Tag Archives: Amazon

Economic Development Develops

Every so often, we need to take our eyes off the clown show in Washington, D.C., and consider what’s happening elsewhere. For example, the much-hyped competition for Amazon’s second headquarters.

I hate to be Debby Downer, but that competition is an excellent example of what’s wrong with current approaches to economic development. Economic development offices around the country participate in what is nationally a zero-sum game–attracting businesses from one locality to another, and spending lavishly to do so. (According to several sources, states and counties have awarded over $1.3 billion in incentives just to attract Amazon’s fulfillment centers.)

As a Brookings Institute report recently noted, this approach to job creation is problematic.

The most obvious is that in each of these cases, Amazon was going to come with or without incentives. It is a core tenet of Amazon’s strategy to be able to rapidly deliver products directly to people’s homes, increasingly with same day service, so they must have a major presence in every large region. Seemingly every metro area we’ve worked in over the past several years has highlighted the attraction of an Amazon facility as a major local economic development success story. (A quick web search confirmed the presence or recent announcement of one or more major Amazon fulfillment centers in or near each of the 40 largest US metro regions.) In these cases, state incentives make no sense. And county incentives are used only to influence selection of the actual site within a region, thus pitting local jurisdictions against each other to claim a political win, with no actual competitive benefit to the regional economy….

Another issue is spatial mismatch. In our work across the country, many employers such as Amazon express frustration in not being able to find enough workers—while at the same time, workers complain of not having access to good jobs. This problem is predictable. While traditional retail jobs are spread throughout metro areas to be near customers (and by default, the workforce), warehouse and logistics operations (such as Amazon’s) consolidate employees under one roof on the periphery of the metro…. The Amazon jobs that replaced these are less accessible to many of the lower-skilled employees that are best suited to fill them because workers do not live nearby. Lack of access to transit, zoning decisions that limit nearby affordable housing, and childcare responsibilities severely limit the number of workers in a given region for which this type of job commute makes sense.

The Amazon Headquarters frenzy highlights what economic development has become; a system that revolves around government giveaways to corporations.

There’s a better way. And the Indianapolis Chamber of Commerce has recently partnered with Brookings to research that better way, culminating in a report titled “Rebuilding the Dream: Inclusive Growth in the Indianapolis Region.” It begins with a recognition that the economy is “misaligned between employer needs and workforce capability, and riddled with barriers to upward mobility,” and it urges policymakers to focus on removing those barriers and creating the conditions for inclusive and sustainable growth.

Rather than a competition to bring new employers to the region, the report advocates an emphasis on expanding companies that are already here, especially but not exclusively in so-called “advanced” industries (tech, very broadly defined). If those companies are to grow, however, they need access to a workforce capable of doing the jobs they are creating. The report enumerates the multiple barriers those potential employees face, and recommends a comprehensive and strategic approach to their removal: improved transportation, childcare,  health care innovations, language and training opportunities, etc.

This makes so much sense.

Rather than prospecting for companies willing to relocate and then bribing them with our tax dollars, the Chamber wants us to spend those dollars on measures that will reduce the mismatch between employer needs and the ability of unemployed or underemployed residents to meet those needs.

This is an investment that would pay real–rather than PR– dividends. Policymakers should endorse it.

Playing The Economic Development Lottery

Amazon’s recent announcement that it would be “accepting proposals” for a secondary headquarters has set off a predictable–and unfortunate– competition by cities all over the country.

“Pick me! Pick me!” Even Indianapolis and Fishers have teamed up for the hunt.

The Brookings Institution gets the dynamics right.

In the world of state and local economic development, Amazon is a whale. The possibility of 50,000 highly-paid jobs for professionals at a new $5 billion development is too tempting to pass up for any metro area with even the slimmest hope of courting one of the largest and most profitable companies in the world. Amazon’s unsubtle hint that tax incentives will play a big role in its decision helps ensure it will receive one of the biggest packages in history. Already, cities and states have rushed to announce their hope to entice Amazon with their distinct value proposition, and—in all likelihood—breathtaking handouts.

This begs important questions about the wisdom of state and local economic development strategies and their ability to remain focused on addressing the real challenges American communities face today.

Amazon’s shameless invitation to see who will offer the biggest bribe does indeed raise “important questions” about standard economic development practices–practices which assume a zero-sum competition to entice employers to relocate to the redevelopment officer’s city or state.

That competition is expensive for bidders, most of whom have no real prospect of securing the prize, and even more expensive for taxpayers of the eventual winner. As the Brookings article points out, Amazon undoubtedly narrowed its choices to two or three locations before it ever  announced its search for a headquarters site.

Amazon’s faux competition will lure one otherwise enviable place into handing over a huge amount of its taxpayers’ money to a fabulously wealthy corporation for something that place could have gotten for free.

As anyone who has ever been involved in one of these efforts can attest, cities will waste significant staff time calculating and crafting proposals, time and effort that could have gone into solving other problems.

It is past time to revisit economic development policies that center on these expensive efforts to lure employer A from location B to location C. Instead, we need to take a hard look at the strengths and weaknesses of our local economy, and determine what measures would help us grow the employers who are already here.

What are the jobs that are open? Why aren’t they being filled? Are there “skill gaps” keeping jobless Hoosiers from filling them? If so, what can we do to provide unemployed workers with the necessary skills? Is the problem transportation–the inability of workers to get to the places they are needed? Can we improve public transportation to solve that problem?

In other words, what are the unmet needs of Hoosier employers and workers, and how can we meet those needs?

Political figures love to cut ribbons and announce that manufacturer A or retailer B is moving to town and hiring X number of employees. Those announcements rarely include enumerations of the costly enticements (bribes) that accompanied the decision to locate here: tax abatements, infrastructure improvements, training grants and the like.

Efforts to grow the industries and other enterprises that are already here would not only be more cost-effective, they would also be fairer. These are employers who are already part of our community, after all–already paying taxes, already hiring local residents. They may not be as glamorous as Amazon, but in the real-world scheme of things, they’re much more important.

Amazon may be a whale, but we don’t have to emulate Ahab.