Monday, September 11, 2017

 

Lessons from Amazon


Like many academics, I have mixed feelings about Amazon.  On one side, I don’t like the concentration of market share and power in one company.  On the other, wow, is it convenient.  I’m that guy who misses small bookstores but still re-ups for Amazon Prime every year.  (I had a girlfriend in graduate school who described herself as “both a socialist and a smart shopper.”  She was right.)  It offers a bracing reality check.  But its recent announcement of a hunt for a home for a second headquarters offers us a new, and different, version of a reality check.

Its criteria for a new location aren’t the ones we usually think about when we think about cities competing to lure employers.  It’s not looking for low salaries, right-to-work status, low taxes, or a desiccated public sector.  Instead, it’s looking for the sorts of things that a healthy and well-funded public sector delivers: good transit, a good airport, and an educated workforce.  And the payoff it’s offering is substantial, both in terms of jobs and in terms of tax revenues.

The RFP it put out has gained plenty of attention, but I haven’t seen much discussion of its implications.

(Obligatory home-team plug: Newark!  Audible is already there.  It has a port, a major airport (Newark Liberty) and a small bespoke airport (Teterboro), an Amtrak station on the Acela route, NJ Transit, PATH trains, the NJ Turnpike, the Garden State Parkway, and just about every major highway in the state.  It’s close enough to NYC to have access to the brainpower at Columbia, CUNY, and NYU, as well as drawing on the brainpower of Princeton, Rutgers, and NJIT.  It’s about as diverse an area as you can possibly find.  There’s no shortage of great K-12 schools in the region.  And Amazon could be part of an inspiring urban comeback story.  End of plug…)

The classic version of company-luring involved hollowing out public services in order to offer tax breaks and a relatively low cost of doing business.  It was a civic race to the bottom, with public higher education suffering severe collateral damage as the tax base withered.  

But that version has natural limits.  Most basically, the jobs offered by companies that focus on those things tend to be particularly vulnerable to automation or offshoring.  Bending over backwards to accommodate low-wage employment may postpone the inevitable for a bit, but it won’t stop it.  And forking over years of tax revenue for jobs that trend downward over time is a losing battle.  

This version replaces low-cost/low-value with high-cost/high-value.  Yes, an educated workforce is more expensive than an uneducated one, but it’s so much more productive that it’s more than worth it.  Yes, a good transit system costs money, but so does isolation.  Taxes are a cost, but the educated workforce they produce is more than worth it.  Good schools pay off both directly, through producing productive graduates, and indirectly, by inducing people with choices to move there to give their kids better opportunities.  Strong public higher education systems can provide the backbone for a productive workforce.

Advocates of public higher education (hi!) should seize on this moment.  This plays to our strengths.  If we want to foster, and lure, the kind of high-value employers that pay community-sustaining wages, this is the way to do it.  It’s an especially appealing model for places that don’t have oil or other fossil fuel deposits to rely on.  For a state like New Jersey, competing on the low end is pretty much guaranteed to fail; population density and a lack of oil means we step up to the plate with two strikes.  But competing on mass transit and a well-educated workforce?  That, we can do.  

I don’t know where Amazon will land -- I’m guessing Toronto or DC -- but the criteria it’s using aren’t unique.  Where the first reality check was mostly humbling, this second one is actually encouraging.  As advocates for public higher education, we shouldn’t be shy about promoting the connection between education and high-value employment.  It’s even better than free shipping.

Comments:
Amazon is asking for tax breaks too. They want it all, and some city is probably going to be stupid enough to give them tax breaks that far exceed the value of the offices to the region. Ten years later, Amazon will decide they don't need the space any more and the city will be left with massive debt and no jobs to show for it.
 
Yeah, Amazon's is calling for an area with a well-educated populace and fine amenities that they can exploit through tax breaks until the city collapses from high demand and low revenue. The only difference between this and the usual "we'll build a factory here if you pay us enough and never tax us ever and give us back rubs on Thursdays" is that Amazon's labor force will be more educated. The company is still planning on finding a host to bleed dry, then move on to the next host. It's like an NFL team looking for a new city to publicly fund a stadium, minus the head trauma.
 
I don’t know where Amazon will land -- I’m guessing Toronto or DC

I'd guess Philadelphia or Atlanta. DC's height limits and other unfortunate zoning mean that it'll have a hard time providing space (both office and private). Toronto is more likely IMO, but it's also extremely expensive.

Philadelphia and Atlanta provide "relatively inexpensive" with "okay mass transit." Mass transit could obviously be better in both, but it still exists.
 
I've been following discussions about this, and the two names that keep coming up are Denver and Atlanta.

I would guess the key requirements are:
- big enough to accommodate the workforce without dominating the city
- nice enough that white-collar workers with options will live there
- not too expensive

All the rest is smokescreens and mooching. Yeah sure, local universities are nice, but Amazon recruits across the country and indeed the world. Transit is nice, but Microsoft manages just fine in Redmond with basically everyone coming to work by car.

 
It’s essentially like openly allowing the NSA to come in and mine your data, but this time you’re also handing it over to the DHS.resume tips 2018
 
Mass transit in Atlanta? Have you noticed what fraction of people use MARTA to commute to work? If mass transit was a viable option in Atlanta, people would not be on the road more than an hour each way to work. And simply building it in Atlanta will require land that will not come cheap, unless Cobb county steals it from Atlanta by making a deal like they did for the Braves stadium. (Which would be a plus, since Cumberland is on MARTA.)

A city with a decayed factory area would offer a much better deal on land. The tradeoff would be the weather in a northern industrial city (or Toronto).
 
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