of these deal with County Business Patterns. Table A presents a basic overview as to the exact composition of Ann Arbors industries. There are some salient examples of Washtenaw’s specialization that can be gathered even from this generalized table. For example, Professional, Scientific, Technical firms employ 10.75% of the workforce, and yet generates 14.96% of its revenues. Also, Health Care and Social Assistance employs 19.22% of the workforce. In general, this means that the workforce for Washtenaw County is somewhat skilled and as a result, this labor generates high revenues for the county. A caveat of this is that it is possible that another input other than labor causes the cost of production to be higher, which necessitates higher revenues. This possibility is beyond the Census Bureau data.

Further analysis of County Business Pattern data in Table B shows that there are indeed a number of industries that are specialized within Washtenaw County; that is to say that they employ more people than the national average for a town of Ann Arbor’s size (that is, they have a Location Quotient greater than 1). These specialized industries (also called “Basic Industries”) include:

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• Utilities

• Information

• Professional, Scientific, and Technical Services

• Health Care and Social Assistance

It is very important to properly interpret this data. The primary concern is whether or not these basic industries are export industries or not. Looking at Table B we can see that Utilities created 583 more jobs than the national average for that industry; but, perhaps these extra jobs only exist to meet the demand for Utility services in Washtenaw County alone. Perhaps companies and individuals of Washtenaw County have a higher preference for Utilities. You may even go so far as to say that it’s possible that Utility services are imported, but again, this depends on the consumption of Washtenaw County. Again, this is a caveat which is not presented in the data.

A somewhat better indicator for measuring the health of an industry would be to generate growth share data from the given County Business Pattern data. This information can be found on Table C. National Share basically details the number of jobs that would be created using the overall national growth (1.97%); Mixed Share represents the number of jobs that are created due to industry growth over and above national growth; and, Residual Growth is everything left over that cannot be accounted for by the other means. Any industry that posts positive numbers in Mixed and Residual Share shows that national growth for that industry was healthy, and there’s something special about it that gives it a higher than usual employment. This is a better way to summarize specialization.

Combating Recession

It’s no secret that the economy of the U.S. is experiencing turmoil. Given the subprime mortgage fallout and it’s implications on major fund