Amazon Chose Super Expensive Cities, Should Entrepreneurs Follow Their Example?

by Evil HR Lady on November 15, 2018

Amazon announced they will split their new headquarters between two cities: Long Island City (in Queens) New York, and National Landing (formerly Crystal City) in Arlington Virginia. Numerous cities vied anxiously for the honor of landing this headquarters, which will bring upwards of 50,000 well-paid jobs. (Right now, they are slated to be split between the two locations.)

Amazon is getting massive subsidies and tax breaks from the “winning” cities. According to CNET, these incentives run into the billions:  $1.525 billion in incentives in New York, and $573 million in Virginia. Whew! That’s some serious corporate welfare.

And that’s the key part here: Amazon is big and cities fell over themselves to offer money to get Amazon to pick me. This pick-me dance is limited to the big players. If you walk into New York Mayor Bill de Blasio’s office and say, “I’m thinking of bringing my startup to New York. What can you do for me?” you’ll get laughed out. Actually, you won’t even make it into the office.

To keep reading, click here: Amazon Chose Super Expensive Cities, Should Entrepreneurs Follow Their Example?

{ 7 comments… read them below or add one }

BethRA November 15, 2018 at 4:45 pm

Lots of old mill towns worth a look, too – decent infrastructure, may still have a skilled workforce depending on when the mills closed – and a lot of them are making serious outreach efforts to land start-ups.

(fascinating map – thank you for sharing it!)

Reply

Evil HR Lady November 15, 2018 at 4:51 pm

I may have spent waaaaay too much time playing with that map.

Reply

Elizabeth West November 15, 2018 at 6:48 pm

Bahahahaha well-paid jobs my foot. I know people who work for Amazon.

I just read an article about the headquarters thing this morning. It will also strain the public transport system and housing prices will go through the roof. Just look at what big tech did to San Francisco.

I’m tired of this monopoly fueled corporate oligarchy junk. It kills smaller businesses. You’re right about one thing–you’ll get nothing if you’re not a huge company already. But what you really need is the money to buy state and local politicians, not for development. 😛

If they take over cities, people will have to leave simply because they can’t afford to live there any longer.

Reply

Dan November 15, 2018 at 7:46 pm

Elizabeth West,

For the sake of argument, you can’t say the jobs aren’t well paid but housing prices will go through the roof.

That said… I live in metro DC and work in tech. Housing prices out here are already ridiculous, and tech workers must be paid well if employers want to attract them. On the whole, I expect the immediate vicinity around HQ2 to notice the impact, but less so elsewhere.

And while 25k jobs is a lot of jobs for one employer, who knows how fast they will be added. Second, numbers like this are typically calculated for “best case” scenarios, and these jobs won’t all be filled at once. So, that many jobs probably won’t all show up, and the ones that do will likely trickle in over a few years.

I don’t expect this move to have the outsized effect that the doom-and-gloomers are predicting. Never mind that the transportation infrastructure is already over burdened, and housing is expensive. Plus, Crystal City itself is almost the epitome of suburbia. I don’t see a line of people beating down the door to paradise and ruining it after everybody gets here.

Reply

MariaRose November 15, 2018 at 8:08 pm

I want to add a comment on this (giving incentives to big companies to set up). Everyone wants a tax break as no one volunteers to pay taxes. I live close enough to the Long Island City site to consider a commute even though I am not in the inner boroughs of NYC. But as I heard that specific site is undergoing gentrification (most of it has been underused and abandoned for years) the city and the state has been encouraging privatization of the development to take the cost of revamping the area so as to not pass the cost to local taxpayers most of whom are a mixed income mostly under $100,000 level who are already maxed out to pay costs for all necessities. There’s even gentrification going on in my city of Yonkers right near the train station which would connect commuters to their high paying jobs in NYC.
What I think is the big protest about this is any pushing out of long term residents and small businesses to get a higher rental business income. The question is where is that income money going. The city and state of New York will get a great deal of money which should be poured into the areas that need funding,like public transportation,infrastructure, etc., all which have been underfunded by misappropriation. (Take the example of NYCHA, which is public subsidized housing) The main reason for the lack of maintenance is funding not used properly—why such a high administration cost just to push papers around).
Amazon has committed to develop a school, housing and other amenities to encourage the workers they hire to live near the work site, without displacement of any residents outside the area. If costs rise in that area it will be because of greedy landlords who only are interested in profit.

Reply

Didi November 17, 2018 at 6:07 pm

Amazon is locating in DC and NYC because these are among a handful of cities with large enough talented labor pools for Amazon. When people think of tech, they think of Silicon Valley, but in fact DC has as many tech pros and NYC has more. They are much larger labor markets. Also, there are over 100 colleges in DC and NYC that produce hordes of graduates annually. There was never a contest!

People got confused between population and labor pool. In most US cities, the labor pool is about 55% of the population. That means 45% are children, retirees, or people who don’t work for whatever reason. While your city may have 1 million people, it only has 550,000 workers.

Let’s examine this with, say, Columbus Ohio – a much smaller labor market with very few tech professionals compared to NYC and DC. For Amazon’s 50K jobs to fit in Columbus, 1 in 10 workers in Columbus would have to become Amazon employees. Is that happening? Of course not!

A few larger cities had the basic work force size, such as Dallas, Chicago and LA, but NYC and DC had the most techies.

If you are a start-up, or a small entrepreneur, you don’t have to worry about these scale issues. And economic development incentives go to smaller businesses all the time. But the biggest meals will go to the biggest fish.

If I were a taxpayer in ANY of the cities who applied, I’d be seriously ticked off at the amount of money and effort spent when the result was a foregone conclusion.

If I were a taxpayer in DC or NYC, I’d be pissed too. Amazon already was coming and you gave away the store anyway,

Reply

Iain @ ISL November 19, 2018 at 5:59 pm

We had this same thing in Europe pre-recession, back in the early 2000s, where states and cities were falling over themselves to offer incentives to big tech cos to move in.

10 years later and, while they’ve clearly benefited from skilled and well-paid workers living locally, there has been nothing like the trickle-down effect once hoped for.

Just a personal view, but European states, like Southern Ireland, now have nation-sized corporations effectively squatting on their land, cyphoning off their profits in the direction of the nearest Caribbean island.

Reply

Leave a Comment

Previous post:

Next post: