Written by Aldo Aragon
The local less-educated and low-skilled workers in the selected city will likely not face the same opportunistic labor market facing a Stanford or MIT graduate. Under these conditions, regional economic inequality is destined to rise. While some optimistic economic projections consider the impact on the selected city of the Amazon brand-name alone, middle-class and low-income citizens are unlikely to benefit from this arrival.
Corporate America is in love with Amazon. The American consumer is addicted to two-day shipping while politicians across the United States prepare to court Amazon’s second headquarters complex.
Amazon released its request for proposal for a new headquarter location in early September, presenting the opportunity as a heavenly gift that would enrich the lives of citizens of whichever city is lucky enough to welcome Bezos and his band of executives. In the short-term, economic analysts argue that the presence of Amazon’s headquarters will positively impact city economies through direct investment from outside, and boost local employment by an estimated 50,000 new jobs. In short, cities reap broad-based benefits from the efforts needed to construct a $5 billion complex.
However, before any city allocates countless resources to please Jeff Bezos, local politicians must carefully explore the implicit and explicit costs of participating in the process. Additionally, policymakers must also analyze the long-term implications of housing Amazon’s “HQ2”.
In the long-term, development analysts assert that the chosen city will benefit from an inflow of young, highly-skilled, and highly-educated workers that could stimulate a revitalization of the local economy and municipal infrastructure. Public servants, often enticed by the short term political rewards—in this case, landing an Amazon deal for a particular constituency—may find it difficult to recognize long-term consequences. With this dynamic, it is easy to overlook the risk of rising housing prices. An influx of 50,000 employees and the resulting appeal of the area to young professionals may either prompt a new housing crisis or rekindle the flame of an old one. Current citizens will be priced out and therefore excluded from the promised economic benefits.
It is also important to note that the 50,000 additional jobs will likely require applicants to have college degrees. The local less-educated and low-skilled workers in the selected city will likely not face the same opportunistic labor market facing a Stanford or MIT graduate. Under these conditions, regional economic inequality is destined to rise. While some optimistic economic projections consider the impact on the selected city of the Amazon brand-name alone, middle-class and low-income citizens are unlikely to benefit from this arrival.
As mayors and council-members refine their plans for Amazon, local government offices face the risk of misallocating both their political capital and time. Further, such plans are likely to include ludicrous amounts of subsidies for Amazon, pushing Amazon’s initial capital costs to near-zero.
Furthermore, it would be naïve to think that Amazon does not have a location in mind already. Amazon’s interest lies in generating media attention for itself, as many cities are bound to offer plenty of subsidies.
The long-term implications, therefore, include even larger subsidy packages for future Amazon expansions, making it more likely that vital state and local tax dollars will go to Amazon’s coffers, rather than to initiatives that could improve the lives of middle-class and low-income families like retraining programs.
Local officials therefore run the risk of ignoring the danger of putting all their eggs in the Amazon shopping cart—their optimism creates the fallacious belief that there is a singular solution out there to revitalize urban centers and local economies, thus leading to lazy policy-making and short-sighted governing.
Bottom line, regional growth is ensured by government-sponsored vocational and retraining programs, with remedies for rising urban housing costs coming in the form of eased restrictions on new home construction. Economic development cannot be delivered in two days. Amazon is not our savior.