Amazon Selects New York and DC For HQ2 Locations — Here's What To Read
Today, after cities spent months groveling for the favor of Jeff Bezos, Amazon confirmed that it has selected New York's Long Island City (a neighborhood in Queens) and Virginia's Crystal City (a neighborhood in Arlington) as the two locations for its HQ2, the secondary headquarters for the online retail giant.
The selection marks the end of a yearlong selection process in which 230 cities made their case to Amazon, with the end result being Amazon putting new offices in the two most obvious choices — New York and DC — while enjoying over $2 billion in taxpayer subsidies.
So, you might be wondering, is this worth it? Are Long Island City and Crystal City the best places for Amazon's expanding empire? Here's what to read.
New York and DC Do Not Need Amazon's Jobs
The one thing that politicians and legions of tech-billionaire fans lean heavily on in discussions of HQ2, or any sort of expansion of the tech industry, is that they bring jobs. Bezos and Musk might be extraordinarily wealthy, sure, but they're creating jobs, or so the argument goes. And they're correct. Amazon's HQ2 will bring 25,000 jobs to both New York City and the DC metro area.
But they are not the jobs that either of these cities really need, argues Vox's Matt Yglesias. Adding 25,000 high-paying white-collar jobs to each of these areas is going to make a tight housing market even tighter, ultimately raising rents and displacing the very working class Bezos supporters believe to be helping out.
The problem in markets like this is that when the rich get richer — say because a new office complex opens and hires 20,000 to 30,000 people for six-figure salaries — the price of scarce housing rises.
If you actually get a job at Amazon or have the kind of job skills that you plausibly could get a job at Amazon, this will pay off for you because you'll end up with higher wages that more than equal the higher rent. But if you work in a restaurant or cut hair or clean houses or a drive cab, you'll probably end up worse off.
[Vox]
That's not to say that Amazon's highly-skilled, highly paying jobs wouldn't be welcome elsewhere. As Yglesias points out, introducing HQ2 in a "slack" housing market — a place where there is ample supply of housing to accept the influx of tens of thousands of new residents — actually helps lift up the surrounding businesses.
The issue, of course, is that Amazon, and to a larger extent the highly-skilled, highly-paid tech workers it wants to employ, don't want to live in a place with "slack" housing markets. Fast Company's Adele Peters spoke with demographics expert Bert Sperling, who says the best solution would be for Amazon to, essentially, move to a struggling city and make it their own.
"These large companies are really getting constrained where people where people are commuting two hours and living five to a house," he says. "I think everybody would be happier if they could create their own vision of a place to live and work." A location like Oatlands, Virginia, is also close enough to DC that people could go there for entertainment. Amazon could invest in helping others move to the community. "They have deep enough pockets that they could sustain a diversity of population with schoolteachers, workers for retail and restaurants, etc. For not a lot of money, they could have really almost — I don't want to get all warm and fuzzy — but more of a utopian vision of what a community should be like instead of a lot of rich and entitled tech workers."
Amazon Doesn't Need Billions In Tax Subsidies
It's not just that Amazon decided to build additional headquarters in two places that are already feeling the crunch of a housing crisis. What makes matters worse is that both Arlington and New York City "won" their Amazon offices by putting up billions of dollars of subsidies and incentives that will be paid for by the very citizens who will likely be displaced by rising rent prices once Amazon moves in. And the worst part? Historically, the deal-sweeteners policymakers draft up so they can boast their job-creating abilities end up with the companies gladly accepting them, and then under-delivering on their promises.
Just this past month, a report from the Verge details how even after Scott Walker, then the governor of Wisconsin, offered $4.1 billion in subsidies to Foxconn in the hopes that it would build a factory in Racine — bringing 13,000 blue-collar factory jobs — Foxconn decided that, actually, it would be building a smaller plant with most of the manufacturing done by robots, and would be staffed by high-paying knowledge workers.
The size of the subsidy was stunning. It was far and away the largest in Wisconsin history and the largest government handout to a foreign company ever given in America. Like most states, Wisconsin had given subsidies to companies in the past, but never higher than $35,000 per job. Foxconn's subsidy was $230,000 per job.
The Verge report cites one economist from the University of Georgia, who predicts that Wisconsin taxpayers will likely never see a return on the investment made with these subsidies.
What's more, this trend of state governments offering lucrative incentive packages to get companies to to relocate has caused states to fight amongst each other for jobs they don't really need, writes the Atlantic's Derek Thompson, wasting billions of taxpayer dollars.
No story illuminates this absurdity more than the so-called Border War, in which the Kansas and Missouri sides of Kansas City have spent zillions of dollars dragging companies back and forth across state lines, within the same metro area. Several years ago, Kansas lured AMC Entertainment with tens of millions of dollars in incentives. Then Missouri responded by stealing Applebee's headquarters from Kansas with another incentive package. Back and forth they went, until both states had spent half a billion dollars creating no net new jobs but changing the commutes of 10,000 Kansas City workers who got caught up in an interstate duel.
Look At Seattle To See How This Is Going To Turn Out
Some will point out that we can't really know what will happen until the two new campuses are up and running (and what, exactly, have we done to create jobs and grow the economy?), but we already have evidence of what an Amazon headquarters will do to a city: Seattle.
Back in 2017, when Amazon first requested proposals for HQ2, Paul Roberts, a journalist based in Seattle, already knew what Amazon's HQ2 — then thought to be a single place! — would do to the city it landed in.
The question, of course, is whether those benefits would outweigh the costs. These include the billions of dollars in tax breaks and other explicit giveaways. But they also include the broader impacts that Seattleites have seen in the past few years as Amazon and its rivals have boomed. The influx of well-paid tech workers has helped drive up the median house price by 69 percent since 2012, and has added to income inequality: The average tech salary was $98,215 last year, while more than half of the city's residents earned less than $50,000. And rich and poor alike must endure traffic congestion that is now the fourth worst in the United States. Such "negative externalities," as economists call them, aren't the fault of Amazon or any of its tech peers. Even pre-Bezos, Seattle's housing market and transportation infrastructure had struggled under the city's superstar status. Seattle's new Amazon headache is simply what happens when a hyper-successful company meets an already popular city.
[Politico]
