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.