economic development of a U.S. city
The Economic Development of New York City
New York City is one of the most important cities in the world, its importance being granted by its numerous population and history, and by its influence on global level. The influence of New York is exerted in various fields, like commerce, finance, media, culture, art, fashion, research, education, and entertainment. In addition to this, the United Nations Headquarters is located in New York, which allows the city to present itself as an important international affairs center.
The city is located in the state of New York, on the Atlantic Coast of the U.S. The city is also famous for its neighborhoods, depicted in numerous films and TV series. These neighborhoods include: Manhattan, Brooklyn, Queens, the Bronx, and Staten Island. One of the most important characteristics of New York is represented by its diversity. The city’s history relies on the immigrants that built the city, developed it, and continue to transform it. The cultural diversity has a significant impact on the economic, social, and cultural environment.
The city is well-represented in the sports sector also. New York is the headquarters of important baseball and hockey teams. In addition to this, the U.S. Open, one the grand slam tennis tournaments, is held in Queens. Also, the largest marathon in the world is held in New York.
The city was established in 1624, and began its expansion. During the following century, the city’s importance as a trading port significantly increased. Furthermore, in the 19th century New York experienced economic development and a series of modifications as a result of the increasing immigration and economic development.
Main Economic Development Problems, Challenges and Solutions
Regarding the economic situation, New York is one of the most important economic centers in the world, same as London and Tokyo. In addition to this, New York is the largest regional economy in the U.S. However, one of the most important aspects that prove the city’s economic development is represented by the fact that New York is responsible for controlling 40% of the world’s financial resources. This means that the city is the largest financial city in the world.
The most important business sectors in the New York economy are: finance, real estate, manufacturing, trade, information technology, health systems and biotechnology, and media.
However, with great economic development comes a series of problems and challenges that affect the people of New York, the authorities of the city, and the business activity in New York, which further affects the economic situation in numerous areas across the world. For example, one of the most important problems that the city is facing is represented by the declining fiscal revenues.
As a result of economic and financial crisis, the fiscal revenues of New York have decreased. This is because the incomes of most people have been reduced, leading to reduced level of taxes paid the by the population. Also as a result of the crisis, population’s consumption has decreased, given the fact that people had to allocate their financial resources in other ways in comparison with the period before the crisis. This affected the local businesses that reported smaller profits, which also leads to reduced level of taxes paid by these companies.
Another problem that characterizes the economy of New York is represented by the fact that the economic environment in the city can be considered stall. The environment in the city is mainly comprised of mature industries. It is a well-known fact that such industries do not encourage and support innovations as much as developing industries do.
These industries, through their representing companies, prefer to focus on producing the products and services they initially produced, because they have practically become experts in producing those goods, and are able to make economies of scale. In addition to this, these companies have built a reliable customer base and a supply chain model that ensure them their profitability (Redlich, 2010).
By introducing innovative products on the market, they would require important financial resources to invest in the research and development process, their production process would cost more, which means the price of these products could be higher than usual customers can pay. The introduction of innovative products on the market requires a series of modifications in the structure of these companies, of the market, and of the customers’ purchase behavior.
This further requires significant investments from these companies and the emergence of a series of risks that many of these companies are not willing to take. The authorities of New York should focus on developing strategies aimed at encouraging investments in the growth of new business sectors in order to influence the economic development of the city. However, this situation is likely to not be able to be controlled by the government.
The city has faced several challenges regarding its economy and the manner it affects New York and its population. For example, the adverse economic shocks that determined changes in the world’s economy were counteracted by the workforce of New York’s metropolitan area. The economic challenges were counteracted with the help of the skilled and well-educated workforce that allowed the city to adapt to a services industry (Orr & Topa, 2006).
The most important challenges that specialists in the field consider to affect the city’s economic situation include:
Attracting new companies
Maintaining immigration flows
Competitor cities
The economy of the city is characterized by extremes: the city’s has proven to be adaptable to new technologies, markets, and economic behaviors, but it was also resilient in certain periods and in certain business sectors. The city’s economy is the leader in certain sectors, while it refuses to invest in the development of new products and services.
The city’s workforce seems to be more adaptable from this point-of-view. The employees working in New York in various domains made it easier for the city to transit from an economy based on the manufacturing sector to an economy based on the services sector. The success of this transition can be mainly attributed to the workforce of the city, its adaptability, and to human resources management.
Furthermore, specialists consider that the economic resilience of New York is generated by the skilled and higher educated workers that somewhat prevented the city’s economy to develop in the direction that other cities developed. In order to change this situation, specialists consider it is important to encourage and support the continuous expansion of the human capital. They also state that the current situation of the region’s economy ensures companies’ strong position on the market, but makes it less likely for them to develop, while competition from other regions is increasing.
The economic development of New York is reflected in the evolution of population and of employment. The metropolitan area was characterized by significant population growth in the first half of the 20th century. Since then, the population growth rate decreased. The areas surrounding New York are characterized by the opposite situation. In these areas, population has significantly increased in the second half of the 20th century.
The influence of human capital on the city’s economy is reflected in:
Highly skilled workers influence consumption value
Economic growth is related to production value
High concentration of human capital provides flexibility
In other words, the human resources represent the most important resource that companies can exploit. Therefore, policymakers should focus on developing and implementing a series of strategies directed towards attracting and retaining highly skilled workers from the U.S. Or from abroad.
As one may observe, specialists’ opinions regarding the relationship between the skilled workers and the city’s economy are various. As mentioned above, some of these specialists consider that the economic resilience of the city is attributed to the highly skilled and educated workers. The structure of the workforce does not encourage or create the necessity of changes in the economic structure and in companies’ intention of investing in the research and development process in order to support the economic growth required by the city.
In opposition to this opinion, other specialists consider that economic growth is attracted by highly skilled and educated workers. Also, they consider that the authorities should make efforts into attracting such workers from other cities in the U.S. Or from other countries.
In order to achieve these objectives, there are several measures that policymakers can take into consideration. These measures include:
Meeting the education and training needs of less skilled immigrants
Increasing the city’s attractiveness to high skilled workers
Providing incentives to companies in order to increase the level of training of their employees
However, there are also other problems that require the attention of authorities. One of the most important issues that policymakers should include in their development strategies is represented by the increasing competition of other metropolitan areas in the U.S. These areas compete in attracting a great number of companies, whether one refers to well-known, established companies or to new companies. This is because well-known companies are successful and are able to support the economic needs of the city and to allow for its economic development. New companies have the advantage of taking more risks and investing more in the research and development process, being interested in addressing less developed industries.
It is difficult for large cities like New York to attract such companies. The main reason for this situation is represented by the high costs of doing business in these areas. Even so, the city can counteract this problem by providing strong productivity opportunities that are determined by high human capital and relative wages.
The most important economic sector of New York is represented by the financial services sector, including finance, insurance, and real estate business sectors. The importance of this sector is reflected in its influence on jobs evolution and of the city’s earnings. Therefore, the authorities have recognized the potential of this source of jobs and of earnings, and their interest in this sector must be translated in a series of incentive intended to encourage and support the training of employees in this sector and companies interest in this region.
Biotechnology is another important sector for the city’s economy. The significant developments made by companies in this industry have determined New York to become one of the most important and influential centers in the world. However, the increasing competition in the economic sector has lowered the importance of New York in this industry.
The views on policies and strategies regarding the economic sector are various and are usually influenced by the political environment. Certain Democrats consider that the level of taxes is too high, and the citizens of New York and the companies doing business in the city pay too many taxes. In addition to this, certain representatives consider that public spending must be reduced. There are several strategies that take such factors into consideration and that the authorities should focus on developing.
New York Policies
The authorities of New York City have thoroughly analyzed the situation and have developed a series of directions that the policies regarding the city’s economic development should follow. The main aspect that the policies of the city’s authorities intend to follow are represented by increasing revenues, given the fact that the budget is not able to cover the expenditures of the city, same as in the case of the budget of individuals.
Authorities’ efforts regarding this issue are directed towards Wall Street and increasing its taxes (Parrott, 2010). In order to achieve this objective, the city’s authorities intend to develop and implement policies that would temporarily tax Wall Street. These policies are intended to be based on:
Bonus tax paid by firms
Windfall profits tax
Disallow use of prior year losses to offset tax liability
Reduction in rebate on stock transfer tax
Raise top tax rate on millionaires
Bonus tax modeled on London tax
In addition to this, the Mayor of New York City has developed a series of propositions that are intended to help the city counteract the effects of the crisis. Therefore, the Mayor has decided that the following budget cuts are required: school funding, Police, human services, transportation, parks, libraries, arts, most city agencies, and others.
Effects of Policies
The effects of the policies developed and implement by the city’s authorities are on medium term and on long-term. This means that it will be a while before their effects can be observed and felt by the population. Although these effects require certain periods to be produced, the measures will be felt immediately. This is because the budget reductions will significantly affect the services that the authorities provide the city’s citizens.
However, the most important effects that are pursued by the authorities through these policies are represented by increasing revenues, increasing the number of jobs, and increasing the companies that do business in New York. Some of the policies that the authorities of the city intend to implement in this region have been successfully implemented by authorities in other cities, like London.
As a consequence, one cannot assess at the moment whether the policies developed and implement by the authorities in New York have been successful. It is necessary to analyze future budgets and to determine whether the revenues have increased.
Reference list:
1. Redlich, W. (2010). Economic Development Questions. Retrieved December 2, 2010 from http://wredlich.com/ny/2010/09/economic-development-questions/.
2. Orr, J. & Topa, G. (2006). Challenges Facing the New York Metropolitan Area Economy. Federal Reserve Bank of New York. Retrieved December 2, 2010 from http://papers.ssrn.com/sol3/papers.cfm?abstract_id=886519&http://www.google.ro/search?q=new+york+economic+challenges&btnG=C%C4%83uta%C5%A3i&hl=ro&source=hp&aq=f&aqi=&aql=&oq=&gs_rfai=.
3. Parrott, J. (2010). New York City: Economic and Budget Challenges. Fiscal Policy Institute. Retrieved December 7, 2010 from http://www.fiscalpolicy.org/FPI_Presentation_NYC_BudgetEconomicChallenges_20100520.pdf.
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