Amazon to New York City: Drop Dead. Reacting to a fierce storm of criticism over its $3 billion incentive agreement with New York City and New York State, Amazon said it was taking its HQ2 and the potential of 25,000 new jobs and blowing town.
Well, not quite. "We love New York, its incomparable dynamism, people, and culture," the company said in a statement. So much so that there are 5,000 Amazon employees here, and the company says it will continue to grow here.
And that's the point, according to Amazon's very loud local critics, which include politicians in Long Island City, where Amazon was going to set up shop, and labor unions--Amazon is anti-union and wouldn't agree to even stay neutral on the subject. How's this for dynamism: You want a piece of us? Then pay for it. Other tech companies, particularly Google, have been expanding in New York without trying to hold jobs hostage to real estate deals.
The Amazon retreat, and perhaps one by Foxconn in Wisconsin, rekindles the national debate over corporate subsidies to land jobs from such beauty contests as the one that Amazon staged so expertly. Data from Brookings and other organizations that have studied economic development consistently show that the return on the investment nearly always comes up short. But state and local governments get sucked in again and again in the battle to "win" plants and headquarters that are essentially put up for bid.
"Most jobs come from expansion of existing companies and startups," Amy Liu, vice president and director of Brookings' Metropolitan Policy Program, told me when I interviewed her a couple of months ago, when the Amazon deal was announced. "It comes from within, not hunting them from the outside."
In other words, job creation is much more about Inc. than it is about Fortune. (And I used to work for Fortune. Great magazine. No hard feelings.) Yet, it's the big companies that get the attention and the money. The better payoff, says Liu, comes from investing in the core, in the ecosystems that develop around industries.
That's more the idea at Cornell Tech, for instance, located on Roosevelt Island--near Long Island City, where Amazon planned its HQ2. This new urban campus of Cornell in partnership with Technion-Israel Institute of Technology has the stated goal of diversifying the economy and creating a tech hub. The city estimated that Cornell Tech will create 8,000 jobs and, more important, be able to spin out new companies. At a subsidy of $100 million, that seems like a better deal for the more than $20 billion of economic growth it is projected to generate. (Some of that growth will be generated by Graduate Hotels, featured in Inc., which is building a new location there.)
One of the reasons that New York can attract companies such as Google is because of its growing supply of tech workers. It sure as hell isn't about mass transit--been in the subway lately? Or the cost of living, unless you really like paying $20 for a pastrami sandwich. But young, talented tech people love it here just the same--it's the "incomparable dynamism, people, and culture" Amazon references--and that talent is highly desirable. And not just for the big companies. There are 176 New York City-based companies on the 2018 Inc. 5000 list of the fastest-growing private firms in the U.S. And you can bet that out of those 176 companies, you'll get dozens more startups.
Amazon is welcome to that talent just as much as any other company, large or small. But there's no particular reason for the government to overspend to underwrite Amazon's expansion any more than it should firms such as Peloton, Bombas, or any other company. Economic development needs to be cost effective.
Funny isn't it, that Amazon was once a struggling startup run out of the Bezos residence in Seattle--an Inc. kind of company. Now that it's a massive global corporation, it demands payment for employment. Certainly, New York should renew its efforts to give Amazon the kind of environment it needs to thrive here. But even in a city with sky-high prices, there has to be a limit on what it pays for job growth.