Research Paper on "D Economic Diversification in Las Vegas"

Research Paper 9 pages (2915 words) Sources: 7

[EXCERPT] . . . .

Las Vegas Economic Diversification

The economy of Las Vegas is under crisis and the future growth is completely in the dark. The concerned officials are putting in efforts to device mechanism for economic recovery. One of the proposed methods is diversification. This method is highlighted in the recent report issued on the economy of Las Vegas (Whaley, 2011). Multiple reports related to economy of Nevada are also published. They have presented the same suggestion of diversification for growth. Keeping in view the present scenario, the most profitable sectors are medical and health services. For job creation purposes, the fields of aerospace, defense and clean energy can play vital roles (Whaley, 2011).

According to a report about economy of Las Vegas, the gross metro product is the only indicator that showed positive change by 0.1% increase (Whaley, 2011). Brookings explicitly mentioned in the Mountain Monitor that in the third quarter, Las Vegas was ranked as the second last metropolitan area, when compared with the pool of 100 large others. This rating was based on the index that measured employment rate, gross metro product, unemployment rate and real estate prices collected both before the recession and recently.

Background

The economic crisis of Las Vegas was predicted in 1990 by late Keith Schwer and Christopher Meenan. They were members of UNLV Center for Business and Economic Research. They highlighted the need of diversification in the economy of Las Vegas. In their report, they predicted that the weakening gaming industry will lead to the weakening of entire economy. They stated that Las Vegas economy is a horse town whose future conditions entirely rely upon the tourism in Las Vegas.

Economic diversification is easy to suggest but difficult to accomplish. The practice has been conducted numerous times in the economies of the world and failed many times. Yet, there are certain success stories as well. The basic point to ponder is how to avoid the mistakes of others and repeat the successful steps (Meenan and Schwer, 2011).The economy of Las Vegas can be compared with that of Detroit. Automotive was the largest industry of Detroit in 2006. The size of workforce related to automotive industry was 4.68 times bigger than that of average workforce of the nation (Meenan and Schwer, 2011)

In 2006, accommodation was the largest industry of Las Vegas. The size of workforce in this industry was 13.67 times bigger than that of national average. The employment in Detroit is three times smaller than the one present in Las Vegas. Consequently, the economic shocks occurring in accommodation and tourism affect the economy of Las Vegas at much severe ends (Meenan and Schwer, 2011).

The economy of Detroit is concentrated upon automobile industry while Steel and Coal are the major economy runners in Pittsburgh (Meenan and Schwer, 2011).

When the core field faces crisis in any area, the entire economy collapses. It was the option of diversification that led to recovery of Pittsburgh. It started focusing on the field of education, research and technology (Meenan and Schwer, 2011).

Many challenges are still present in the southern Nevada that emerged with the Great Recession. However, the domestic economy is recovering as highlighted in the job report published quite recently (NDA, 2011). This is the first positive indicator noted after the recessionary period.

In the 12 months after March 2010, almost 3,900 positions are created in the employment circle. This figure is narrated in the Las Vegas Metropolitan Statistical Area (MSA). Most of the positions are created in the non-core sectors (NDA, 2011). It has an overall impact of 0.5% increase in job opportunities.

Few other industries are also affected by the economic changes. Among the prospering sectors, hospitality and leisure are at the top with creation of more than 5,300 jobs. The positive impact created by these industries was offset by the downfall of construction industry. There occurred a mismatch of supply and demand which created economic disruptions. There was a time when construction industry was providing nearly 12% of the total jobs in the market. The sector sharply declined to 5% of total jobs and almost 4,300 jobs were reduced further. There was 4.3% decrease in the employment provided by construction sector (NDA, 2011).

Diversification led to positive impact upon both absolute and relative share of employment base in the non-core sectors. In the first quarter of the year, 4,800 new positions were created, which were an almost 4.9% increase from the last year. The number of jobs increased both in services and professional sectors. For the consecutive 12 months, both business services and professional sector report increase in the employment gains (NDA, 2011).

In the past year, another emerging profitable business sectors are of education and medical services. These two sectors have reported annual growth of 5.9% by creating more than 4,100 jobs. These two sectors flourished even during the recessionary period of December 2007. There was absolutely no job loss and the sector continuously gained employment in almost every month. It is quite evident that behind this success was the role of huge investment done in these fields; yet, it is also important to note here that the factor of population growth also contributed a lot. The population growth rate was high in the last few decades which called for effective educational and medical facilities. This sector was neglected for quite some time but emerged again to fulfill the need of growing size of target market. The sector of "other services" was also showing profitable figures throughout the year. The mentioned figures are evidence of prospecting gains from the strategy of diversification. Still, the political and professional officials in southern Nevada are reluctant to accept this strategy as a solution to the economic problems of Nevada. It is true that the economy flourished in the past two decades yet there were certain other reasons for the boom. The two industries of construction and tourism helped the industry to develop. However, the changing market needs and economic conditions have reshaped the expected gains from these two industries. Previously the construction industry developments were based on the tourism requirements. In the changed circumstances, it is quite unobvious that this sector will attract any material investment for expansion of area in near future (NDA, 2011). It is, therefore, difficult to assume that the industry will prosper once again like it did in the past.

Major Challenge Areas (MCAs)

The MCAs are the core objectives justifying the need of a company's existence. Major challenges define potential sustainability of company's orientation. It is a list outlining the core elements of company's orientation - challenges, objectives and impediments. Following are selected MCAs that can significantly affect the company's productivity and progress. Henceforth is identified, the extent of disturbance each MCA brings, limiting the productivity and efficiency, resulting into possible loss for communities (NCED, 2011).

Insufficient employment opportunities for Nevadans

The Nevadans are known for their being opportunists. However, currently Nevada lacks the availability of opportunities which is very unpleasant and unprecedented for the residents. Employment and business opportunities help people to enhance their living standards and live with prosperity. By the end of March 2011, there were 182,000 people in Nevada who were still jobless, reaching 14.5% unemployment in the state (NCED, 2011).

It is also stated that amongst 17, two counties in Nevada have a per capita income less than the average national wage. These counties get only 3/4th of average national income (NCED, 2011).

Moreover, it is stated that 1/3rd workforce served hospitality industry while 17% of the employed worked in gaming industry. Both of these industries face risk of fluctuating international economic conditions, hence a large percentage of employed workforce faces risk of instability and volatility (NCED, 2011).

The alarming economic conditions have suddenly deprived Nevada of significant opportunities consistently. Lack of opportunity, flexibility and employment will cause communities to face lack of social bliss and prosperity. The people will start shifting from Nevada considering the current worsening conditions in search of job. This will not only disturb the social structure but also deteriorate the economic crisis for Nevada (NCED, 2011).

Inadequate infrastructure in rural Nevada

Many a backward areas of Nevada picture the conditions prevailing in the developing regions. A number of residents are void of 24-hour supply for water in the rural communities whereas the water lines and waste lines need be repaired, expanded, replaced or restructured at a large number of places. This relates to notifications that are received by the Community Development Block Grant (CDBG) program from the county, asking for funds for development and maintenance. Lack of attentiveness to these issues causes not only social but health problems and also deprives the region of attractiveness and investment, hence growth is affected (NCED, 2011).

It requires constant funding to maintain and develop restructuring projects for the welfare of the region. However, required funding is either not available or too small to fulfill the purpose. Notifying the federal government is difficult whereas successful funds cause introduction of higher utility rates pressurizing the… READ MORE

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